Comparing Traditional and Roth IRAs

Traditional and Roth IRAs are both good retirement accounts to consider and offer many investment options as you plan for your future. There are several key differences to keep in mind when determining which account makes the most sense for your particular needs.

Traditional IRA

A Traditional IRA may allow you to make pre-tax contributions and may benefit an individual who expects to be in the same or lower tax bracket when they need to start taking withdrawals.

• Contributions may be tax deductible depending on IRA holders adjusted gross income and other circumstances
• Earnings grow tax deferred
• Money contributed and earned is subject to income tax at the time of withdrawal
• Normal distributions may be made without IRS penalty when IRA holder reaches 59 ½*
• Withdrawals before 59 ½ are subject to a 10% early distribution penalty (certain exceptions apply)*
• Annual minimum distributions are required when the IRA holder turns 73

Roth IRA

A Roth IRA allows you to make after-tax contributions and may benefit an individual who expects to be in a higher tax bracket when they need to start taking withdrawals.

• Funded by after-tax dollars; contributions are not initially tax-deductible
• Earnings grow tax deferred
• Withdrawals before 59 ½ are subject to a 10% early distribution penalty (certain exceptions apply)*
• Qualified withdrawals of contributions and earnings are tax free*
• No required minimum distribution regardless of age

The key difference between the accounts is whether it makes more financial sense to take advantage of the tax benefits that a Traditional IRA offers today or enjoy the tax-free withdrawals in the future that a Roth IRA offers.

APCI FCU can assist you with your retirement planning and offers solutions for your everyday banking needs. Please contact Al Kauffman, Certified IRA Professional, at 800-821-5104, ext. 2840 for more information.

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*Share certificate withdrawal penalties may apply.