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Roth vs. traditional IRAs: A comparison

Start simple, with your age and income. Then compare the IRA rules and tax benefits.

IRA eligibility

Is there an age limit?

You can contribute to a Roth IRA at any age.

But with a traditional IRA, you must be under age 70½ to contribute.

Is there a maximum contribution limit based on my income?

The amount you can contribute to a Roth IRA could be reduced—or even eliminated—based on your modified adjusted gross income (MAGI).

Traditional IRAs have no such restrictions.

Is there a minimum contribution limit based on my income?

For both Roth IRAs and traditional IRAs, the amount of your contribution can't exceed the amount of income you earned that year.

Nonworking spouses and minors* may also be able to contribute, but check the special income rules first.

IRA contribution rules

What are the contribution limits?

Whether you’re investing in a Roth IRA or traditional IRA, for the 2015 tax year:

  • If you're under age 50, you can contribute up to $5,500.
  • If you're age 50 or older, you can contribute up to $6,500.

Limits could be lower based on your income.

Can I claim my contribution as a deduction on my tax return?

You can't deduct your Roth IRA contribution.

But some or all of your traditional IRA contribution can be claimed as an IRA deduction. The deductible amount could be reduced or eliminated if you or your spouse is already covered by a retirement plan at work.

What's the deadline for making contributions in a given year?

For both Roth IRAs and traditional IRAs, the deadline is typically April 15 of the following year.

How much do I need to open a Vanguard IRA®?

For both Roth IRAs and traditional IRAs, you’ll need $1,000 for any Vanguard Target Retirement Fund or for Vanguard STAR® Fund.

Most other Vanguard funds require an initial investment of at least $3,000, though there are some with higher minimums.

IRA withdrawal rules

Will I pay taxes on withdrawals?

With a Roth IRA, you'll never pay taxes on withdrawals of your contributions. And you won't pay taxes on withdrawals of your earnings as long as you take them after you've reached age 59½ and you've met the 5-year holding period requirement.

But with a traditional IRA, you'll pay ordinary income tax on withdrawals of all earnings and on any contributions you originally deducted on your taxes.

Is there a penalty for withdrawals taken before age 59½?

There are no penalties on withdrawals of Roth IRA contributions. But there's a 10% federal penalty tax on withdrawals of earnings.

With a traditional IRA, there's a 10% federal penalty tax on withdrawals of both contributions and earnings.

Regardless of which you choose, check to see if you qualify for an exception to the penalty tax.

Will I have to take RMDs?

Roth IRAs have no required minimum distributions (RMDs) during your lifetime.

But if you own a traditional IRA, you must take your first RMD by April 1 of the year following the year you reach age 70½.

Open your IRA today

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You may be able to save even more with a SEP-IRA or SIMPLE IRA.


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Modified adjusted gross income (MAGI)

An amount used to determine a taxpayer's IRA eligibility. Generally, it's the taxpayer's adjusted gross income calculated without certain deductions and exclusions.

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Special income rules

A nonworking spouse may still be able to contribute to an IRA as long as that person is filing a joint tax return with a working spouse. These are known as "spousal IRAs."

But the total contribution for both spouses can't exceed the amount of income earned by the working spouse.

Minors may also be able to contribute to an IRA, but income limits are based on the minor's income, not the parents'.

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5-year holding period

The 5-year holding period for Roth IRAs starts on the earlier of the date you:

  • First contributed directly to the IRA.
  • Rolled over a Roth 401(k) or Roth 403(b) to the Roth IRA.
  • Converted a traditional IRA to the Roth IRA.

If you're under age 59½ and you have one Roth IRA that holds proceeds from multiple conversions, you're required to keep track of the 5-year holding period for each conversion separately.

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Qualifying exceptions to the penalty tax

Distributions received before you're age 59½ may not be subject to the 10% federal penalty tax if they're:

  • Due to your disability or death.
  • Distributed to a reservist who was ordered or called to active duty after September 11, 2001, for more than 179 days.

Or if they're to be used for:

  • A first-time home purchase (lifetime maximum: $10,000).
  • Postsecondary education expenses.
  • Substantially equal periodic payments taken under IRS guidelines.
  • Certain unreimbursed medical expenses.
  • An IRS levy on the IRA.
  • Health insurance premiums (after you've received at least 12 consecutive weeks of unemployment compensation).
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Required minimum distributions (RMDs)

Most owners of traditional IRAs and employer-sponsored retirement plan accounts (like 401(k)s and 403(b)s) must withdraw part of their tax-deferred savings each year, starting at age 70½. If you withdraw less than the RMD amount, you may owe a 50% penalty tax on the difference. Roth IRAs have no RMDs during the owner's lifetime.