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Roth IRAs Vs. Traditional IRAs
Selecting an IRA: Which One Is Right for You?
Traditional IRAs (individual retirement accounts) and Roth IRAs each have distinct benefits and eligibility requirements. Your unique financial needs may make either a traditional IRA or Roth IRA more suitable for your particular situation.
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Compare the Benefits of Traditional IRAs & Roth IRAs
Traditional IRA |
Roth IRA |
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| Are contributions tax-deductible? |
Yes (if eligibility requirements are met) |
No
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| Are earnings tax-deferred? |
Yes
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Yes
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| Are withdrawals tax-free? |
No1
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Yes (if qualified)2
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| Are minimum distributions required beginning at age 70 1/2? |
Yes
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No
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1 For 2006 and 2007, qualified charitable distributions for individuals age 70 1/2 or older may be income-tax-free. Starting in 2007, a qualified Health Savings Account (HSA) funding distribution may be income-tax-free.
2Withdrawals from a traditional IRA, and any earnings from a Roth IRA, prior to AGE 59 1/2 may be subject to ordinary income taxes and 10% IRS penalty.
Determine Your Eligibility to Contribute to an IRA
Traditional IRA. You can contribute to a traditional IRA if you (or your spouse) have earned income and are under age 70. (You cannot make a contribution for the tax year in which you reach age 70 1/2 or for subsequent years.) However, your income and participation in an employer-sponsored retirement plan determine whether your contributions are deductible. Roth IRA. If you file a single tax return for tax year 2006, you may contribute to a Roth IRA if you have earned income and your modified adjusted gross income (MAGI) does not exceed $110,000. The full contribution amount is only available if your MAGI is $95,000 or less. You are limited to a partial contribution if your MAGI is between $95,000 and $110,000. For tax year 2007, the MAGI phase-out range is between $99,000 and $114,000 for a single tax filer. If you are married and file a joint tax return with your spouse for tax year 2006, you may contribute to a Roth IRA if you or your spouse have earned income and your MAGI does not exceed $160,000. The full contribution amount is only available if your joint MAGI is $150,000 or less. You and your spouse are limited to partial contributions if your MAGI is between $150,000 and $160,000. For tax year 2007, the MAGI phase-out range is between $156,000 and $166,000 for joint tax filers.Ask Your Financial Advisor About Traditional IRAs & Roth IRAs
If you need help determining whether a traditional IRA or Roth IRA is more suitable for your situation, your Financial Advisor can provide you with a personalized IRA analysis as well as a variety of other IRA services.