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Advantages of Roth IRA Vs. a Regular IRA

by John Moore
  • Overview

    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.
  • Tax-Free Profits

    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.

    References & Resources