IRAs are a great way for you to save for the future. Your IRA can consist of a range of investments from savings accounts, stocks, bonds, and certificates of deposit or share certificates. You can contribute up to a certain limit each year into your IRA and if you're over 50, you are allowed an additional "catch up" contribution. The tax advantages of a Traditional or Roth IRA depend on your annual income and whether you are covered by your company's retirement plan.
Below we have provided a table to help you understand some of the differences between a Traditional and Roth IRA.
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Traditional IRA |
Roth IRA |
| Primary benefits |
The earnings are tax-deferred until withdrawn and for many taxpayers, the contributions made are tax deductible. |
All qualified distributions (defined as withdrawals allowed from the plan without penalty) are tax-free. |
| Income limits for contributions |
There are no income limits for contributing to a traditional IRA, but your ability to deduct contributions depends on your modified adjusted gross income (MAGI), your filing status, and whether you (or your spouse) have a workplace retirement plan.
In 2025:
Single or Head of Household (and covered by retirement plan at work): Fully deductible if MAGI < $79,000; Partially deductible if MAGI $79,000-$89,000; Not deductible if MAGI > $89.000
Married filing jointly (and covered by a retirement plan at work): Fully deductible if MAGI < $126,000; Partially deductible if MAGI $126,000-$146,000; Not deductible if MAGI > $146,000
Married filing jointly (spouse covered by a retirement plan at work): Fully deductible if MAGI < $236,000; Partially deductible if MAGI $236,000-$246,000; Not deductible if MAGI > $246,000
Married filing separately (and covered by retirement plan at work): Partially deductible if MAGI < $10,000; Not deductible if MAGI > $10,000.
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How much you earn limits how much you can contribute to a Roth IRA.
In 2025:
Single - must have a MAGI < $150,000
Joint filers - must have MAGI < $236,000
Your contribution can be reduced or "phased out" if your MAGI approaches these limits:
Single: $150,000-$165,000
Married filing jointly: $236,000-$246,000
Married filing separately: $0-$10,000 |
| Contribution limits |
Individuals can save up to $7,000 through an individual retirement account (IRA)
|
Same |
| Catch-up contributions |
Additional $1,000 if 50 years of age by end of the tax year |
Same |
| Tax advantages |
All IRAs are tax deferred. You do not owe taxes on any earnings until you make a withdrawal. If you qualify, you may be able to deduct your contributions to a traditional IRA on your federal income tax return, depending on tax-filing and active-participant statuses, as well as income amount.
Earnings grow on a tax-deferred basis. Earnings are added to taxable income for the year distributed.
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Contributions to a Roth IRA are not tax deductible. Earnings grow tax deferred. A Qualified Distribution from a Roth IRA is tax-free.
Earnings are tax-free if you have had an account for five years and one of the following applies:
After age 59½
Death
Disability
First-time home purchase (up to $10,000)
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| Age for required distributions |
Mandatory distributions must begin by April 1 following the year you reach age 73. Beneficiaries are also subject to this rule. |
No. Distributions are not required during your lifetime. Distributions may be taken at any time. |
| Withdrawal penalties |
There is a 10% penalty on withdrawals prior to age 59½ except for withdrawals due to:
Death
Disability
Pre-59½ periodic payments
Qualifying medical expenses
Health insurance premiums while unemployed
Withdrawals up to $10,000 toward the purchase of a first home
Conversion to a Roth IRA
Higher-education expenses
The portion of a withdrawal that is the return of nondeductible contributions is not subject to penalty.
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There is a 10% penalty applied to the earnings portions prior to age 59½ except for withdrawals due to:
Death
Disability
Pre-59½ periodic payments
Qualifying medical expenses
Health insurance premiums while unemployed
Withdrawals up to $10,000 toward the purchase of a first home
Higher-education expenses
Withdrawals of after-tax contributions are not subject to penalty.
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| Conversion options
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A traditional IRA can be converted to a Roth IRA if your income is within IRS limits
The amount converted is included in taxable income for the year.
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A Roth IRA cannot be converted into any other kind of IRA. |
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