What are the two types of IRAs mentioned?

The two types of IRAs mentioned are Traditional and Roth.

A Traditional IRA allows individuals to make contributions that may be tax-deductible, which means the taxes on the money are deferred until withdrawal, typically in retirement. This offers an immediate tax benefit, as the contributions reduce taxable income for the year they are made. Withdrawals during retirement are taxed as ordinary income.

On the other hand, a Roth IRA involves contributions made with after-tax dollars, meaning that while there is no immediate tax benefit, qualified withdrawals during retirement are tax-free. This can be particularly advantageous for individuals who expect to be in a higher tax bracket in retirement, allowing them to avoid future taxes on their earnings.

Understanding both types of IRAs is essential for effective retirement planning, as they each accommodate different tax situations and future financial goals. The other choices provided do not accurately reflect the specific types of IRAs recognized in financial terms.