When considering your Individual Retirement Account (IRA) of choice, here are some distinct differences between the Roth IRA account and a Traditional IRA account!
1. Tax Treatment:
- Traditional IRA: Contributions may be tax-deductible, with taxes paid upon withdrawal.
- Roth IRA: Contributions are made after taxes, with tax-free withdrawals in retirement.
2. Eligibility:
- Traditional IRA: No income limits for contributions, but tax deductibility may vary.
- Roth IRA: Income limits apply, and earned income is required for contributions.
3. Withdrawal Rules:
- Traditional IRA: Withdrawals taxed as ordinary income, with RMDs starting at age 72.
- Roth IRA: Qualified withdrawals are tax-free, no RMDs during the account holder's lifetime.
4. Required Minimum Distributions (RMDs):
- Traditional IRA: RMDs required starting at age 72.
- Roth IRA: No RMDs during the account holder's lifetime.
Additional factors such as tax situation, investment goals, and retirement plans influence a person’s choice between traditional and Roth IRAs. Consulting a financial advisor before deciding which is best for you is recommended!
Comments