Traditional IRA vs Roth IRA

Traditional IRA vs Roth IRA

God has given us a very great gift of intellect in each of us. With the capability of this intellect, every one comprehends, distinguishes and compares. Using their brains in these three things they came to the result of perceiving anything in any context that they desire. Likewise, sticking to our topic we are here to compare between the two major retirement investment policies. Those policies are the traditional ira and the roth ira. Here, we present you a table of comparison to understand both of it properly. The type of individual retirement account you choose can significantly affect you and your family’s long-term savings. So it’s worth understanding the differences between traditional IRA and Roth IRA in order to select the best one for you.

1. ·         Contributions are not tax deductible


Tax deductible contributions (depending on income level)
2. ·         No Mandatory Distribution Age


Withdraws begin at age 59 1/2 and are mandatory by 70 1/2.
3. ·         All earnings and principal are 100% tax free if rules and regulations are followed


Taxes are paid on earnings when withdrawn from the IRA
4. ·         Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits, etc.)


Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits, etc.)
5. Available only to single-filers making up to $95,000 or married couples making a combined maximum of $150,000 annually Available to everyone; no income restrictions
6. ·         Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).


All funds withdrawn (including principal contributions) before 59 1/2 are subject to a 10% penalty (subject to exception).
2015 Contribution Limits $5,500; $6,500, if age 50 or older $5,500; $6,500, if age 50 or older


2015 Income Limits Single tax filers with modified AGIs of less than $131,000 (phase-out begins at $116,000); married couples filing jointly with modified AGIs of less than $193,000 (phase-out begins at $183,000) Anyone with earned income can contribute but tax deductibility is based on income limits and participation in employer plan


Thus, one can find a great difference between the conditions in both of the IRAs but a similarity in the strictness on the investor. Nevertheless, the government and the banks come up with new ideas and new amazing ventures. Both of the body is working for individual retirement future and endeavoring to secure their old life. They are allowing even an old man to become independent from their son and grandson and also allowing the new generation to develop a new idea of selflessness instead of becoming selfish. We can conclude by comparing both of it that it has their own limitation. It is up to the individual or investor to decide whether he wants to secure its money from tax or he wants to invest free from any limitation of age or penalties.

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