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Personal Finance—IRA ABCs
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Roth vs. Traditional |
Age 59½ - 70½ |
Early Retirement |
Later Retirement |
Retirement Options
Traditional vs. Roth IRA
IRAs provide a number of possibilities for withdrawing money. But the name of the game is still retirement. (Remember, IRA stands for Individual Retirement Arrangement!)
Here's a look at your options, and requirements, when you retire.
Traditional vs. Roth IRA - Distribution Options
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Traditional IRA |
Roth IRA |
| Age for withdrawing money without penalty. |
59½. (Penalty may be avoided if you meet an exception.) |
No minimum age for withdrawing contributions without penalty. If under 59½ you may owe tax and penalty on earnings, unless you meet an exception. |
| Penalty for early withdrawal |
If you don't meet an exception, you owe federal income tax and a 10% penalty on deductible contributions, and earnings. |
If you don't meet an exception, you owe income tax and a 10% penalty on earnings withdrawn before age 59½ |
| Age to begin required distributions |
70½ |
None for Roth-holder. |
| Penalty for not making required minimum withdrawal |
50% of the amount you should have withdrawn, but didn't. |
Not applicable. |
| Pay taxes on distributions? |
You pay income tax on deductible contributions, and on earnings. |
No income tax if you take a qualified distribution. |
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