Taxes now

A chart explaining the differences between a traditional and a Roth Individual Retirement Account.

Feature:

Feature:

Traditional:

Traditional:

Roth:

Roth:

Feature:

Contributions

Traditional:

Generally contribute pretax dollars

Roth:

Contribute after-tax dollars

Feature:

Withdrawals

Traditional:

Pay income tax on withdrawals

Roth:

Generally take withdrawals tax free*

Feature:

Best option if

Traditional:

Current tax rate is greater than tax rate in retirement

Roth:

Tax rate in retirement is greater than current tax rate

*Withdrawals of earnings from a Roth account may be taxed and penalized if taken before age 59 1/2 or from an account that has been open for less than five years.