Here's a quick look at which type of IRA account you should go for if you're trying to choose between the two:
You should go with a Roth IRA if:
- You want to withdraw your contributions at any time. Keep in mind that you will still be penalized for withdrawing investment earnings, but not the money you originally put in.
- You want to keep contributing after you turn 70 1/2, and you don't want to be required to make minimum withdrawals after that age. Your interest can keep compounding past your 80s, 90s, and beyond.
- You make less than $127,000 as a single person or $188,000 as a married couple filing jointly.
- You expect to be in the same or higher tax bracket when you retire.
- You want to pay taxes at today's tax rates upfront in exchange for not having to pay taxes on your earnings.
Best for: Younger people who expect to make more in the future.
You should go with a Traditional IRA if:
- You want to be eligible for tax breaks when you contribute to your IRA account. However, you can only deduct if you're not covered by a work retirement plan and if your income is below $69,000 for single and $115,000 for married. Your contributions to your Roth IRA account won't qualify you for any tax breaks.
- You can't meet the income limits of the Roth IRA. However, if you don't meet the income limits of the traditional IRA account, your contributions will be non-tax-deductible, but you will still get the benefits of having tax-deferred earnings.
- You expect to be in a lower tax bracket when you retire.
Best for: Older people who are in their peak earning years.