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Which IRA Is Right For You?

Retirement planning can be confusing—fortunately your friends at Fidelity are here to help you make the best choice for your personal situation and financial goals. There are several different types of Individual Retirement Account (IRA) products available, and each offers unique benefits and holds various requirements. Below is a comparison between Roth IRAs and Traditional IRAs, the two most common types of IRAs.

 

Traditional IRA

Roth IRA

Age Limit To Contribute

Up To Age 70 ½

No Age Limit

Income requirements/limits

Earned income at least equal to IRA contribution; no income ceiling*

Earned income at least equal to IRA contribution; income ceiling depends on filing status**

Distribution requirements

Distributions must begin at age 70 ½; remainder at death can pass to heirs

No distribution requirements; entire account can pass to heirs

Tax Treatment

Contributions potentially tax-deferred

Earnings grow tax-deferred

Distributions taxable

Contributions are not tax-deductible

Earnings grow tax-deferred

Qualified distributions are tax-free

Maximum annual contributions

$5,500 for workers age 49 and younger; $6,500 for workers age 50 and older.

Same as Traditional IRA

* If you participate in an employer-sponsored retirement plan, tax deferment of contributions to a Traditional IRA depends on your Modified Adjusted Gross Income (MAGI) and your tax-filing status.

Modified Adjusted Gross Income (MAGI) Limits for Roth IRAs Tax Year 2013

Filing Status

Traditional IRA

Roth IRA

Single

$59,000 - $69,000 deductibility phase-out

$112,000 - $127,000 eligibility phase-out

Married, filing jointly

$95,000 - $115,000 deductibility phase-out

$178,000 - $188,000 eligibility phase-out

Married, filing separately

More than $10,000 not eligible

More than $10,000 not eligible