Contribution limits – $5,500 (age 49 and under); $6,500 age 50 and older for 2018
Contribution deadline – Tuesday, April 17, 2018 (for the 2017 tax year)
Note: A Rollover IRA is a Traditional IRA often used for rollovers from an old workplace plan, such as a 401(k).
IRA stands for Individual Retirement Account, and it’s basically a savings account with big tax breaks, making it an ideal way to sock away cash for your retirement. A lot of people mistakenly think an IRA itself is an investment – but it’s just the basket in which you keep stocks, bonds, mutual funds and other assets.
Roth IRA an individual retirement account allowing a person to set aside after-tax income up to a specified amount each year. Both earnings on the account and withdrawals after age 59½ are tax-free. It’s created in 1997 and named for Senator William Victor Roth II (1921–2003) of Delaware, who proposed this in Congress.
|Roth IRA||Traditional IRA|
|Tax benefits||Tax-free growth and tax-free qualified withdrawals.||Tax-deferred growth and tax-deductible contributions.|
|Age requirements||Contribute at any age.||Contribute until you’re 70½.|
|Income requirements||Your income affects how much you can contribute.||Your income does not affect how much you can contribute.|
|Withdrawal taxes||You won’t pay taxes when you withdraw your contributions, and you won’t pay federal taxes on your earnings, as long as the five-year aging requirement has been met.||You will pay taxes when you withdraw your pre-tax contributions and when you withdraw any earnings.|
|Early-withdrawal penalties||If you make withdrawals before you’re 59½, you might have to pay taxes on your earnings plus a 10% additional tax.||If you make withdrawals before you’re 59½, you might have to pay a 10% penalty.|
|Required minimum distributions (RMDs)||RMDs do not apply during your lifetime.||RMDs must be taken starting in the year you turn 70½.|