IRA
Whether retirement is just around the corner or decades away, you can take steps today to save on taxes and secure your future. With a traditional IRA, you save on taxes now because your contributions may be tax-deductible. With a Roth IRA, you pay taxes on your contributions now, but you don’t pay taxes on your distributions.
Traditional IRA
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.
Roth IRA
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 | Traditional IRAUnder 70 1/2 | Roth IRANone |
Income limits | Traditional IRAEarned income | Roth IRACan't exceed annual income for Modified Adjusted Gross Income (MAGI) limits |
Contributions may be tax-deductible | Traditional IRAYes | Roth IRANo |
Pay taxes on distributions | Traditional IRAYes | Roth IRANo (as long as all requirements are met) |
Penalties on distributions before age 59 1/2 | Traditional IRAYes, a 10% federal penalty tax | Roth IRAA 10% federal tax penalty on interest earned |
Required minimum distributions (annually beginning at age 70 1/2) | Traditional IRAYes | Roth IRANo |
Save, Earn, Repeat
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.