Retirement Definitions

Roth IRA, Pretax, Aftertax....Some Definitions

Aftertax	Aftertax refers to savings made after you have paid withholding tax. Many traditional payroll savings plans are Aftertax. In an Aftertax plan you are putting money already reduced by taxes into savings and you also have to pay taxes on the interest you earn each year.
Pretax	This refers to savings made before you have paid withholding tax. IRA's, 401k plans and 403b plans are all examples of Pretax plans. In a Pretax plan you don't pay tax on the money you save until you withdraw it. Accumulated interest is also not taxed until you withdraw it. In general, Pretax plans are good if you believe you will be in a lower tax bracket at retirement.
Roth	Contributions into a Roth IRA or Roth 401k are made with Aftertax money. So generally you can put less money into the plan. However, you pay no taxes on the money when you withdraw it. Nor do you pay withholding taxes on the accumulated interest when you withdraw it. Roth IRA's and 401k's are frequently a good idea if you expect to be in a high tax bracket at retirement.