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Roth vs. Traditional IRA

Roth or Traditional IRA

If you're looking for a tax-advantaged way to save for retirement, two good options are the Traditional IRA and a Roth IRA. Each have their unique advantages, and the one you choose will largely depend on your earnings needs and circumstances. To help you get started, here's an overview of each type of IRA and a comparison below for details on contributions, restrictions, and more.

Traditional IRA

  • Contributions to a Traditional IRA may be tax deductible (depending on income level).
  • Earnings can grow federal tax-deferred.
  • A Traditional IRA is available to everyone who earns income.
  • If you were born on or before June 30, 1949: At 70½ you must begin taking an annual required minimum distribution (RMD).
  • If you were born after June 30, 1949: At 72 you must begin taking an annual required minimum distribution (RMD).


Roth IRA

  • May allow you to avoid future taxation of retirement funds by making nondeductible contributions now.
  • No upfront tax deduction for contributions.
  • All earnings are federal tax-free when they are withdrawn according to IRS rules.
  • No required minimum distribution (RMD).

One of the factors that you'll need to think about when choosing between a Traditional and Roth IRA is your current tax bracket, and what that might be during retirement. This will impact what's ultimately left after taxes in your retirement fund. Contact a Financial Consultant who can help you choose.

Traditional and Roth IRA Comparison Overview

Traditional IRA

Roth IRA

Age

Traditional IRA

There are no age limits

Roth IRA

There are no age limits

Income

Traditional IRA

To participate you must earn income (there are no maximum income limits)

Roth IRA

To contribute, you must earn income

The maximum amount you can contribute each year phases-out as your household income exceeds:

2020

If you are single, $124,000 or less
If you file jointly, $196,000 or less

2021

If you are single, $125,000 or less
If you file jointly, $198,000 or less

Contribution Limits

Traditional IRA

2020 and 2021

Up to age 50: $6,000

Age 50+: $7,000

Roth IRA

2020 and 2021

Up to age 50: $6,000

Age 50+: $7,000

Contributions

Traditional IRA

May be tax-deductible

Roth IRA

Are not tax-deductible

Earnings

Traditional IRA

Grow tax-deferred

Roth IRA

Grow tax-free

Distributions

Traditional IRA

Are penalty-free and taxed as ordinary income when taken after age 59 1/2

Roth IRA

Are free from federal income tax when:

- The Roth IRA has been open for at least 5 years

- You are age 59 1/2 or older

Required Minimum Distributions

Traditional IRA

If you turned 70 1/2 prior to January 1, 2020: Are you required April 1 of the year following the year you turn 70 1/2 

If you turn 70 1/2 after January 1, 2020: Are required April 1 of the year following the year you turn 72

Roth IRA

Are never required

Early Withdrawals

Traditional IRA

Withdrawals before age 59 1/2 are subject to a 10% penalty in addition to any ordinary income tax that may be due

Roth IRA

Withdrawals before age 59 1/2 are subject to a 10% penalty in addition to any ordinary income tax that may be due

  • Roth IRA vs. Traditional IRA

    Need help deciding between a Roth IRA and a Traditional IRA? Try our IRA Selection Tool or view a comparison chart to find out which IRA is right for you.

  • Considering a Roth IRA conversion?

    Take advantage of every savings strategy you can. A Roth conversion may help you do that.

  • Keep your old 401k working for you

    You have choices when it comes to managing your old 401k retirement assets. Learn more.

Get in touch Call or visit a branch

Call us: 800-454-9272

175+ Branches Nationwide

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