Types Of IRAs
Comparison of Roth vs. Traditional IRA: A Chart
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Feature |
Traditional IRA |
Roth IRA |
|
Current Tax Savings |
In 2016, shelters up to the lesser of earned income or $5,500 a year ($6,500 if age 50 and above) from current income taxes ($11,000 and $13,000 if married and filing a joint return). The amount is maximum for combined Traditional and Roth IRAs. There are "phase out" rules - the maximum changes as income increases. For current information, see the Smart Money IRA primer |
Same |
|
Tax-Deferred Growth |
No tax paid on income or growth of assets until distribution. |
No tax paid on income or growth of assets until distribution. Even at distribution, usually not taxed. |
|
Withdrawals after age 59 l/2 |
Entire distribution is taxed as ordinary income. |
Entire withdrawal is income tax free, as long as the account is at least five years old. |
|
Withdrawals for Disability |
Entire distribution is taxed as ordinary income. |
Entire withdrawal is income tax free, as long as the account is at least five years old. |
|
Mandatory Withdrawals |
Withdrawals must begin no later than April 1st of the year after you reach age 70 1/2. |
NONE. You do not have to take money out ever, and can leave the entire account to your beneficiary. |
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