Comparing Traditional IRAs to Roth IRAs

Are you curious about how traditional and Roth IRAs compare? When it comes to planning your future, you should know how to invest, so you make the most out of your contributions. Below we outline important retirement plan characteristics by comparing IRA options and what you should consider when deciding how to invest for retirement.


Traditional IRAs provide many tax benefits when you invest for retirement. You can either make full or partial deductions off your contributions depending on certain qualifications. During retirement, your distributions or withdrawals are taxable.

Roth IRAs are like traditional IRAs, but Roth IRAs do not require you to pay taxes on distributions or withdrawals during retirement. This is because you invest post-tax compensation when you make your contributions.

Another difference between the two IRAs is the required minimum distributions (RMDs). Traditional IRAs require you to start taking funds from your account(s) once you reach the age of 70 ½. Roth IRAs do not RMDs.


Who can make contributions

You or your spouse can make contributions from taxable compensation to either IRA. Roth IRAs allow you to make contributions at any time without an age limit, whereas traditional IRAs only allow you to make contributions until you reach the age of 70 ½.

Tax deductibles

You can deduct contributions from a traditional IRA if you qualify. This is because you pay taxes on those funds later during retirement. Roth IRA contributions are not tax deductible. Keep in mind that traditional IRA deductions rely on two criteria. Your income cannot exceed certain levels and if your workplace covers the retirement plan.

Investment limitations

There are annual contribution limitations for both IRAs. Anyone of any age can invest up to $5,500 to his or her IRA in 2018. You can invest an additional $1,000 if you are 50 years of age or older. Looking forward to 2019, the annual investment total increases to $6,000. Again, you will be able to invest an additional $1,000 if you are 50 years of age or older.

Contribution deadline and withdrawals

You can make contributions to either IRA for 2018 up until April 15, 2019. You can make withdrawals at any time for either IRA. Keep in mind that any withdrawals by anyone under the age of 59 ½ (unless you qualify for an exemption) can result in a 10% tax on early distributions.

Required minimum distributions (RMDs)

The minimum required withdrawals you must take out of your traditional IRAs each year are called required minimum distributions (RMDs). Once you are the age of 70 ½, the federal government mandates you withdraw a specified minimum amount, and it is included as part of your yearly taxable income. As stated above, traditional IRAs require RMDs and Roth IRAs do not.


The most differentiating characteristic of the two IRAs is when you must pay taxes. You can pay takes now whenever you make contributions to a Roth IRA or wait and pay taxes when you make withdrawals with a traditional IRA. Roth IRAs do not require RMDs, and you can continue to make contributions, even after the retirement age.

It is important to note that currently there are lower interest rates available versus previous years. Investing in a Roth IRA now might save you money in the long run. But there is no guarantee that current rates are your best option because interest rates are always changing depending on how the economy is performing.

If you have additional questions on comparing IRA options, speak with our IRA Specialist, who can provide you with additional information.