The main difference between a traditional IRA and a Roth IRA is the way contributions are deducted for tax breaks. Whereas contributions to traditional IRAs are either deductible or non-deductible, Roth IRA contributions are always non-deductible. As a result, Roth IRAs offer tax-sheltered growth, whereas traditional IRAs offer tax-deferred growth.
In addition, traditional and Roth IRAs have different age limits. If you'd like to contribute to your IRA for as long as you'd like, Roth IRAs would be the best choice, as there is no age limit. You may not make contributions to a traditional IRA once reach age 70½.
Another difference between the two are income limitations. Whereas a traditional IRA has no income caps, a Roth IRA has the following for 2017 and 2018. If your modified AGI reaches the following amount, you cannot contribute to a Roth IRA in those tax years:
|Individuals who are married and file a joint tax return||$196,000||$199,000|
|Individuals who are married, file a separate tax return and lived with their spouse at any time during the year||$10,000||$10,000|
|Individuals who file as single, head of household, or married filing separately and did not live with their spouse at any time during the year||$133,000||$135,000|
To learn more, see Roth or Traditional IRA … Which is the Better Choice?