An IRA is money set aside for your retirement, with Traditional and Roth IRA options differing in their benefits and advantages. The biggest difference between the two is how your money is taxed. If you believe you will be in a higher tax bracket in the future, the Roth IRA is generally considered a better choice, and a Traditional IRA has certain benefits if you expect to be at a lower tax bracket at retirement time. Another difference is based on what you believe your future income tax to be, since a good amount of your income during retirement may be taxable.
Similarities Between a Roth IRA and Traditional IRA
In the past they have had the same contribution limits, and both allow you until April 15 for your previous tax year contribution. There are currently no minimum contribution limits to open either of these IRAs.For each year you plan to contribute to an IRA, check the income and contribution limits, which are subject to change.
The graphic to the right offers a quick comparison of the differences between these IRA types, to make it easier to decide based on your needs.
Other Comparison Considerations
When comparing IRAs, also consider:
There are ways to convert Traditional IRAs to Roth IRAs
The age you plan to retire
How much you expect to work or earn during retirement versus your current income
We can help you decide which type of IRA may be right for you. Learn more about First Source IRA options, and let us help you Invest Smarter.
IRA Options: Learn More
Disclaimer: IRAs are products of First Source FCU and are federally insured by NCUA.