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.
