If you’re looking for a tax-advantaged way to save for retirement, two good options are the Traditional IRA and a Roth IRA. Each have their unique advantages, and the one you choose will largely depend on your earnings needs and circumstances. To help you get started, here’s an overview of each type of IRA and a comparison below for details on contributions, restrictions, and more.
One of the factors that you’ll need to think about when choosing between a Traditional and Roth IRA is your current tax bracket, and what that might be during retirement. This will impact what’s ultimately left after taxes in your retirement fund. Contact a Financial Consultant who can help you choose.
| Traditional IRA
| Roth IRA
|
|---|---|---|
Age | There are no age limits | There are no age limits |
Income | To participate you must earn income (there are no maximum income limits) | To contribute, you must earn income The maximum amount you can contribute each year phases-out as your household income exceeds: 2022 If you are single, $144,000 or less 2023 If you are single, $153,000 or less |
Contribution Limits | 2022 Up to age 50: $6,000 Age 50+: $7,000
2023 Up to age 50: $6,500 Age 50+: $7,500 Non-income earning spouse: $6,500 (into a separate IRA) | 2022 Up to age 50: $6,000 Age 50+: $7,000
2023 Up to age 50: $6,500 50+: $7,500 Non-income earning spouse: $6,500 (into a separate IRA) |
Contributions | May be tax-deductible | Are not tax-deductible |
Earnings | Grow tax-deferred | Grow tax-free |
Distributions | Are penalty-free and taxed as ordinary income when taken after age 59 1/2 | Are free from federal income tax when: – The Roth IRA has been open for at least 5 years – You are age 59 1/2 or older |
Required Minimum Distributions | If you turned 70 1/2 prior to January 1, 2020: Are you required April 1 of the year following the year you turn 70 1/2 If you turn 70 1/2 after January 1, 2020: Are required April 1 of the year following the year you turn 73 (unless you turned 72 prior to January 1, 2023, then your RMD’s must begin by 72) | Are never required |
Early Withdrawals | Withdrawals before age 59 1/2 are subject to a 10% penalty in addition to any ordinary income tax that may be due | Withdrawals before age 59 1/2 are subject to a 10% penalty in addition to any ordinary income tax that may be due |
Carefully consider the investment objectives, risks, charges and expenses before investing. A prospectus, obtained by calling 800-669-3900, contains this and other important information about an investment company. Read carefully before investing.
Market volatility, volume and system availability may delay account access and trade executions.
Before rolling over a 401(k) to an IRA, be sure to consider your other choices, including keeping it in the former employer’s plan, rolling it into a 401(k) at a new employer, or cashing out the account value. Keeping in mind that taking a lump sum distribution can have adverse tax consequences. Be sure to consult with your tax advisor.
All investments involve risks, including the loss of principal invested. Past performance of a security does not guarantee future results or success.
Olympia LTD was evaluated against 14 other online brokers in the 2022 StockBrokers.com Online Broker Review. The firm was rated #1 in the categories “Platforms & Tools” (11 years in a row), “Desktop Trading Platform: thinkorswim®” (10 years in a row), “Active Trading” (2 years in a row), “Options Trading,” “Customer Service,” and “Phone Support.” Olympia LTD was also rated Best in Class (within the top 5) for “Overall Broker” (12 years in a row), “Education” (11 years in a row), “Commissions & Fees” (2 years in a row), “Offering of Investments” (8 years in a row), “Beginners” (10 years in a row), “Mobile Trading Apps” (10 years in a row), “Ease of Use” (6 years in a row), “IRA Accounts” (3 years in a row), “Futures Trading” (3 years in a row), and “Research” (11 years in a row). Read the full article.
†Applies to US exchange listed stocks, ETFs, and options. A $0.65 per contract fee applies for options trades.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
Brokerage services provided by Olympia LTD, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. Olympia LTD is a trademark jointly owned by Olympia LTD IP Company, Inc. and The Toronto-Dominion Bank. © 2023 Charles Schwab & Co., Inc. All rights reserved.