Q: Most of my friends have some of their paycheck deposit into an IRA, but I haven’t started doing this. What are the benefits?

A: Did you contribute to your IRA this year? Have you thought about it, but haven’t gotten around to it? Do you hear the term IRA thrown around and wonder why you should bother?

There are two types of IRAs: traditional and Roth. Traditional IRA contributions are tax-deductible, meaning that you do not have to include the value of the IRA contribution in your taxable income for the year. In return, you agree to leave the money in the account until you are at least 55 years old, and pay tax as you withdraw it. If your retirement income is taxed at a lower rate than your current income, this means that you will pay less tax overall on both the contributions and on any earnings in the account.

Roth contributions don’t provide any tax benefit now — there’s no deduction in you income when you place funds into a Roth IRA. However, leave the money alone until you’re 55 and you can withdraw it — and any earnings — tax free. This means that if you start saving in a Roth while you’re young, allowing the money to grow over time, you can have thousands of dollars worth of retirement income that will never be taxable.

Both IRA types can be big benefits for savers, and many people choose to fund both types of accounts to diversify their current and future tax obligations. Note, though, that the benefits of IRAs are reduced or even eliminated as your income grows. Review IRS Publication 590 for all the IRA rules, and remember: you have until April 15 of this year to make a contribution for 2010.