Traditional or Roth IRA

Traditional IRAs can let your money grow tax-deferred, while Roth IRAs may allow your money to grow tax-free. Use the chart below to understand what works for you.
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Traditional IRA

Roth IRA
OPEN TRADITIONAL IRA OPEN ROTH IRA
The Basics

Money that you contribute may be deductible on your annual income taxes. Your contributions and any gains are not taxed until you withdraw your money.

This IRA is excellent for anyone eager to save money for retirement and reduce current income taxes at the same time.

OPEN TRADITIONAL IRA

Your contributions are not tax deductible, but upon reaching retirement, you can withdraw your contributions and any gains tax-free.

In general, Roth IRAs offer greater tax savings in the long run and better flexibility to withdraw funds.

OPEN ROTH IRA
Eligibility & Deductions

You can make contributions to a Traditional IRA if:

  • You or your spouse received taxable income during the year, and
  • You will not reach age 70½ by the end of the year.

Contributions are typically tax-deductible. However, it depends on income limits and if you participate in a retirement plan at work. Check with your tax advisor before taking a deduction or refer to www.irs.gov.

You can make 2011 contributions to a Roth IRA if:

  • You or your spouse received taxable income during the year, and
  • You file taxes jointly and your adjusted gross income is less than $179k, or
  • You file taxes individually and your adjusted gross income is less than $122k.

You can make 2012 contributions to a Roth IRA if:

  • You or your spouse received taxable income during the year, and
  • You file taxes jointly and your adjusted gross income is less than $183k, or
  • You file taxes individually and your adjusted gross income is less than $125k.

There are no age restrictions for Roth IRAs.
Contribution Limits & Deadlines
  • 2011 Contribution Limits

    • $5,000 by 4/17/12


    • Those age 50+ by the end of the calendar year can make an additional $1,000 "catch-up" contribution.


    • The limit can be split between a Traditional and Roth IRA but the combined limit is $5,000 or $6,000 as stated above.


  • 2012 Contribution Limits

    • $5,000 by 4/15/13


    • Those age 50+ by the end of the calendar year can make an additional $1,000 "catch-up" contribution.


    • The limit can be split between a Traditional and Roth IRA but the combined limit is $5,000 or $6,000 as stated above.
  • 2011 Contribution Limits

    • $5,000 by 4/17/12


    • If your adjusted gross income is at least $169k but less than $179k (filing jointly) or is at least $107k but less than $122k (filing individually), you may be able to contribute a partial amount.


    • Those age 50+ by the end of the calendar year can make an additional $1,000 "catch-up" contribution.


    • The limit can be split between a Traditional and Roth IRA but the combined limit is $5,000 or $6,000 as stated above.


    • Check with a tax advisor as to the exact amount or refer to www.irs.gov.


  • 2012 Contribution Limits

    • $5,000 by 4/15/13


    • If your adjusted gross income is at least $173k but less than $183k (filing jointly) or is at least $110k but less than $125k (filing individually), you may be able to contribute a partial amount.


    • Those age 50+ by the end of the calendar year can make an additional $1,000 "catch-up" contribution.


    • The limit can be split between a Traditional and Roth IRA but the combined limit is $5,000 or $6,000 as stated above.


    • Check with a tax advisor as to the exact amount or refer to www.irs.gov.
Penalty-free Distributions

Available once you reach 59½. Earlier distributions may be subject to penalties.

Available once you reach 59½ as long as it has been 5+ years since you first established and contributed to your Roth IRA. Earlier distributions may be subject to penalties.
Required Minimum Distributions (RMD)

Begin at age 70½.

RMDs not required.