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A Roth IRA is an individual retirement account started in 1997 to help ease strain on the social security system.

There are many common traits between the regular IRA and the Roth IRA, and it is important to know the differences between them when deciding which to use.

One main difference is that the traditional IRA is tax deductible. This means that you can deduct all that you contribute to the fund during the year from your income while filing your taxes. The Roth IRA however is not deductible.

A traditional IRA allows for a few penalty free withdrawals, but they have very strict rules and can only be taken advantage of in very specific circumstances. This is a bit frustrating because you can not access your earnings until you retire.

The Roth IRA is much more loose with the withdrawal allowances. After five years you are allowed to withdraw the funds contributed.

For this very reason many have chosen to use the Roth IRA as their personal emergency fund. After five years you can use it for any unexpected emergencies that come up while simultaneously planning for your retirement.

Whatever your circumstances are, you should consider these facts before opening a retirement account.