The IRA Difference

Jesse needs help from Dave about which IRA type is which.

QUESTION: Jesse on Twitter wants to know the difference between a simple IRA and a traditional IRA.

Dave's ANSWER: A simple IRA is basically a 401(k) plan for a small business. When my company was much smaller and we had 40 or 50 employees, we had a simple IRA that allowed my team members to participate in it. I was required by law to match 3%. It has very low fees, so it's good for a small business that wants to operate the equivalent of a 401(k) for their company.

The traditional IRA is, obviously, just a traditional IRA. Either one can and should be invested in good growth-stock mutual funds.

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