Traditional IRA vs Roth IRA. Which option is better for investing in your retirement?  Learn the key differences between the two in the video above.

When comparing a Traditional IRA vs a Roth IRA, there are three key differences between them that you need to know about before making an investment decision or converting one type to the other.

Key Difference Between a Traditional IRA and a Roth IRA

  1. Tax Incentives: Both provide tax breaks, but it is a matter of time before you are allowed to claim them.  Traditional IRAs are tax deductible in the year you make a contribution and taxable when you make a withdrawal. Roth IRAs do not provide a tax break when you contribute, but when you withdrawal contributions and earnings they are generally tax-free.
  2. Withdrawal Rules: Traditional IRAs require you to start taking required minimum distributions at age 70 and a half. With Roth IRAs, there is no requirement on withdrawing any fo the funds. So if you do not need the money, it can continue to grow while remaining in the Roth IRA.
  3. Income Limitations: Anyone under the age of 70 and a half can contribute to a Traditional IRA, but depending on your income the contributions may not be tax deductible. There is no age restriction for Roth IRAs, but they do have income restrictions.  For the 2019 tax year, if you are filing single, you can contribute to a Roth IRA if your Modified Adjusted Gross Income is less than $122,000.  The Modified Adjusted Gross Income for married couples filing jointly must be less than $203,000.

If you have questions about a Traditional IRA vs a Roth IRA for your investment situation please contact us.