For Individuals: How do a traditional IRA and the Roth IRA compare?
This chart compares the features and benefits of a traditional IRA and Roth IRA.
|Traditional IRA||Roth IRA|
|Eligibility||Under age 70½ with earned income.||
Eligible wage earners of any age.
|Annual Contribution Limits (Total maximum contributions to any IRA or combination of IRAs must not exceed the annual contribution limits for that year.)||2014: $5,500
Catch-up contributions for age 50 and older is an additional $1,000 annually.
|Deductibility of Contributions||
|Earnings||Income tax-deferred.||Federally tax-free if taken after five years and meet any one of the following: age 59½, death, disability, first-time home purchase (up to $10,000).|
|Taxation on Withdrawals||Withdrawals are taxed as ordinary income (except those representing nondeductible contributions).||Contributions – federally tax-free at any time. Taxation on earnings – see above.|
|Early Withdrawal Considerations||Withdrawals taken prior to age 59½ are subject to a 10% IRS-imposed penalty unless one of several conditions is met. They include:
||Withdrawals of earnings which do not meet the five-year exception are subject to a 10% IRS-imposed penalty unless one of several conditions is met. This includes:
|Distribution Rules||Must begin withdrawing by April 1 of the year after you reach age 70½.||Not required to take distribution by any certain age.|
*2014 tax year
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