As you plan and invest your retirement savings, you probably have several choices of vehicles you can use 401K if youre an employee of a large company, SEP plans for self employed people, and for most of us, IRAs and Roth IRAs.

For the most part, IRAs are treated like 401Ks and SEPs in that the money you put into the plan is exempt from taxes when it is invested, but you do pay tax on it whenever it is withdrawn. Since the tax is deferred until you withdraw, these are typically referred as tax deferral vehicles for retirement.

With an IRA, you must leave the money invested in the IRA until you reach the age of 59 or face a 10 percent early withdrawal penalty on top of the tax, and you must begin taking a minimum distribution each year from an IRA at the age of 70.

There are limits to the amount you can make contributions that are exempt from taxes in any year. For 2008, this limit is $5,000 for taxpayers under the age of 50, and $6,000 for those who are over 50. It is usually unwise to contribute more than this to an IRA as excess contributions made in after tax dollars, and they will also be taxed on withdrawal.

The Roth IRA works just the opposite. Read more, http://harborfi.typepad.com/tax/2008/10/knowing-the-differences-between-traditional-iras-and-roth-iras-can-benefit-you.html