Traditional IRA | Roth IRA |
Eligibility | |
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Maximum contribution | |
2024: $7,000 annually | 2024: $7,000 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 | |
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Investment growth is tax-deferred and earnings can be withdrawn tax-free if the account has been open for at least five years and if certain requirements are met.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 | |
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Contributions are not tax deductible. |
Required distribution | |
If you were born on or after July 1, 1949 but before January 1, 1951, distributions must begin by April 1 of the calendar year following the year you reach age 72 and continue each year by December 31. If you were born on or after January 1, 1951 distributions must begin by April 1 of the calendar year following the calendar year you reach age 73 and continue each year by December 31. | • Distributions not required during life of IRA owner (nor during the life of a spouse beneficiary who elects to treat Roth IRA as his/her own). |
Taxable amounts withdrawn prior to age 59 ½ may be subject to an additional 10% penalty tax. | • Distributions that are not “qualified distributions” are includable in income to the extent attributable to earnings. For individuals under age 59½, a 10% early distribution penalty will typically apply to the taxable portion of the non-qualified distribution unless an exception applies. |
Qualified early withdrawals | |
Withdrawals can potentially be made penalty-free prior to age 59½ under these circumstances:
Taxes typically apply to all earnings and all pre-tax contribution amounts when withdrawn, which will reduce accumulated amounts. |
Withdrawals are tax-free if the account is open for at least five years and:
Distributions that are not “qualified distributions” are includable in income to the extent attributable to earnings. For individuals under age 59½, a 10% early distribution penalty will typically apply to the taxable portion of the non-qualified distribution unless an exception applies. . |
Rollovers and transfers | |
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DRD-513999-2024-03-14