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| Traditional or Roth IRA? |
A traditional IRA is a
personal savings plan that gives you tax advantages of saving for your
retirement.
Contribution you make may be fully or partially deductible depending on your circumstances. Also, amounts are not taxed until they are distributed. However, you can only leave amount in your traditional IRA until you reach age 70 ½ and no more contribution is allowed after that age
A Roth IRA is also a personal savings plan, but your contributions are not tax deductible. However, the distributions are not included in your income. In other words, if you meet the requirements, qualified distributions are tax-free. You can leave amount in your Roth IRA for as long as you want. You can also make contributions even after you reach age 70 ½.
Both IRAs can be established at many different financial institutions, including banks, insurance companies and brokerage firms. Both allow you to save money for your retirement.
The chart below
highlights some of their similarities and differences.
Contribution you make may be fully or partially deductible depending on your circumstances. Also, amounts are not taxed until they are distributed. However, you can only leave amount in your traditional IRA until you reach age 70 ½ and no more contribution is allowed after that age
A Roth IRA is also a personal savings plan, but your contributions are not tax deductible. However, the distributions are not included in your income. In other words, if you meet the requirements, qualified distributions are tax-free. You can leave amount in your Roth IRA for as long as you want. You can also make contributions even after you reach age 70 ½.
Both IRAs can be established at many different financial institutions, including banks, insurance companies and brokerage firms. Both allow you to save money for your retirement.
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| Let's put money away for your retirement. |
Features
|
Traditional
IRA
|
Roth
IRA
|
Who
can contribute?
|
You can
contribute if you
have taxable compensation and
before age 70½.
|
You can
contribute at any age if you have taxable compensation and your modified adjusted gross income is below certain
amounts.
|
Are
my contributions
deductible?
|
You can
deduct your
contributions if you qualify.
|
Your
contributions are not tax
deductible.
|
How
much can I contribute?
|
The
most you can contribute to all of
your traditional and Roth IRAs is the smaller of:
· (1) $5,500 (for 2013 and 2014), or $6,500
if you’re age 50 or older by the end of the year; or
· (2) your taxable compensation for the
year.
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What
is the deadline to make
contributions?
|
Your
tax return filing deadline (not including extensions). For example, you have
until April 15, 2014, to make your 2013 contribution.
|
|
When
can I withdraw money?
|
You can
withdraw your money at anytime.
|
|
Do
I have to take required
minimum distributions?
|
You
must start taking distributions by April 1 following the year in which you
turn age 70½ and by December 31 of later years.
|
Not
required if you are the
original owner.
|
Are
my withdrawals and
distributions taxable?
|
Any withdrawals and distributions from your traditional IRA are taxable.
Also, if you are under age 59 ½ you
may have to pay an additional 10% tax for early withdrawals unless you
qualify for an exception.
|
Not taxable if
it’s a qualified distribution. Otherwise, part of the distribution may be taxable.
If
you are under age 59 ½, you may also have to pay an additional 10% tax for
early withdrawals unless you qualify for an exception.
|
If
you have any questions, please feel free to email us.
Your
comments and feedbacks are welcome.
Source: www.irs.gov.
Contact Email: Excellent-tax@gmx.com
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