How to choose between traditional and Roth IRA.
Based on 2017 tax year.

1.1 Is there an age restriction for contribution?

1. Traditional IRA: Anyone with earned Income younger than age 70 ½ can contribute.
2. Roth IRA: No age restriction.

1.2 Is the contribution tax deductible?

1. Traditional IRA: Yes. However, eligibility for the tax deduction depends on your income and whether you or your spouse (if you’re married) are covered by a retirement plan with your job (i.e. 401(k)). For further detail please see the 2017 IRA Deduction Limits - If already covered by a retirement plan at work .
2. Roth IRA: No. Contributions are not tax deductible.

1.3 Is there an income-eligibility restriction? If so, how does that affect the contribution?

1. Traditional IRA: No. Contributions to a Traditional IRA are not limited by annual income.
2. Roth IRA: Yes. Contributions to a Roth IRA are affected by your filing status and the amount of your modified adjusted gross income (MAGI). For example, if you are single you must have a MAGI less than $133,000 in order to contribute to a Roth IRA. (Please note: contribution limits begin to phase out starting with a MAGI of $118,000.) Married couples filing a joint return must have a MAGI less than $196,000 in order to contribute to a Roth IRA. (Please note: contribution limits begin to phase out starting with a MAGI of $186,000.) For further details, please see the IRS guidelines for the Amount of Roth IRA contributions.

1.4 What is the contribution limit?

1. Traditional IRA and Roth IRA: For 2015, 2016, and 2017, your total contributions to all of your traditional and Roth IRAs cannot be more than:
   1. $5,500 ($6,500 if you’re age 50 or older), or
   2. your taxable compensation for the year, if your compensation was less than this dollar limit.

2.1 Are there any tax breaks on the following:

1. Contributions?
   1. Traditional IRA: contributions are tax deductible on state and local returns corresponding to the the tax year in which the contribution is made.
   2. Roth IRA: No tax breaks for contributions.
2. Earnings?
   1. Traditional IRA: No tax breaks on earnings.
   2. Roth IRA: Earnings are tax free.
3. Withdrawals?
   1. Traditional IRA: No. Withdrawals are taxed at ordinary income tax rates.
   2. Roth IRA: Yes. Withdrawals are tax free.
4. Growth of Contributed Funds?
   1. The growth of your contributed funds will be tax free as long as the funds remain in your Traditional IRA and/or your Roth IRA.
5. Summary: Traditional IRAs avoid taxes when you put the money in and Roth IRAs avoid taxes when you take the money out during retirement.

3.1 When must the savings be withdrawn?

1. Traditional IRA: At age 70 ½ you must start taking required minimum distributions (RMDs), which are a mandatory and taxable withdrawals of a certain percentage of your funds.
2. Roth IRA: Does not require any withdrawals during the owner’s lifetime. (Note: You can allow your Roth IRAs to continue to grow tax-free throughout your lifetime, which is an ideal vehicle for wealth transfers.)

3.2 Is there any tax on withdrawals for the beneficiaries of the IRAs?

1. Traditional IRA: Yes, in most cases the beneficiary will pay taxes on any distributions the beneficiary takes.
2. Roth IRA: No. The beneficiaries of Roth IRAs will not owe income tax on withdrawals. Also, beneficiaries have the option of extending distributions over many years. (Note: Beneficiaries may be subject to estate taxes.)

3.3 When is the earliest you can withdraw or take a distribution?

1. Traditional IRA and Roth IRA: At age 59 ½, owners can begin taking penalty-free, “qualified” distributions. Qualified distributions are distributions made from a Roth IRA that are penalty-free.
2. Roth IRA: In order to avoid incurring a tax payment, the first contribution must be made at least five years prior to the first withdrawal. (Note: this requirement only has to be satisfied once. If you are able to meet this benchmark, you will only have paid tax on the money that went into the account, not the money you will eventually take out.)

4.1 Traditional IRAs - What other specific rules and benefits are there to consider?

1. Contributions to Traditional IRAs lower your taxable income in the contribution tax year. (Note: The aforementioned contributions will lower your adjusted gross income, which may help you qualify for other tax incentives such as the child tax credit or the student loan interest deduction.
2. If you are under age 59 ½, you can withdraw up to $10,000 of Roth earnings (penalty-free) to pay for qualified first-time home buyer expenses, provided at least five tax years have passed since your initial contribution.
3. Although you will still pay taxes on the distributions related to hardships (including disability and certain levels of unreimbursed medical expenses) may be exempt from penalties.

4.2 Roth IRAs - What other specific rules and benefits are there to consider?

1. Contributions (but not earnings) can be withdrawn free of taxes and penalties (even before age 59 ½).
2. If you are under age 59 ½, you can withdraw up to $10,000 from your account to pay for qualified first-time home buyer expenses and for qualified higher education expenses without being subject to the normal 10% early-withdrawal penalty.
3. Although there are limits to the types of assets Traditional IRAs can hold, Roth IRAs can be invested in almost anything (including but not limited to index funds, lifecycle funds, individual stocks, and alternative investments).