Michelle Tucker, CPA/PFS/CFP®/JD
michelle@3dwealthadvisors.com
 
 




Basic Retirement Planning

 

Comparison of Traditional IRAs and Roth IRAs

Traditional IRARoth IRA
Maximum yearly contribution (2024)Lesser of $7,000 or 100% of earned income ($8,000 if age 50 or older)Lesser of $7,000 or 100% of earned income ($8,000 if age 50 or older)
Income limitation for contributionsNoYes
Tax-deductible contributionsYes. Fully deductible if neither you nor your spouse is covered by a retirement plan. Otherwise, your deduction depends on your income and filing status.No. Contributions to a Roth IRA are never tax deductible.
Age restriction on contributionsNoNo
Tax-deferred growthYes Yes; tax free if you meet the requirements for a qualified distribution.
Required minimum distributions during lifetimeYes. Distributions must begin by April 1 following the year you reach age 73.No. Distributions are not required during your lifetime.
Federal income tax on distributionsYes, to the extent that a distribution represents deductible contributions and investment earnings.No, for qualified distributions. For nonqualified distributions, only the earnings portion is taxable.
10% penalty on early distributionsYes, the penalty applies to taxable distributions if you are under age 59½ and do not qualify for an exception.No, for qualified distributions. For nonqualified distributions, the penalty may apply to the earnings portion. (Special rules apply to amounts converted from a traditional IRA to a Roth IRA.)
Includible in taxable estate of IRA owner at deathYesYes
Beneficiaries pay income tax on distributions after IRA owner's deathYes, to the extent that a distribution represents deductible contributions and investment earnings.Generally no, as long as the account satisfies the five-year holding requirement.



Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2024.