Roth IRA
VS
Traditional IRA
Tax Treatment
Contributions
Contributions are made with after-tax dollars.
Contributions are made with pre-tax dollars.
Withdrawals
Qualified withdrawals are tax-free.
Withdrawals are taxed as ordinary income.
Eligibility
Income Limits
Has income limits for contributions.
No income limits for contributions.
Withdrawal Rules
Age for Withdrawals
Taxed upon early withdrawals.
Penalty-free withdrawals after age 59½.
Required Minimum Distributions (RMDs)
RMDs must begin at age 72.
No RMDs during the account holder’s lifetime.
Investment Choices
Investment Flexibility
More flexibility in investment options.
Limited to the brokerage’s offerings.
Overall Benefits
Long-term Growth Potential
Potential for tax-free growth.
Tax-deferred growth until withdrawal.
