Mutual Fund Resource Center

Planning for Retirement


Roth IRAs vs Traditional IRAs

  ROTH IRA TRADITIONAL IRA
Age Limit Can contribute at any age, provided you have taxable income (W-2) Starting in tax year 2020, can contribute at any age, provided you have taxable income (W-2)
Contribution Limits Maximum contribution is $6,000 ($7,000 if 50 or older). Click here for more information about current limits.
Contribution Deadline Contributions must be made by tax filing deadline NOT including extensions
Deductibility Contributions to a Roth IRA are never deductible, as they are after-tax funds Contributions may be deductible depending on income, filing status and whether or not you are covered by a retirement plan at work.  Click here for a chart of deductibility guidelines.
Income Limit One must have earned income to be eligible to contribute. Click here for more information about income limits
Required Minimum Distributions (RMDs) RMDs do not apply for the original owner Starting in 2020, RMDs must begin at age 72.

Shareholders who turned 70 ½ in 2019 or earlier must continue to take their RMDs as scheduled.
Taxation at time of distribution Distributions are not taxed, provided you meet certain criteria

Contributions are always withdrawn tax-free

Earnings are withdrawn tax-free after the 5 year holding period AND either age 59 ½, death, disability or 1st time home purchase
Distributions of pre-tax contributions and earnings are taxed as ordinary income
Penalties at time of withdrawal 10% penalty may apply to non-qualified distributions.  Some exceptions may be: death, disability or 1st time home purchase. 10% penalty may apply for distributions made before age 59 ½. Some exceptions may be: medical expenses, disability, 1st time home purchase, or birth or adoption of a child.

This information does not constitute tax advice. Please consult your tax advisor and/or state and local tax offices for more complete information.

 

 



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