The main difference is pre-tax dollars vs post tax dollars funding it. traditional = pre tax today.... taxed at retirement when you pull, and thus your investment gains are also taxed. roth = post tax today... and NOT taxed at retirement when pull, and thus your investment gains are TAX FREE. Just need to wait until you are 59 1/2 years old to touch it. you can pull YOUR contribution amount tax free at any age (but would be a stupid thing to do). Any pull above the contribution (ie, your gains) will be taxed before 59 1/2. So, moral of the story is, don't touch it until you're 59 1/2. So, what's better? Odds are, you will be making WAY less money at retirement, and thus will be in a lower income tax bracket at retirement than you are today. this is what the traditional harps on. You will pay full tax today on a roth, and maybe, 50% less later? But that assumes you made 0 gains on the money. If there was no real gain, and it was a place to hold money only, a tranditional would be smarter. But since you can make crazy gains in the markets if you play right, the roth allows you to reap those earnings without being taxed on them. At the end of the day, the answer is "Fund Both". Take the pre-tax hit for the regular as 100 bucks pretax ends up costing about 25 in take home pay. (your results will vary) and take the post tax hit for the roth to reap the gains later. I fund both of mine with 3% trad, 2% roth. my company matches 3% (100% up to 3%) on the traditional and 1% (50% on the next 2%) on the roth. so for my 3/2, i'm actually saving 6/3%. I find it futile to fund above what my company matches at this time as I still have other debt to pay off. once i'm debt free, I will up these contributions above the matches. They give me 15-odd funds to chose from. I made a killing on them form year to last week and moved to 80% cash. While, keeping my new money going into the same funds. So, I basically locked in those gains but still kept some money in play in case it was a stupid move. Locking profits is never a bad thing to do, especially when I was up about 30% since January. lol (remember, 9% a year is average). I don't play with these much. Most funds don't let you play much either. Theres rule son how many times you can move stuff in and out. What I play with is my last job's 401k and roth. I never rolled them in, as I have wide open market access to play with them instead of putting them in funds. for novices, funds are great. for me, they stop me from making money. There's a service fee for this, since I can't contribute to it anymore. but its only like $30 a year and it makes up for it for sure. THIS is where I've made a killing recently. I use this area as my playground, knowing my 'real' 401k is in more stable funds and such. I have a few that are high div payers (15-20%) and I use those as my revenue stream. The earn and pay as cash into the account. I use those funds to purchase other non-div, high volatile price stocks that make real money in the buy and trade. I hardly ever play short (betting that the stock price will go down) nor play with puts/calls (options... pay $.50 cents for the 'option' to buy the stock on X date for Y price). If it jumps, you can get stock cheap later. if it drops, you only lost your 50 cents and you don't have to buy it. Those are more advanced topics. Generally, you go 'long' on a stock, buying it with the hopes that it goes up in price. At the end of the day, the system always wins. 'retail' investors are the last to get in and the last to get out when things happen. without predicting the future, its all a crap shoot and know going in that you may lose everything you have in anything. if it goes bankrupt, or gets bought out... investing in RELIABLE companies is key to moderate gains. investing in startups can net 100000% returns, or lose it all. Find your sweet spot of risk/reward and mix it up. 5 eggs, 5 baskets. Also, since last post, I've gotten 80% out of the market. it's peaked. it started a crash. So, I at least gave you some decent advice to stay out. Wait for the pull back and then think about getting in.