Let’s explore some of the differences between a traditional IRA and a Roth IRA.

With a traditional IRA, your contributions may be tax-deductible and can grow tax-deferred. In retirement, traditional IRA distributions are taxable as ordinary income. With a Roth IRA, your contributions are non-deductible, but have the opportunity to grow tax free. At retirement age, distributions from a Roth IRA are tax free.

Here is a list of some of the primary differences:

Traditional IRA Roth IRA
Tax Treatment of Contributions: Tax-deductible Non-deductible
Tax Treatment of Distributions: Taxable as ordinary income Tax free
Mandatory Distributions: Mandatory at age 70.5 No mandatory distributions
Early Withdrawal Penalty: 10% on entire amount 10% only on earnings

Although the above table highlights some of the major differences between a traditional IRA and a Roth IRA, there are a number of other nuances not reflected. Please feel free to contact us to discuss which makes the most sense for your financial situation.