Traditional IRA or Roth IRA?
If you’re eligible to deduct a Traditional IRA contribution, your taxable income will be reduced this year and you will postpone paying taxes until you make withdrawals later.
If you prefer to forego a tax deduction this year in order to avoid paying taxes on withdrawals in retirement, consider making a contribution to a Roth IRA.
Here’s a brief summary of how these IRAs differ.
|Traditional IRA||Roth IRA|
|Can I contribute?||Yes, if you or your spouse have earned income* and you are under age 70½ .||Yes, if you or your spouse have earned income* and your income is not too high.|
|How much can I contribute in 2016?||The overall contribution limit to these IRAs is the lesser of:
100% of your earned income
$5,500 if you're under age 50; $6,500 if 50 or older.
|Can I deduct my contributions when I do my taxes?||Maybe. If you or your spouse were covered by a retirement plan at work, you might not be able to deduct your contributions.||No.|
|Are distributions taxable?||Yes.||No, if your account has been open for five years and you're 59½ or older.|
|Am I required to take distributions annually after turning 70½ ?||Yes.|
Required Minimum Distribution information
* Earned income includes wages, salaries, tips, professional fees, bonuses, commissions, self-employment income, nontaxable combat pay, military differential pay, taxable alimony and separate maintenance payments.
Both Sit Traditional and Sit Roth IRAs can be opened using the Sit IRA Application.