The difference between a Simple IRA and a Roth IRA can be confusing. It’s important to understand the advantages and disadvantages of each in order to best invest your money. We can talk to you about your circumstances and which IRA best fits your needs.
For a brief and general breakdown of the two, see below:
- Tax deductible contributions (depending on income level).
- Withdraws begin at age 59 1/2 and are mandatory by 70 1/2.
- Taxes are paid on earnings when withdrawn from the IRA.
- Available to everyone; no income restrictions.
- All funds withdrawn (including principal contributions) before 59 1/2 are subject to a 10% penalty (subject to exception).
Roth IRA Profile
- Contributions are always withdrawn tax-free
- No Mandatory Distribution Age
- All earnings and principal are 100% tax-free after the five-year aging requirement has been satisfied and one of the following conditons is met: age 59 1/2, death, disability, qualified first-time home purchase
- Available only to single-filers making up to $95,000 or married couples making a combined maximum of $150,000 annually.
- Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).