Comparison of traditional IRAs and Roth IRAs
|Traditional IRA||Roth IRA|
|What is the maximum annual contribution (2015)?*||Lesser of $5,500 or 100% of earned income ($6,500 if age 50 or older)||Lesser of $5,500 or 100% of earned income ($6,500 if age 50 or older)|
|What is the maximum annual contribution to a spousal IRA (for a spouse with little or no earned income) (2015)?*||Lesser of $5,500 or 100% of combined earned income ($6,500 if age 50 or older)||Lesser of $5,500 or 100% of combined earned income ($6,500 if age 50 or older)|
|Is your ability to contribute phased out for higher incomes?||No||Yes|
|Is your contribution tax deductible on your federal income tax return?||Yes. Fully deductible if neither you nor your spouse is covered by a retirement plan. Otherwise, your deduction depends on your income and filing status.||No. Contributions to a Roth IRA are never tax deductible.|
|How are earnings taxed?||Tax deferred||Tax deferred; tax free if you meet the requirements for a qualified distribution|
|Are distributions included in your taxable income?||Yes, to the extent that the distribution consists of tax-deductible contributions and investment earnings||Qualified distributions are completely tax free; otherwise, the portion that represents investment earnings is included in your taxable income|
|Are you required to take distributions during your life?||Yes, the required minimum distribution (RMD) rule applies after you reach age 70½||No, distributions are not required until after your death|
|Can contributions be made after age 70½?***||No||Yes, if you have earned income|
|Does a 10% early withdrawal penalty apply to distributions made before age 59½?||Yes, on the taxable portion of the distribution**||Yes, on the taxable portion of the distribution**|
|Includable in your taxable estate at death?||Yes||Yes|
|Do your beneficiaries pay income tax on distributions after your death?||Yes, to the extent that a distribution represents deductible contributions and investment earnings||Generally no, as long as the account has been in existence for at least five years|
*Note: Certain low- and middle-income taxpayers may be able to claim a partial income tax credit for amounts contributed to a traditional IRA or Roth IRA. The credit is phased out based on income.
**There are a number of exceptions to the early withdrawal penalty (e.g., distributions made due to qualifying disability). See Premature Distribution Rule (RT30-05-0500) for details. Special rules apply to amounts converted from a traditional IRA to a Roth IRA.
***Rollover contributions can be made regardless of age or earned income.