Traditional IRA
A traditional individual retirement account (IRA) allows individuals to make contributions that may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
Simple IRA
A Simple IRA is a retirement plan that may be established by employers, including self-employed individuals. The Simple IRA allows eligible employees to contribute part of their pretax compensation to the plan. This means the tax on the money is deferred until it is distributed.