You can open a Roth or Traditional IRA (or both) after logging to your Betterment account and clicking "Add account."
Here are the main differences between a Roth and Traditional IRA:
- Roth IRA: No tax deduction for your contribution; you contribute to the account with after-tax dollars, taxed at your current income rate.
You do not pay any taxes on dividends, capital gains, or withdrawals (as long as you are older than 59 and a half, and have the account for at least five years).
- Traditional IRA: You make tax-deductible contributions to a traditional IRA with pre-tax dollars if you meet the eligibility criteria. There are no taxes on dividends and capital gains, but you will pay taxes on qualified withdrawals in retirement.
If this is your first time opening an IRA, and you're not sure which one is right for you, you can use this IRA calculator to determine the best fit.