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Traditional vs. Roth IRAs: Which is right for you?
For 2020, your total contributions to all of your Traditional and Roth IRAs cannot be more than $6,000 ($7,000 if you’re age 50 or older), or your taxable compensation for the year, if your compensation was less than this dollar limit. Both Traditional and Roth IRAs have options for rollover from employee retirement plans, but there are a few differences to keep in mind.
Anyone who has a Traditional IRA, SEP-IRA, or distributions from many types of employer retirement plans can convert their savings to a Roth IRA.
For 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs.
Contributions are tax deductible (certain limitations apply) |
Contributions are not tax deductible |
Earnings are tax-deferred (withdrawals will be taxed as ordinary income, future tax rate will apply) |
Earnings are tax exempt (free from taxes when withdrawn) |
Required minimum distributions after age 72 (If you turned age 70 ½ prior to January 1, 2020, your RMDs are based on age 70 ½, not age 72 |
No required minimum distributions |
Early withdrawal penalty before age 59½ (exceptions may apply) |
No penalty on early withdrawals of principal |
Available to everyone (restrictions on tax deductible contributions apply) |
Not available to everyone (single-filers with a max of $124k modified AGI for full contribution, married-filers up to $196k modified AGI for full contribution) |