| Traditional IRA |
Roth IRA |
| Eligibility |
- You must have earned income in the year the contribution is made.
- A non-working spouse is also eligible to contribute up to $6,000 in 2022, or $7,000 if age 50 or above, based on working spouse's income.
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- No age limit, you must have a modified adjusted gross income (MAGI) below $129,000 if single or $198,000 if married and filing jointly.
- The maximum contribution limit is phased out for those individuals with AGI between $129,000 and $144,000 (single) and $204,000 and $214,000 (joint).
- A non-working spouse is also eligible to contribute up to $6,000 in 2022, or $7,000 if age 50 or above. The same higher annual maximum contribution limits apply.
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| Maximum contribution |
| 2022: $6,000 annually |
2022: $6,000 annually |
| Catch up contribution |
| If you are age 50 or older in the year of the contribution, eligible IRA holders can make an additional contribution of $1,000. |
If you are age 50 or older in the year of the contribution, eligible IRA holders can make an additional contribution of $1,000. |
| Tax-deferred growth |
- Investment growth is tax-deferred.
- Contributions are possibly tax deductible.
- Taxes are not paid on deductible contributions and all earnings until money is withdrawn.
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Investment growth is tax-deferred and earnings can be withdrawn tax-free if the account has been open for at least five years and if certain requirements are met. |
| Contribution tax deductibility |
- If neither you nor your spouse is an active participant in an employer-sponsored plan, your entire contribution is tax deductible.
- If you are an active participant in an employer-sponsored plan, and (subject to certain phaseout provisions) your MAGI in 2022 does not exceed $68,000 (single) or $109,000 (joint).
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Contributions are not tax deductible. |
| Required distribution |
| Distributions must begin by April 1 of the calendar year following the year you reach 70 ½ if you were born prior to 7/1/1949 or age 72 if you were born after 6/30/1949 and continue each year by December 31. |
There is no required date for beginning distributions. |
| Taxable amounts withdrawn prior to age 59 ½ may be subject to an additional 10% penalty tax. |
Premature withdrawals may be subject to federal and state taxes plus a 10% federal tax penalty. |
| Qualified early withdrawals |
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Circumstances in which withdrawals can be made penalty free prior to age 59 ½ include:
- IRA owner's death or disability
- timely removal of excess contributions
- substantially equal periodic payments made over life expectancy
- purchase of health insurance while unemployed
- the purchase of a first home (up to $10,000)
- for certain higher educational expenses
Taxes apply to all earnings and all deductible contributions withdrawn.
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Withdrawals are tax free if the account is open for at least five years and:
- the withdrawals are made after attaining age 59½
- your death or disability
- to purchase a first time home (up to $10,000)
Distributions that are not qualified distributions are included in income to the extent attributable to earnings.
A 10% penalty tax will apply to the taxable portion of the non-qualified distribution unless an exception applies for individuals under the age of 59½.
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| Rollovers and transfers |
- When a Traditional IRA is converted to a Roth IRA, taxes must be paid on deductible contributions and all earnings.
- Transfers to and from other Traditional IRAs are permitted.
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- When a Traditional IRA is converted to a Roth IRA, taxes must be paid on all pre-tax contributions and all earnings.
- Transfers to and from other Roth IRAs are permitted.
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