If you'd like your retirement years to be as happy as those of the nice ladies pictured at left, it pays to get your story straight on retirement vehicles. One area where confusion often reigns is understanding the difference between a Roth IRA and a traditional IRA, and knowing which is better.

Here is a quick primer, and then a little extended info to round it out. Here's a handy FAQ for you.

What's the difference between a traditional IRA and a Roth IRA?

In short, a traditional IRA saves you from paying taxes on income today; a Roth IRA saves you from paying income taxes tomorrow.

With a traditional IRA, you make contributions that you can deduct from this year's tax form. Your money can then grow tax-free in your IRA up until retirement, at which time any money you remove from the IRA is taxed.

With a Roth IRA, you get no tax deduction this year - the money you contribute is therefore after-tax money. Your money then grows tax-free, and (here's the big upside) when you reach retirement, the money you remove from your Roth IRA is not taxed.

Which is better?

Neither, really. Like most things in finance, it depends on your situation.

An example: Say you have $3000 to contribute to an IRA. If you put it in a traditional IRA, you'll get a tax break this year of maybe $600 to $800 depending on your tax bracket. Thirty years from now that $3000 grows into $30,000, and you're taxed on the withdrawals. If you eventually withdraw it all, you'll pay maybe $6000 to $7500 in taxes. So, you end up with about $22,500 to $24,000 after taxes. (I did this assuming a roughly 8% gain per year on your money.)

Now, say you have $3000 and decide to pay the taxes on it this year and put it into a Roth IRA. Let's say you pay $750 in taxes (depends on tax bracket) now, and thus put $2,250 into a Roth IRA. Thirty years later that $2,250 might be worth $22,640 and you'll pay no tax on it.

You come out with roughly the same amount of money in the end.

But you know it's not that simple, right? Other points to ponder:

* A Roth IRA gives you more flexibility with your money. Because it has already been taxed, the government doesn't care what you do with it. That means once you reach retirement age, you can draw on it or not depending on how your finances look. With a traditional IRA, you have to make withdrawals after a certain age, currently 70 1/2, so the government can get their hands on some tax money.

* On the other hand, if you make only limited withdrawals of a traditional IRA in retirement, you may never draw out the money completely, and the tax burden you feel would then be less, and the comparisons above are not necessarily relevant. Whoever gets your remaining money after you die would pay tax on their inheritance, so eventually the traditional IRA money would get fully taxed, but you personally may never pay the majority of those taxes while alive.

* A Roth IRA is good if you'll retire into a higher tax bracket than you're currently at. If you're young and not making a lot of money, your tax bracket is low, so you might pay 15% in taxes now, but have a 30% tax bracket at retirement, meaning it's beneficial to get your money tax-free when you're in the higher tax bracket.

* On the other hand, you might be in your big earning years right now and in a higher tax bracket than you'll be in once you retire. In that case, the tax break you get today with the traditional IRA might be the better way to go.

* Who knows what the future holds? If a tax break today would be really helpful, go for it now with the traditional IRA. If you feel like you're sitting pretty financially at present, pay the taxes today and use the Roth IRA to hedge against the future.

There's no right or wrong answer, unfortunately.

What are the rules, contribution limits, etc.?

If you make too much money, the Roth IRA may not be available to you and the decision will be taken out of your hands. Go here to see tables of income limits and contribution maximums for both the traditional IRA and Roth IRA.