A Roth IRA’s tax advantages differ from the Traditional IRA. If eligible for this account, your annual contribution limits are the same but are not tax deductible. However, since annual contributions have already been taxed, these contributions will never be taxed again and earnings can grow tax free. Finally, the contributed funds can be withdrawn any time you wish and there are no required minimum distributions.
Withdrawals
Withdrawals of your contributions to a Roth IRA are tax-free anytime. However, withdrawals of earnings are only free from federal income tax, provided they meet the following requirements:
- You are purchasing your first home ($10,000 lifetime maximum)
- The Roth IRA has been in existence for at least five years
- You are age 59½ or older
- You become disabled or have passed away
What You Should Know About Converting Costs
You can convert a Traditional IRA to a Roth IRA at any time. You must note that when you convert to a Roth IRA, you must pay income tax on the otherwise taxable amount of the transfer. To maximize the benefits of conversion, the money to pay those taxes should come from a source outside the Traditional IRA you are converting. You may convert your Traditional IRA over several years to manage the tax consequences.
Account Minimums and Fees:
- There is no minimum initial deposit required to open an account
- There are no maintenance fees for retirement accounts
Commissions, service fees and exception fees still apply. See our commission and brokerage fees for details.
Need help deciding between a Traditional IRA or a Roth IRA? Try our IRA Selection Tool or view our IRA guide to find out which IRA is right for you.
