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Comparing Traditional & Roth IRAs

Man and woman looking at tablet

Traditional and Roth IRAs are two ways to save for retirement that have different approaches. In a nutshell, the primary difference between the two is whether you pay taxes on your contributions before you make them or when you withdraw them in retirement.

Here are a few basics about traditional and Roth IRAs for the 2016 and 2017 tax years.

Contributions
Traditional IRA
Roth IRA
Anyone with earned income, and nonworking spouses filing jointly, can make a full annual contribution.
Anyone with earned income, and nonworking spouses filing jointly, may make a full or partial contribution based on income. See 2016 IRA Contribution Limits and Deadlines for specifics.
How much is a full annual contribution for 2016 and 2017?

Age 49 and under $5,500

Age 50 and older: $6,500

Age limit to contribute?
Year you reach 70½
None
Can I take a tax deduction for my contributions?
Yes, if neither you nor your spouse has a plan at work. If either of you does, you may be able to deduct all, part or none of your contribution based on your income. See tax deductibility of traditional IRA contributions, below.
No


Withdrawals
Traditional IRA
Roth IRA
When can I start withdrawals?
Withdrawals before age 59½ may be subject to an early withdrawal penalty.
If you've held the account for at least five years, you can withdraw money you contributed any time without penalty. There may be a penalty on your contributions' earnings if you withdraw them before age 59½.
Do I pay taxes on my withdrawals?
Yes, except for withdrawals of contributions that were not tax-deductible when you made them.
Withdrawals of earnings before age 59½ may be subject to tax.
Do I have to start withdrawing money at a certain age?
Yes, at age 70½ you must begin withdrawing annual minimums (known as required minimum distributions, or RMDs).
No


 

Tax deductibility of traditional IRA contributions
2016 Modified Adjusted Gross Income (MAGI) Phase-Out Ranges
2017 Modified Adjusted Gross Income (MAGI) Phase-Out Ranges
Filing Status
Deductibility
Filing Status
Deductibility
Single or Head of Household
Not Covered by Employer's Retirement Plan:
Any Amount
Full
Any Amount
Full
$61,000 or less
Full
$62,000 or less
Full
$61,001 - $70,999
Partial
$62,001 - $71,999
Partial
$71,000 or more
None
$72,000 or more
None
Married Filing Jointly
Neither Spouse Covered by Employer's Retirement Plan:
Any Amount
Full
Any Amount
Full
Both Spouses Covered:
$98,000 or less
Full
$99,000 or less
Full
$98,001 - $117,999
Partial
$99,001 - $118,999
Partial
$118,000 or more
None
$119,000 or more
None
One Spouse Covered by Employer's Retirement Plan - for Covered Spouse:
$98,000 or less Full $99,000 or less Full
$98,001 - $117,999 Partial $99,001 - $118,999 Partial
$118,000 or more None $119,000 or more None
One Spouse Covered by Employer's Retirement Plan - for Non-Covered Spouse:
$184,000 or less Full $186,000 or less Full
 $184,001 - $193,999 Partial $186,001 - $195,999 Partial
$194,000 or more  None $196,000 or above None

Learn more

There are a lot more details to these retirement plans, and it's important to understand all your options before deciding whether one or both are right for you. Here are a few places to learn more:

Ask a financial advisor

The most important part of helping determine retirement strategies may be a conversation with a financial advisor. At Edward Jones, we'll work to deeply understand your current needs, preferences and future goals to help develop a personalized strategy for you. Talk to a financial advisor today.

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