IRA Quick Facts

 
  Traditional IRA Roth IRA
Account descriptions Your earnings grow tax-deferred and, if eligible, your contributions may be tax-deductible as well.

You can also roll over your 401(k) or employer-sponsored qualified retirement plan to consolidate your retirement assets.
You make after-tax contributions but the money you withdraw after retirement may be free from federal taxes.
Eligibility to contribute You can contribute up to the year you turn 70 1/2 as long as you have earned income. You can contribute at any age as long as you have earned income and meet the income limitations.
Maximum annual contribution $5,500 ($6,500 age 50 and older) for 2013 & 2014. $5,500 ($6,500 age 50 and older) for 2013 & 2014.
Tax-deductible contributions You can deduct your contributions if you meet the eligibilty requirements. Contributions are made in after-tax dollars if you meet the eligibility requirements.
Taxation of earnings and withdrawals
  • Tax deductible contributions and earnings are taxed as ordinary income when withdrawn.
  • After tax contributions are withdrawn tax-free.
  • Contributions (all are made after tax) and earnings are income tax free if the account is held for 5 years and are withdrawn for a qualified reason.
  • Withdrawal of earnings for nonqualified reasons may be taxed as ordinary income and subject to an early withdrawal penalty.
Withdrawal penalities 10% IRS early withdrawal penalty if withdrawn before age 59 1/2 unless exception applies.
  • No penalties for withdrawals of contributions.
  • 10% IRS early withdrawal penalty if earnings withdrawn before age 59 1/2 unless exception applies.
Required withdrawals Must begin at age 70 1/2. Upon death of owner

 

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