Advantages of Roth IRA Vs. a Regular IRA
by John Moore
Your money grows tax-free inside a Roth IRA (Individual Retirement Account) or a regular IRA. However, IRS rules treat the contributions and withdrawals differently. Knowing the differences can help you decide which IRA is best for you.
Higher Income Limits
As of 2009, if you had a retirement plan at work, you could make tax-deductible contributions to a regular IRA if your taxable income was less than $65,000 and you were single, or less than $109,000 and you were married and filing a joint return. Roth IRA income limits were higher, $120,000 and $176,000, respectively.
Unlike a regular IRA, you can withdraw profits from a Roth IRA tax-free. You must have owned the account at least five years and be at least 59 1/2 years old or qualify for an early withdrawal exception.
Access to Principal
You must pay taxes when you withdraw pretax principal from a regular IRA, and you also may owe a 10 percent penalty if you make a withdrawal before age 59 1/2. Because you make Roth IRA contributions using after-tax money, you can withdraw the principal tax-free and penalty-free at any time.
No Contribution Cutoff
You must stop contributing to a regular IRA at age 70 1/2. If you have earned income and don't exceed the income limit, you can contribute to a Roth for as long as you want.
No Required Withdrawals
You must begin withdrawing money from a regular IRA at age 70 1/2. You never have to withdraw funds from a Roth, so you can leave the entire balance to your heirs.