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FAQ
What is the difference between a Roth IRA and a Traditional IRA?
Traditional IRA | Roth IRA |
---|---|
Tax Benefits | |
Contributions may be tax-deductible Earnings grow tax-deferred Withdrawals generally are taxable |
Contributions are not tax-deductible Earnings generally grow tax-free Withdrawals generally are tax-free |
Contributions | |
Maximum the lesser of | |
$6,000 per year (for 2020) or the individual's taxable compensation for the year |
$6,000 per year (for 2020) or the individual's taxable compensation for the year |
Catch-Up | |
An additional $1,000 per year, beginning in the year the individual turns 50 |
An additional $1,000 per year, beginning in the year the individual turns 50 |
Eligibility | |
Any age Must have taxable compensation No maximum income limits |
Any age Must have taxable compensation Maximum income limits |
Withdrawals | |
Withdrawals after 59½ without tax penalty Withdrawals before 59½ generally subject to a 10% tax penalty unless exception1 applies Mandatory withdrawals starting at 72 |
Withdrawal of original contributions without tax penalty Withdrawal of earnings before 59½ may be subject to a 10% tax penalty unless a qualified distribution or an exception1 applies No mandatory withdrawals |
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