Traditional vs. Roth IRA
What are the differences between Traditional IRAs and Roth IRAs?
Traditional IRA*All workers and non-working spouses younger than 70 1/2 may contribute to a Traditional IRA, regardless of income level. For some individuals all or a portion of the contribution may be tax deductible. Some of the eligibility requirements for tax deductibility include: Neither spouse is covered by an employer's retirement plan. Only one spouse is covered by an employer's plan and your combined income is less than $160,000. If both you and your spouse are covered by employer retirement plans and you meet certain income requirements*.Earnings accumulate tax-deferred until you withdraw them in retirement. Penalty free distributions may begin at age 591/2 and you must begin taking distributions by age 701/2. |
Roth IRA*All taxpayers, whether they are working or not, may contribute to a Roth IRA as long as they meet certain income level requirements. Eligibility gradually phases out for single taxpayers earning between $95,000 and $110,000 and married couples earning between $150,000 and $160,000. Contributions are not tax deductible but the earnings are tax-free. That means when you make withdrawals from a Roth IRA you do not pay taxes on the earnings. Of course there are distribution requirements for Roth's as well but unlike Traditional IRAs, Roth IRAs do not have a required minimum distribution age. |
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The IRA Calculators may help you determine which IRA is right for your investmtent needs. |
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