www.HowCanIRetire.net

Traditional IRA vs Roth IRA

Differences between a Roth IRA and a Traditional IRA

The Roth IRA vs IRA.
The Roth IRA is good if you are older than 701/2 since you can't open a Traditional IRA at that age and it is the only choice of the two.

If you are earning a lot of money, then I like the Traditional IRA. Making a maximum IRA contribution for the deduction would be good for me if I am at the margin of a tax rate increase.
If the contribution deduction keeps me from the tax rate jump, I would save a lot of money there.

I would like the Roth IRA if I were going to be retiring with remarkably less income that when I am working.

In that case, I would consider that the IRA distribution would be income tax free (as long as the criteria is met)..

If I was thinking about setting my beneficiary with a good amount of income after my death, the Roth IRA would be better for me. It would be better for them actually as I would be dead, and they would get the benefit.

These are known as Individual Retirement Arrangements.

There are a lot of specifics in the107 page printable file entitled IRS Publication 590.

Here's the list of differences right from the IRS

How Are a Traditional IRA and a Roth IRA Different?


Question	Answer	Answer
	Traditional IRA?	Roth IRA?
Is there an age limit on when I can open and contribute to a ............... .	Yes. You must not have reached age 701/2 by the end of the year. See Who Can Open a Traditional IRA? in chapter 1.	No. You can be any age. See Can You Contribute to a Roth IRA? in chapter 2.
If I earned more than $5,000 in 2011 ($6,000 if I was 50 or older by the end of 2011), is there a limit on how much I can contribute to a .................. .	Yes. For 2011, you can contribute to a traditional IRA up to: • $5,000, or • $6,000 if you were age 50 or older by the end of 2011. There is no upper limit on how much you can earn and still contribute. See How Much Can Be Contributed? in chapter 1.	Yes. For 2011, you may be able to contribute to a Roth IRA up to: • $5,000, or • $6,000 if you were age 50 or older by the end of 2011, but the amount you can contribute may be less than that depending on your income, filing status, and if you contribute to another IRA. See How Much Can Be Contributed? and Table 2-1 in chapter 2.
Can I deduct contributions to a ....... .	Yes. You may be able to deduct your contributions to a traditional IRA depending on your income, filing status, whether you are covered by a retirement plan at work, and whether you receive social security benefits. See How Much Can You Deduct? in chapter 1.	No. You can never deduct contributions to a Roth IRA. See What Is a Roth IRA? in chapter 2.
Do I have to file a form just because I contribute to a .................. .	Not unless you make nondeductible contributions to your traditional IRA. In that case, you must file Form 8606. See Nondeductible Contributions in chapter 1.	No. You do not have to file a form if you contribute to a Roth IRA. See Contributions not reported in chapter 2.
Do I have to start taking distributions when I reach a certain age from a .... .	Yes. You must begin receiving required minimum distributions by April 1 of the year following the year you reach age 701/2. See When Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1.	No. If you are the original owner of a Roth IRA, you do not have to take distributions regardless of your age. See Are Distributions Taxable? in chapter 2. However, if you are the beneficiary of a Roth IRA, you may have to take distributions. See Distributions After Owner’s Death in chapter 2.
How are distributions taxed from a .... .	Distributions from a traditional IRA are taxed as ordinary income, but if you made nondeductible contributions, not all of the distribution is taxable. See Are Distributions Taxable? in chapter 1.	Distributions from a Roth IRA are not taxed as long as you meet certain criteria. See Are Distributions Taxable? in chapter 2.
Do I have to file a form just because I receive distributions from a ......... .	Not unless you have ever made a nondeductible contribution to a traditional IRA. If you have, file Form 8606.	Yes. File Form 8606 if you received distributions from a Roth IRA (other than a rollover, qualified charitable distribution, one-time distribution to fund an HSA, recharacterization, certain qualified distributions, or a return of certain contributions).

Disclaimer

Disclaimer: Before you make an investment get legal or professional advice.