IRA accounts come in many flavors, but they’re all alike in one respect: Each is actually just a shell that can hold money in many different forms of investments. Different IRA, different shell, with different rules according to how the IRS treats it.
For example, you can deduct any contributions (money you contribute to an IRA) from your income if you contribute to a traditional IRA. This will lower your tax bill and could even net you a refund come tax time. But if you contribute to the similarly named Roth IRA, those contributions are not tax-deductible, and they will not lower your tax bill.
Why are there so many different types of IRA accounts? It isn’t just to confuse the heck out of people.
Indeed, having the different types gives you an array of ways to save for retirement and tailor a savings plan to your individual situation.
The more flavors, the happier everyone is likely to be.