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Compare Roth IRA and Traditional IRA

Commerce Financial Advisors

Comparison of Roth IRA and Traditional IRA

  Roth IRA Traditional IRA
Is there an annual contribution limit?
  • Yes, up to $6,000 per person to all IRAs combined per year1
  •  Additional $1,000 for individuals who attain age 50 before the end of the tax year
  • Yes, up to $6,000 per person to all IRAs combined per year1
  • Additional $1,000 for individuals who attain 50 years of age before the end of the tax year
Is there an age limit to make a contribution?
  • No
  • No. But prior to January 1, 2020, you were unable to contribute if you were age 70½ or older.
Are there income limits on the ability to make nondeductible contributions?
  • Yes. In 2021 – the ability to contribute phases out between $125,000 and $140,000 Modified Adjusted Gross Income (MAGI) for single filers and between $198,000 and $208,000 MAGI for joint filers
  • No
Are contributions deductible?
  • No, all contributions are nondeductible, after-tax contributions
  • Your deduction is allowed in full if you (and your spouse, if you are married) are not covered by a retirement plan at work.
  • Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels.
Are there minimum distribution requirements?
  • Not if you are the original owner
  • Distribution must begin by April 1 following the year in which you attain 72 years of age and by December 31 of later years
How are withdrawals taxed after age 59½?*
  • Withdrawals are tax free if account is held for 5 years
  • Contributions are withdrawn tax free at any time
  • Withdrawals are subject to tax except for pro-rata share of nondeductible contributions
How are withdrawals taxed before age 59½?*

Contributions are withdrawn tax free

  • Withdrawals may be subject to an additional 10% tax unless you qualify for an exception

 

  • Withdrawals are subject to an a 10% penalty unless you qualify for an exception
Can I convert my IRA?
  • An account set up as a Roth IRA cannot be converted to a traditional IRA
  • A conversion to a Roth IRA results in taxation of any untaxed amounts in the traditional IRA

Disclosures:

1. Effective Jan 1, 2019 individual annual contribution limit is raised from $5,500 to $6,000.

* Consult your tax advisor for advice.

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The information provided on this website is not meant as a recommendation or endorsement of any specific security or strategy. An individual’s situation can vary; therefore the information provided above should be relied upon only when coordinated with individual professional advice.

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Commerce Brokerage Services, Inc., Member FINRA/SIPC, is a wholly owned subsidiary of Commerce Bank. This site is not intended for use by, or to provide any information to, investors in any state where Commerce Brokerage Services, Inc. is not registered or in any jurisdiction outside the United States of America where such use would be prohibited or otherwise regulated. Nothing on this web site shall be considered a solicitation to buy or an offer to sell a security to any person in any jurisdiction where such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. 

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