The Traditional IRA vs. The Roth IRA
This section of the guide compares the features between the two most popular IRAs and can help you determine which IRA is best for you. Eligible individuals can contribute to a tax-deductible traditional IRA, to a non-deductible Roth IRA or to a combination of the two. However, no more than a combined total of $4,000/$5,000 if age 50 or older in 2006 (or 100% of earned income if less) may be contributed to these accounts each year.
Individuals who are not eligible for deductible contributions to a Traditional IRA or to make contributions to a Roth IRA may still make non-deductible contributions to a Traditional IRA and receive the benefits of tax-deferred growth.
| Eligibility |
| Traditional IRA |
Up to the year you turn age 70½ as long as you have earned income; a nonworking spouse of a wage earner up to the year the nonworking spouse turns age 70½. |
| Roth IRA |
Any age as long as you have earned income (subject to income limits below); a nonworking spouse of a wage earner. |
| Key tax characteristics |
| Traditional IRA |
Earnings grow tax-deferred; potentially tax-deductible contributions. Distributions are generally included in gross income and therefore taxable. |
| Roth IRA |
Earnings grow tax-deferred;distributions are federally tax-free if age 59½ or older and account held for five years. |
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