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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  • All earnings are federal tax-free when they are withdrawn according to IRS rules.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 IRARoth IRA
Age2019: You are under age 70½ by the end of the calendar year
2020: There are no age limits

There are no age limits

IncomeTo participate you must earn income (there are no maximum income limits)To contribute, you must earn income. The maximum amount you can contribute each year phases-out as your household income exceeds: 

2019

If you are single, up to $122,000 or less If you file jointly, up to $193,000 or less

2020
If you are single, up to $124,000 or less If you file jointly, up to $196,000 or less

Contribution Limits

2019
Up to age 50: $6,000
Age 50-70 1/2: $7,000
Age 70 1/2+: Not Allowed
 
2020
Up to age 50: $6,000
Age 50+: $7,000
 
 
2019 and 2020
Up to age 50: $6,000
Age 50+: $7,000

Contributions

May be tax deductibleAre not tax deductible

Earnings

Grow tax-deferredGrow tax free

Distributions

Are penalty-free and taxed as ordinary income when taken after age 59½Are free from federal income tax when:

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

- You are age 59½ or older
Required Minimum DistributionsIf you turned 70½ prior to January 1, 2020: Are required April 1 of the year following the year you turn 70½
If you turn 70½ after January 1, 2020: Are required April 1 of the year following the year you turn 72
Are never required
Early WithdrawalsWithdrawals before age 59½ are subject to a 10% penalty in addition to any ordinary income tax that may be dueWithdrawals before age 59½ 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.

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