|Roth IRA||Traditional IRA|
|Main Benefit||Offers the potential for tax free growth.||Offers a tax deduction, if eligible, on the amount you contribute.|
|Do I pay tax on my distribution?||Not as long as you funded the Roth more than five years ago and you are age 59 1/2 or meet other requirements.||Not as long as you funded the Roth more than five years ago and you are age 59 1/2 or meet other requirements.|
|Can I make a tax-free distribution of my contributions?||Yes, because your contributions are not included in gross income.||No, not on deductible contributions. If you have after tax amounts the pro rata rule applies.|
|When do required minimum distributions (RMDs) begin?||Roth IRA owners have no RMDs.||RMDs generally begin by April 1 following the year you reach RMD age.6|
1 Brokerage IRAs with Brokerage Cash Services are eligible for this feature. Online access is required. Talk to your Financial Advisor for more information about the benefits of Brokerage Cash Services.
2 Traditional IRA distributions are generally taxed as ordinary income. Qualified Roth IRA distributions are tax-free provided a Roth account has been open for more than five years and the owner is at least age 59½, or as a result of their death, disability, or using the first-time homebuyer exception. Qualified Roth IRA distributions are not subject to state and local taxation in most states. Distributions from Traditional and Roth IRAs may be subject to an IRS 10% additional tax for early or pre-59½ distributions. For SIMPLE IRAs, the IRS penalty increases to 25% if a distribution is taken prior to two years from when the first deposit was made into the SIMPLE IRA if under 59½.
3Workplace retirement plans include 401(k), 403(b), SEP and SIMPLE IRA.
4 The “Retirement Plan” box in Box 13 of your W-2 tax form should be checked if you were covered by a retirement plan at work.
5 Your filing status is considered single for IRA contribution purposes if you did not live with your spouse during the tax year. Read IRS Publication 502 for more information https://www.irs.gov/pub/irs-pdf/p501.pdf.