IRAs are a great way for you to save for the future. Learn which type is right for you!
Your IRA can consist of a range of investments from savings accounts, stocks, bonds, and certificates of deposit or share certificates. You can contribute up to a certain limit each year into your IRA and if you're over 50, you are allowed an additional "catch-up" contribution. The tax advantages of a Traditional or Roth IRA depend on your annual income and whether you are covered by your company's retirement plan.
Below we have provided info to help you understand some of the differences between a Traditional and a Roth IRA.
|Can I contribute?||You are eligible to contribute if you earn compensation (or file a joint tax return with a spouse who earns compensation) and your modified adjusted gross income (MAGI) is less than or within the defined limits. See the MAGI chart below.||You are eligible to contribute if you are under age 73 and earn compensation (or file a joint return with a spouse who earns compensation).|
|Can I take an income tax deduction for my contribution?||No. Roth IRA contributions are not tax-deductible.||Whether your Traditional IRA contribution is deductible on your federal income tax return depends on your marital and tax-filing status, your MAGI, and whether you or your spouse actively participate in an employer-sponsored retirement plan. If neither you nor your spouse, if married, are an active participant, you are eligible to deduct your full contribution. Otherwise, see the MAGI chart below.|
How much can I contribute each year?
*Contribution limits are subject to annual COLAs
|Depending on your MAGI, you may be able to contribute up to $6,000 for 2022 and $6,500 for 2023, or if you are age 50 or older, up to $7,000 for 2022 and $7,500 for 2023.
*Contributions cannot exceed compensation.
|You can contribute up to $6,000 for 2022 and $6,500 for 2023, or if you are age 50 and older, up to $7,000 for 2022 and $7,500 for 2023.
*Contributions cannot exceed your annual compensation.
|What are the benefits?
*A Roth IRA qualified distribution occurs when money is withdrawn from your Roth IRA after you have owned a Roth IRA for at least five years, and you are age 59 1/2 or older, disabled, a first-time homebuyer, or are deceased.
|Because all Roth IRA contributions must be included in your taxable income, and therefore are not tax-deductible, you can withdraw your contributions at any time, tax and penalty-free.
Any earnings generated within the IRA are tax-deferred (you do not pay tax on the earnings until you withdraw them).
If you satisfy the qualified distribution requirements, you can withdraw the earnings tax-free, which is the ultimate advantage of having a Roth IRA.
You are never required to take money out of your Roth IRA, regardless of your age.
|Any earnings generated within the IRA are tax-deferred (you do not pay tax on the earnings until you withdraw them).
If your traditional IRA contributions are tax-deductible and therefore tax-deferred, you do not pay taxes on them until you withdraw the money.
Any after-tax amounts (non-deductible contributions) within your IRA can be withdrawn tax and penalty-free.
|Will I ever be required to withdraw the money?||No. Roth IRA owners are never required to take distributions. After your death, however, your beneficiaries may be subject to required distributions.||Yes. Traditional IRA owners are required to take annual minimum distributions beginning for the year they turn age 73. Your beneficiaries also will be subject to required distributions.|
What are the MAGI Limits?
MAGI is your adjusted gross income before certain deductions or adjustments to income are made. MAGI limits are subject to annual cost-of-living adjustments (COLAs).
||Full Contribution||Partial Contribution||No Contribution Allowed|
|Single||2023||$138,000 or less||$138,000 - $153,000||$153,000 or more|
|2022||$129,000 or less||$129,000 - $144,000||$144,000 or more|
|Married, filing jointly||2023||$218,000 or less||$218,000 - 228,000||$228,000 or more|
|2022||$204,000 or less||$204,000 - 214,000||$214,000 or more|
Depending on your MAGI, you may be able to contribute up to $6,000 for 2022 and $6,500 for 2023, or if you are age 50 and older, up to $7,000 for 2022 and $7,500 for 2023.
||Active Participant||Full Contribution||Partial Contribution||No Contribution Allowed|
|Single||2023||Yes||$73,000 or less||$73,000 - $83,000||$83,000 or more|
|2022||$68,000 or less||$68,000 - $78,000||$78,000 or more|
|Married, filing jointly
|$116,000 or less||$116,000 - $136,000||$136,000 or more|
|2022||$109,000 or less||$109,000 - $129,000||$124,000 or more|
Married, filing jointly
|$218,000 or less||$218,000 - $228,000||$228,000 or more|
|2022||$204,000 or less||$204,000 - $214,000||$214,000 or more|
You can contribute up to $6,000 for 2022 and $6,500 for 2023, or if you are age 50 and older, up to $7,000 for 2022 and $7,500 for 2023.