Comparing Roth and Traditional IRAs

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Choosing which type of IRA can seem extremely confusing and overwhelming. Below is a chart to give a quick reference to the key differences between the two. Of course congress can change these below at any time so it is always a best practice to work with a Financial Advisor that can help guide you in the right direction that fits your individual needs and goals.

Comparing Roth and Traditional IRAs

This table lays out the differences between the two types of IRAs. Keep in mind that Congress can change these rules at any time. The regulations may be very different when you retire.

Roth IRA  Traditional IRA
2018 Income Limits Eligible are single tax filers with modified AGIs of less than $135,000 (phase-out begins at $120,000); married couples filing jointly with modified AGIs of less than $199,000 (phase-out begins at $189,000).  Anyone with earned income can contribute, but tax deductibility is based on income limits and participation in an employer plan.
2018 Contribution Limits $5,500; $6,500, if age 50 or older  $5,500; $6,500, if age 50 or older
Withdrawal Rule Contributions can be withdrawn at any time, tax-free and penalty free. Five years after your first contribution and age 59½, earnings withdrawals are tax-free, too. No withdrawals required during account holder’s lifetime; beneficiaries can stretch distributions over many years.  Withdrawals are penalty free beginning at age 59½. Distributions must begin at age 70½; beneficiaries pay taxes on inherited IRAs.
Tax Treatment No tax break for contributions; tax-free earnings and withdrawals in retirement. Tax deduction in contribution year; ordinary income taxes owed on withdrawals.
Extra Benefits After five years, up to $10,000 of earnings can be withdrawn penalty-free to cover first-time home-buyer expenses. Qualified education and hardship withdrawals may be available without penalty before the age limit and five-year waiting period. These may be taxed.  Contributions lower taxpayer’s AGI, potentially qualifying him or her for other tax incentives. Up to $10,000 penalty-free withdrawals to cover first-time home-buyer expenses, but taxes due on distributions. Qualified education and hardship withdrawals also available.
All Items Description

Still not sure which to choose? Contact Suzanne Ward at 724-875-4625 option 3

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