With a traditional IRA, you may get double tax benefits: You’re often able to deduct your contributions from your taxable income and the interest grows tax-deferred. That means you don’t have to pay taxes on your investment earnings until you request a distribution—and at that time, you may be in a lower tax bracket. Calculate your future finances by utilizing this retirement planning calculator.
With a Roth IRA, your earnings and withdrawals grow tax-free. That is, when you withdraw your money, you may not have to pay taxes! Plus, after you’ve owned the account for five years, you can request a distribution of your money anytime after age 59½.
| Traditional IRA | Roth IRA | |
|---|---|---|
|
Age limit to contribute |
Under 70 1/2 |
None |
|
Income limits |
Earned income |
Can't exceed annual income for Modified Adjusted Gross Income (MAGI) limits |
|
Contributions may be tax-deductible |
Yes |
No |
|
Pay taxes on distributions |
Yes |
No (as long as all requirements are met) |
|
Penalties on distributions before age 59 1/2 |
Yes, a 10% federal penalty tax |
A 10% federal tax penalty on interest earned |
|
Required minimum distributions (annually beginning at age 70 1/2) |
Yes |
No |
Earn solid rewards without the risk.
Money market accounts are a smart option for those who want to grow their funds but limit their risk. The more you save, the more you earn.
