What is the difference between traditional ira and sep ira and roth ira accounts?

The main differences between the three types of Individual Retirement Accounts (IRA) are who contributes the funds and when the funds are taxed.

A traditional IRA is a retirement account that an individual contributes into. Contributions are tax deductible in the year they are contributed, and then distriubutions are taxed at the ordinary income rate when they are withdrawn.

A Roth IRA is also an IRA account that individuals contribute to. The difference is that with the Roth IRA, contributions are not tax deductible in the year they are contributed. However, withdrawals from a Roth IRA are tax free. This includes any capital gains, dividends or interest.

A Simplified Employeed Pension (SEP) is a retirement plan that business owners can contribute into for themselves and their employees, kind of like a 401K plan. Like a traditional IRA in that money is contributed pre-tax and then taxed at the ordinary income rate at withdrawal.