Whats the difference between a Roth and 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 $5,000* per year, or 100% of your compensation (whichever is less). Persons over age 50 can make an additional “catch-up” contribution of $1,000* to either IRA plan. And both offer the flexibility to use the funds not only for retirement, but also for a first-time home purchase and higher-education expenses.
