What’s the difference between a Roth and a Traditional IRA?
With a traditional IRA, your contributions may be tax-deductible and earnings are tax-deferred, meaning you pay taxes on most IRA funds upon withdrawal. In contrast, Roth IRA contributions are always made with after-tax dollars, but qualified withdrawals are tax-free – including all your earnings! As for similarities, the aggregate contribution limit to either a Roth or traditional IRA is $3,000 per year or 100% of your compensation (whichever is less). And both offer the flexibility to use funds not only for retirement, but also for first-time home purchase and higher-education expenses.
