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Traditional IRA - This is an account which allows you to defer taxes on your earnings until they are withdrawn. Also, certain contributions are tax deductible in the year they are made.
Roth IRA - This account is a nondeductible IRA that offers tax-deferred earnings. Tax-deferred earnings allow you to grow your nest egg at a faster pace than taxable investments. But, the best part about the Roth IRA is that it offers tax-free distributions if you follow certain requirements. That means the money you withdraw is yours alone and does not have to be included as income at tax time. No other investment product allows you this type of tax-free benefit.
Educational IRA - This account is a nondeductible account that features tax-free withdrawals for a very specific purpose - a child's higher education expense. Higher education distributions are permitted from Traditional and Roth IRA's as well, but the crucial difference is that while qualified higher education distributions from these IRA's are penalty free, the same distributions from an Educational IRA are penalty free and tax free.
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