IRA Center

An Individual Retirement Account (IRA) provides eligible investors a tax-advantaged way to save for retirement. Whether you are looking to better understand the basics of IRAs, compare IRAs side by side, try a calculator or find out how to open an IRA, we are here to help.

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American Century Investments® offers different IRA types designed to help investors like you save for a secure retirement. Find out the benefits of each and use our IRA calculators to decide which might be right for you.

The answer for which IRA is best for you is not as simple as the "paper or plastic" decision we make all the time at the grocery store. Comparing the two side by side may give you a better understanding of which one may be right for you.

Advantages

Traditional IRA

  • You may be able to deduct some or all of your contributions, including catch-up contributions, depending on your income, filing status and participation in an employer-sponsored retirement plan.
  • Generally, earnings grow tax deferred and are taxed at your ordinary income tax rate upon withdrawal.

Roth IRA

  • You may withdraw earnings tax free and penalty free beginning at age 59½ if the account is at least five years old.1
  • You may withdraw contributions tax free and penalty free at any time.1
  • There is no required minimum distribution at age 70½.
  • You may contribute to a Roth IRA as long as you want, provided you have earned income.
  • The beneficiaries of your Roth IRA will not have to pay income tax on the assets in your account if it was open for at least five years.1,2

Eligibility

Traditional IRA

  • You must be under the age of 70½ on December 31.
  • You or your spouse (if one of you are not working and you file a joint return) must have earned income during the year.
  • No Modified Adjusted Gross Income (MAGI)3 limit for contributions; MAGI limits do apply to tax deductibility.

Roth IRA

  • You must have earned income.
  • Modified Adjusted Gross Income (MAGI)3 Limits: $181,000 for couples, $114,000 for singles for 2014; $183,000 for couples, $116,000 for singles for 2015.
  • Eligibility phases out at $191,000 for couples, $129,000 for singles for 2014; $193,000 for couples, $131,000 for singles for 2015.

Withdrawals

Traditional IRA

  • A 10% early withdrawal penalty tax may apply for withdrawals prior to age 59½.
  • Withdrawals for special purposes may be permitted prior to retirement.

Roth IRA

  • Tax-free, penalty-free withdrawals are allowed if you are at least age 59½ and the account is at least five years old.1
  • Withdrawals for special purposes may be permitted prior to retirement.

Distributions

Traditional IRA

Minimum distributions are required to begin at age 70½.

Roth IRA

Minimum distributions are not required at any age. However, if your estate includes Roth IRA assets after your death, your beneficiaries will have to take required minimum distributions.

Deductions Allowed

Traditional IRA

Deductibility depends on MAGI3 and whether you or your spouse is covered by an employer-sponsored retirement plan. You must figure your deduction and your spouse's deduction separately. The deduction for contributions to Traditional IRAs phases out over the following MAGI levels.  (See tables below.)

There is no income limit for contributions to a non-deductible Traditional IRA.

Roth IRA

Deductions on contributions are not available.

Deductible Traditional IRA Phaseouts

(Does not apply to Roth IRA)

Covered by employer plan

Filing Status 2014 2015
Single $60,000-$70,000 $61,000-$71,000
Married Filing Jointly $96,000-$116,000 $98,000-$118,000

Not covered by employer plan

Filing Status 2014 2015
Single or married filing jointly with a spouse who also is not covered No limit No limit
Married filing jointly with a spouse who is covered $181,000-$191,000 $183,000-$193,000

 

Annual Contribution Limits

Regular Contributions

Traditional IRA Roth IRA
Filing Status 2014 2015
Single $5,500 $5,500
Married Filing Jointly $11,000 $11,000
Filing Status 2014 2015
Single $5,500 $5,500
Married Filing Jointly $11,000 $11,000

 

Catch-Up Contributions (age 50 or older)

Traditional IRA Roth IRA
Filing Status 2014 2015
Single $1,000 $1,000
Married Filing Jointly $2,000 $2,000
Filing Status 2014 2015
Single $1,000 $1,000
Married Filing Jointly $2,000 $2,000

1State and local taxes may apply.
2Estate tax may apply.
3Modified Adjusted Gross Income (MAGI) is your Adjusted Gross Income (AGI) with standard deductions included.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.