When it comes to getting an early, smart start on retirement planning, the discussions often include considering a Roth IRA vs. a traditional IRA. Both can be great ways to save for retirement. But there are some key differences between the two offerings, as the table below shows.
|Traditional IRA||Roth IRA|
|How It Works||The contributions you make usually are tax deductible in the year that you make them. Taxes on the money earned in the IRA are deferred until you take money out in retirement.||You don't get a deduction on contributions, but there are no taxes on the money earned in the IRA.|
|Who Can Contribute||
|Limitations||Contribution limits: $5,500 if under age 50; $6,500 if age 50 or older.||Contribution limits: $5,500 if under age 50; $6,500 if age 50 or older.|
|Taking Money Out (Distributions)||
If you take money out before age 59 1/2, you will have to pay a 10-percent penalty (with some exceptions for certain circumstances). Distributions taken during retirement after age 59 1/2 are taxed at your tax rate at that time.
You can take your original contributions out at any time, even before retirement, without paying more tax or a penalty.
Consult a qualified financial advisor to help you make the best decision for your retirement goals. Learn about the IRA accounts at Ally Bank by visiting Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559).
Ally Bank, member FDIC