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.
A Traditional IRA is an individual retirement account that may provide tax benefits because contributions may be tax deductible. Investment earnings can also grow tax-deferred until withdrawn, typically at retirement. You may contribute up to $6,000 of earned income ($7,000 if you are age 50 or older), but bear in mind that you must begin taking an annual Required Minimum Distribution (RMD) at age 72 (or 70½ if you turned 70½ prior to January 1, 2020). Withdrawals are penalty-free and taxed as ordinary income when taken after age 59½. If you are in a higher tax bracket today than you will be during retirement, a Traditional IRA may be a smart choice.
Open a Traditional IRAEligibility | You must earn income, but there are no income limits. |
Contributions | May be tax deductible |
Maximum Contributions | 2020 and 2021
Up to age 50: $6,000
Over age 50: $7,000 Non-income-earning spouse: $6,000 (into a separate IRA)
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Earnings | Grow tax-deferred until withdrawn, typically at retirement |
Distributions | Penalty-free and taxed as ordinary income when taken after age 59½ |
Required Minimum Distributions | If you turned 70½ prior to January 1, 2020: Required April 1 of the year following the year you turn 70½ and by December 31st every year thereafter If you turned 70½ after January 1, 2020: Required April 1 of the year following the year you turn 72 and by December 31st every year thereafter |
Early Withdrawals | 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.