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Roth vs. Traditional IRA
Roth or Traditional IRA
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 73 (unless you turned 72 prior to January 1, 2023, then your RMD's must begin by 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- All earnings are federal tax-free when they are withdrawn according to IRS rules.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: 2022 If you are single, $144,000 or less 2023 If you are single, $153,000 or less |
Contribution Limits | Traditional IRA 2022 Up to age 50: $6,000 Age 50+: $7,000
2023 Up to age 50: $6,500 Age 50+: $7,500 Non-income earning spouse: $6,500 (into a separate IRA) | Roth IRA 2022 Up to age 50: $6,000 Age 50+: $7,000
2023 Up to age 50: $6,500 50+: $7,500 Non-income earning spouse: $6,500 (into a separate IRA) |
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 73 (unless you turned 72 prior to January 1, 2023, then your RMD's must begin by 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.