What are the tax advantages of opening a Roth IRA versus a Traditional IRA account?
A Traditional IRA is fully deductible on your federal income tax return for individuals not participating in a Qualified Retirement Plan (ex: 401K). If you are an active participant in an employer sponsored retirement account, there are certain income guidelines you need to follow for single or married couples filing jointly. Distributions taken from a Traditional IRA are taxable as ordinary income. There’s no tax deduction for a ROTH IRA, but distributions will be totally tax free if held in the account for at least five (5) years and the account owner has reached age 59 1/2. The active participation rules in an employer sponsored retirement account do not apply to the ROTH IRA.
