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Compare IRAs

Which IRA type is right for you?

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Traditional and Roth IRAs have different characteristics and tax benefits to help you save for retirement. Rollover IRAs are similar to Traditional IRAs but are subject to different rules. The side-by-side comparison below will help you determine which one is right for your situation.

You can also use our Roth IRA vs. Traditional IRA calculator to evaluate which IRA might be more appropriate, or use our Roth IRA Conversion calculator to analyze the effect of converting your Traditional IRA to a Roth IRA.

Income Requirements

Traditional IRA

You or your spouse (if one of you is not working and you file a joint return) must have earned income during the year.

Roth IRA

You or your spouse (if one of you is not working and you file a joint return) must have earned income below annual limits. If your income is within the "phaseout" range, you may be able to make partial contributions.

Rollover IRA

Like a Traditional IRA, you must have earned income to contribute.{sup}1{/sup} But to open a new Rollover IRA, you must have an eligible distribution from an employer-sponsored retirement plan due to a job change or retirement.

Contribution Limits

You can contribute to an IRA as long as you want, provided you have earned income. The amount you can contribute to all of your IRAs combined is 100% of your taxable compensation,{sup}2{/sup} up to the maximums listed below.

You can choose to contribute to both a Traditional and Roth IRA, but the IRS looks at combined total contributions for all IRAs, including those you hold at other companies.

Traditional IRA

Roth IRA

Rollover IRA

Annual Contribution Limits

Annual Contribution Limits{sup}3{/sup}

New contributions (not amounts rolled over from other plans) have the same limits as Traditional IRAs.

Single – 2022

$6,000

$1,000

Married Filing Jointly – 2022

$12,000

$2,000

Annual Catch-Up Contributions (age 50 or older

Annual Catch-Up Contributions (age 50 or older)

If you combine rollover assets and new contributions in the same account, the combined assets are considered "commingled" and may not be able to be rolled over into a new employer’s plan.

Single – 2022

$1,000

$1,000

Married Filing Jointly – 2022

$2,000

$2,000

Taxes on Earnings

Traditional IRA

Income tax on earnings is deferred until you withdraw them.{sup}5{/sup}

Roth IRA

Earnings are tax-free if the account is at least five years old and you are at least age 59½.

Rollover IRA

Not applicable. Earnings are not allowed on Rollover IRAs.

Tax Deductions for Contributions

Traditional IRA

Some or all contributions may be tax deductible. It depends on your modified adjusted gross income (MAGI),{sup}4{/sup} tax filing status and if your spouse participated in a workplace plan.

Roth IRA

Contributions are not tax deductible.{sup}5,6{/sup}

Rollover IRA

Not applicable. Contributions are not allowed to Rollover IRAs.

Withdrawals

For all IRA options, you can make penalty-free withdrawals at age 59½. Early withdrawal penalties may apply for withdrawals prior to age 59½.

You may also make “special purpose" withdrawals allowed under specific conditions (examples: first home, higher education) that are penalty free, but you may owe tax on earnings and deductible contributions.

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Distribution Requirements

Traditional IRA

You must take annual minimum distributions at a certain age{sup}7{/sup} to avoid a penalty on the amount you were required to withdraw.

Roth IRA

You are not required to take money out at any age.

Rollover IRA

You must take annual minimum distributions at a certain age{sup}6{/sup} to avoid a penalty on the amount you were required to withdraw.

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If you combine rollover assets and new contributions in the same account, the combined assets are considered "commingled" and may not be able to be rolled over into a new employer’s plan.

Exception for Married Filing Jointly: An employed spouse may contribute to a separate IRA on behalf of a spouse who has little or no income. The amount of the couple’s combined contributions can’t be more than the taxable compensation reported on their joint return. For more information, refer to Spousal IRA sections in IRA Publication 590-A.

Annual contributions to a Roth IRA are not tax deductible.

Modified Adjusted Gross Income (MAGI) is your Adjusted Gross Income (AGI) with standard deductions included.

State and local taxes may apply.

Estate tax may apply.

The SECURE Act, effective January 1, 2020, changed the age at which RMDs begin.

  • If you were born before 7/1/1949, you must begin RMDs at age 70½.

  • If you were born on or after 7/1/1949, you must begin RMDs at age 72.

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.

Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.

Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.

This information is for educational purposes only and is not intended as a personalized recommendation or fiduciary advice. There are different options available for your retirement plan investments. You should consider all options before making a decision. Our representatives can help you evaluate all of your distribution options.