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Traditional versus Roth: Which is best?
The best choice for you depends on your personal situation. You may open both types of IRAs as long as the combined contributions do not exceed the maximum annual contribution limit. (Example: $4,000 Roth + $1,000 Traditional = $5,000 total.) You may want to consult with your tax advisor.
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Traditional IRA |
Roth IRA |
| Age Limit To Contribute |
Up To Age 70 ½ |
No Age Limit |
| Income requirements/limits |
Earned income at least equal to IRA contribution; no income ceiling* |
Earned income at least equal to IRA contribution; income ceiling depends on filing status** |
| Distribution requirements |
Distributions must begin at age 70 ½; remainder at death can pass to heirs |
No distribution requirements; entire account can pass to heirs |
| Tax Treatment |
Contributions potentially tax-deferred
Earnings grow tax-deferred
Distributions taxable
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Contributions are not tax-deductible
Earnings grow tax-deferred
Qualified distributions are tax-free
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| Maximum annual contributions |
$4,000 for tax years 2007
$5,000 for tax year 2008
For workers age 50 and older $5,000 (2007)
$6,000 (2008) |
Same as Traditional IRA |
* If you participate in an employer-sponsored retirement plan, tax deferment of contributions to a Traditional IRA depends on your modified adjusted gross income (MAGI) and your tax-filing status. Refer to the chart below.
** Listed below are MAGI limits that help to determine your eligibility to contribute to a Roth IRA. There are no restrictions for participation in employer sponsored plans.
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Traditional IRA
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Roth IRA
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| Filing Status |
Tax Year 2007 |
Tax Year 2008 |
Tax Year 2007 |
Tax Year 2008 |
| Single |
$52,000 - $62,000 deductibility phase-out |
$53,000 - $63,000 deductibility phase-out |
$99,000 - $114,000 eligibility phase-out |
$101,000 - $116,000 eligibility phase-out |
| Married filing jointly |
$83,000 - $103,000 deductibility phase-out |
$85,000 - $105,000 deductibility phase-out |
$156,000 - $166,000 eligibility phase-out |
$159,000 - $169,000 eligibility phase-out |
| Married filing separately |
$0 - $10,000 deductibility phase-out |
More than $10,000 not eligible |
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