The Roth IRA Versus the Traditional IRA: Which One Is Right for You?

Deciding whether to choose a Roth IRA or a Traditional IRA is an important decision and can have major financial consequences. Both options, however, are excellent ways to save for retirement. Let’s look as some of the biggest differences between the two.

Roth IRA

  • Your contributions are not tax-deductible
  • There is no mandatory distribution age
  • Earnings and principal are tax-free if you follow all rules and regulations
  • Not everyone can open a Roth IRA. Individuals with modified adjusted gross incomes above $137,000 are not eligible. The figure for married couples filing jointly is $203,000
  • Principal contributions can be withdrawn any time without penalty (certain conditions do apply)

Traditional IRA

  • Depending on your level of income, your contributions may be tax-deductible
  • You can make withdrawals without penalty beginning at age 59 1/2. Deductions are mandatory when you reach the age of 70 1/2
  • When you make withdrawals from the IRA, taxes must be paid on earnings
  • There are no income restrictions on opening an IRA, anyone can do so
  • Funds are withdrawn before age 59 1/2, including principal contributions, are subject to a 10 percent penalty (although there are exceptions to this rule)

For many individuals and couples, the Roth IRA is the better choice, thanks to its tax-free distributions and greater flexibility. As noted above, however, not everyone is eligible to open a Roth IRA. And of course, every person’s situation is unique. We invite you to contact us to discuss your concerns and goals before making this important decision.

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Estate Planning

Alexander S. Keenan, Esq.
Alexander S. Keenan, Esq.
Hi, I'm Alex. I consider myself an approachable attorney. I have called the beautiful Hudson Valley home for most of my life. After focusing on things like international commercial law and litigation, I took a step back and pivoted towards helping my community plan for life's greatest moments. My firm specializes in estate planning, small business law, and real estate law.