Roth IRAs
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Roth IRA for Tax-free retirement income
Would you like to be able to make tax-free withdrawals from your account in retirement? A Roth IRA may be for you!
A Roth IRA is an Individual Retirement Account that is funded with earned income that has already been taxed. The advantage of this account, as compared to a Traditional IRA, is that withdrawals are free of federal income tax (to include tax-free growth). Current limits for Roth IRA contributions are $7000/year for ages 49 and below, and $8000/year for those ages 50 and above.
Pre-tax vs. post-tax… it can sometimes make your head spin! Let us help you understand the difference and select the best approach for you.
| Roth IRA | Traditional IRA | |
| Is there an age limit? | No. You can contribute at any age if you (or your spouse if filing jointly) have taxable compensation and your modified AGI is below certain amounts. | No. You can contribute at any age if you (or your spouse if filing jointly) have taxable compensation. Note: Prior to January 1, 2020, you were unable to contribute if you were age 70½ or older. |
| Are contributions tax deductible? | Roth IRA contributions are not tax deductible. | You can deduct your IRA contributions if you qualify. |
| How much can I contribute? | Curently, the maximum is $7,000, or $8,000 if you’re age 50 or older by the end of the year. | Currently, the maximum is $7,000, or $8,000 if you’re age 50 or older by the end of the year. |
| Is there a deadline for contributions? | The IRS allows you until tax day, April 15th, to make prior year contributions. | The IRS allows you until tax day, April 15th, to make prior year contributions. |
| Do I have to take RMDs? | No. | You must start taking distributions by April 1 following the year in which you turn age 73 (70 1/2 if you reached the age of 70 ½ before January 1, 2020) and by December 31 of following years. |
| Are my withdrawals taxable? | Withdrawals and distributions are not taxable as long as the five-year requirement has been met. | Yes, they are taxed at your tax bracket at the time of withdrawal. |
| Are there income limits to be able to contribute? | Yes. It depends on your modified adjusted gross income and how you file your taxes. Click here for more information. | No. |
| When can I withdraw money from my account? | Withdrawals made from principal dollars are tax free, but the growth is taxed and penalized at 10% if withdrawn before age 59 1/2. Click here for some exceptions. | The IRS imposes a 10% penalty in addition to the tax for withdrawals made before age 59 1/2. Click here for some exceptions. |
