IRA tax deductions are a little different, depending on which kind of IRA account you have. There are the traditional IRA's, Roth IRA's, and even self directed subtypes of the two. Knowing the various tax options with each is critical both in the short term and long term. Also, knowing your responsibilities for each kind of account is equally as important.

Traditional IRA

A traditional 401k or 401b is what most employers offer and what most employees opt-for. Contributions (up to an IRS regulated amount) can be contributed to it from your paycheck and from other sources as well. However, with the benefits of an IRA, you'd be crazy not to add one to your work-plan.

Additionally, like 401 taxes, IRA taxes qualify for an IRA tax deduction. These funds are usually managed by an independent brokerage house and they're often placed in things like bonds, CD's, and stocks. It's usually wiser to put your retirement savings in a brokerage's hand rather than a bank, but individual cases will have different needs and the owners will have different preferences.

You pay taxes on your contributions, but at the end of the year they are typically, completely tax-deductible. When you hit 59 and a half, you can initiate your distribution without any early-withdrawal penalties; the only kicker is that when you start withdrawing from your IRA at 60, you start "repaying" (in a way) each IRA tax deduction that you took all of those years and taxes on capital gains, dividends and so forth your account accrued.

Roth IRA

With a Roth IRA, you can contribute money to your account and do it after-taxes-meaning no taxes are paid on your contributions. The kicker in this case is that you don't get an IRA tax deduction at the end of the year. Then again, you can start distributing it to yourself, tax-free, after the first 5 "seasoning" years and after you hit 59 and a half.

Additionally, the maximum contribution limit is significantly higher than a traditional retirement account. Of course to qualify for Roth contributions, you have to make less than 95k annually-or 150k maximum for couples that jointly file.

How to get one and what's best for you

You might be wondering how you set up an IRA-that is, if you don't have an employer-sponsored plan, or want to supplement an existing plan. It's simple; your bank more than likely offers one. If you are feeling somewhat friskier and adventurous, open it with a brokerage. This will allow you not only to have an IRA account, but also to invest in stocks, bonds, securities, etc.

The self-directed IRA (be it a traditional or Roth) is pretty much that-self + directed. You're not exclusively in control of it, actually, but you get a ton-more say in it than you would in say, a 401k or b plan. You rollover your IRA, or even create a new one if you have enough money, to what is known as a custodian or a trustee. Most people who self-direct choose the custodian, because they are experienced, licensed financial advisors who can help them make the best decisions on what to invest in.

The IRA tax deduction stipulations are basically the same, too. You opt for a traditional self-directed IRA (that's tax-deferred), or a Roth self-directed IRA-which is tax-exempt in retirement years).

Choose wisely, and remember-the choices you make now are yours and will affect you in your older years and for the rest of your life. Make sound decisions that will maximize your nest egg earnings and you'll have a very comfortable retirement.