A savings account is an all-inclusive term, which includes IRAs and regular ( non-retirement) savings. A Roth IRA is a savings account in which earnings accrue on a tax-deferred basis, but are tax free if distributions are qualified. In a regular savings account, earnings are added to an individual's taxable income for the year earned.

Check out Tax Treatment Of Roth IRA Distributions for an analysis of Roth IRA distributions and examples and explanations of the circumstances under which earnings in a Roth IRA would (or would not) be subject to income taxes.

Advisor Insight

Rebecca Dawson
Silber Bennett Financial, Los Angeles, CA

A savings account is a deposit account held at a retail bank that pays interest. The money in a savings account typically does not have check writing privileges, like a checking account. Savings accounts allow you to set aside a portion of your liquid assets (cash) while earning interest.

A Roth IRA is a type of IRA in which you pay taxes on money going into your account but future withdrawals are tax free if certain requirements are met. The IRS sets annual contribution limits for Roth and traditional IRAs. A Roth IRA's main advantage is its tax structure.

You can contribute to a Roth at any age as long as you have income. A Roth IRA can be invested in, but not limited to, stocks, bonds, mutual funds, unit investment trusts, exchange-traded funds and real estate limited partnerships.