Compare Traditional vs. Roth IRAs

Couple holding hands on the sea shore Please Note: The contribution limits for both Traditional IRAs and Roth IRAs remained the same for tax year 2014 as in 2013. The maximum you can contribute is $5,500 ($6,500 if you're age 50 or older).

Traditional IRARoth IRA
Comparison- Traditional IRA vs Roth IRA
Who can benefit the most

Traditional IRAs can benefit people who:

  • Think they may be in a lower tax bracket in retirement.
  • Can deduct their contributions from their federal taxes.
  • Earn too much to be eligible to contribute to a Roth IRA.

Traditional IRAs may benefit people who want to prepare for retirement or other long-term financial goals. They have two primary advantages:

  • Tax-deductible contributions
  • Tax-deferred growth

Roth IRAs may benefit people who:

  • Think they might be in a higher tax bracket in retirement.
  • Want to leave assets to their heirs.
  • May want to retrieve their original contributions before retirement.
  • Are age 70½ or older and want to keep contributing to an IRA (provided they have taxable compensation equal to or greater than the amount of their contribution).
Who is eligibleAnyone with taxable compensation who is under age 70½ can make pre-tax (nondeductible) contributions to a Traditional IRA.

Anyone with taxable compensation who meets the adjusted gross income requirements can make after-tax contributions to a Roth IRA.

Individuals who are age 70½ or older and have taxable compensation are eligible to make a Roth IRA contribution (but would not be eligible to make a Traditional IRA contribution).

How much you can contribute

For people under age 50:
For the 2014 tax year:
Up to $5,500 each year.

For people age 50 or older:
For the 2014 tax year:
Up to $6,500 each year.

For people under age 50:
For the 2014 tax year:
Up to $5,500 each year.

For people age 50 or older:
For the 2014 tax year:
Up to $6,500 each year.

When you can make withdrawals

Although federal penalties and taxes apply to withdrawals before age 59½, you can take a penalty-free withdrawal at any age to make a qualified first-home purchase ($10,000 withdrawal limit) or to meet qualified higher-education expenses.

Additional exceptions also apply.

Since you make Roth contributions with after-tax money, you can withdraw your original contributions at any age, free of federal taxes and penalties. If your Roth IRA has been open for at least five years, you can withdraw earnings free of federal taxes after age 59½, or up to $10,000 at any age to make a qualified first-home purchase. Additional exceptions also apply.

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