You've asked a question that nearly every working American wonders about. Fortunately, it's not as tricky as it may seem. Because we're limited as to space, I'll give you a thumbnail sketch of both and then point you in the direction of more in-depth material as well as some interactive tools that will help you decide which type of IRA you should have. For more information about IRAs, go to BUYandHOLD's new Retirement Focus channel as well.

THE TRADITIONAL IRA -- IN A NUTSHELL

You're probably already familiar with this type of IRA, since you posed the question. But for those BUYandHOLDers who are not, a Traditional IRA, the first one on the scene, is a retirement account in which you can sock away up to $2,000 a year ($4,000 for married couples) of earned income in a tax-deferred account. You can start making withdrawals when you turn 59 1/2, although this being the IRS, there are exceptions to this rule.

Advantages...

The two key advantages to the Traditional IRA: (1) There's an up-front tax break in that your annual contribution is deductible. Let's say you contribute $2,000, you can deduct that $2 grand from the income on which you're taxed. If you're in the 28% tax bracket you'll save $560. (2) Your account will grow more rapidly than a taxable account because you don't have to pay capital gains taxes over the years.

Disadvantages...

The three key disadvantages to the Traditional IRA:

(1) When you take the money out after age 59 1/2, it will be taxed as regular income. However, by then you may be in a lower tax bracket -- perhaps the 15% bracket.

(2) You cannot make contributions to a Traditional IRA if you will turn 70 1/2 by the end of the year or, obviously if you're older than 70 1/2.

(3) Not everyone can deduct 100% of their contribution. If, for example, you participate in an employer-sponsored retirement plan or if your income is over a certain amount, your deduction will be limited or even zero.

THE ROTH IRA IN A NUTSHELL

The Roth IRA is similar to the Traditional IRA in that you can also put in up to $2,000 (or 100% of earned income, whichever is less) per year into the account.

Disadvantages...

(1) Your annual contribution is never deductible. Period. It doesn't matter whether or not your have a qualified plan at work. Contributions are not deductible.

(2) Not everyone can have a Roth. You can contribute to a Roth only as long as you have earned income and your modified adjusted gross income is below $110,000 for a single filer and below $160,000 for joint filers.

But here are the advantages...

(1) If you fall within the required income guidelines, you can contribute regardless of your age, for as long as you like. With the Traditional IRA, you recall, the age cap for making contributions is 70 1/2.

(2) You never need to take money out; in fact you can leave your money in the account forever and pass it on to your heirs tax-free. This is in sharp contrast with the traditional IRA where you must start making withdrawals once you turn 70 1/2.

(3) And, probably the greatest advantage the Roth has over the Traditional is that when you make qualified (note the word "qualified) distributions from the Roth, money taken out is not taxed. That's right -- no taxes are due on the principal or on the earnings. This is a nice tradeoff for the fact that contributions going in are not deductible.

Yet in order to escape paying taxes on your gains, you've got to follow the rules which among them include the fact that:

o You must be 59 1/2 or older
o The Roth must have been in existence for at least five years

You can actually have both types of IRAs, but your combined contributions for the tax year to Traditional and Roth IRAs cannot exceed $2,000. See previous Under The Oak Q&A "How Many IRAs Can You Have?"

MORE NITTY GRITTY

I've outlined only the most obvious differences between the two IRAs. You'll find all the details in IRS Publication #590, which you can download at: http://www.irs.gov/.

• Quicken has the best discussion I've seen on which type of IRA to own and whether or not to rollover your regular IRA into a Roth. Log on to: Quicken.com and head for "Retirement." You'll also find an excellent interactive planner on the site that takes you gentle step by gentle step through the various options.
  
  
• Two sites with excellent interactive calculators are The Motley Fool and BUYandHOLD's Retirement Focus Channel.

Good Luck!