Compare Zecco Trading IRAs: Roth IRA vs. Traditional IRA IRAs offer potential tax-advantaged growth of retirement savings, and Zecco Trading's no-commission IRAs permit you to choose from a variety of investments. Get 10 free stock trades every month when you maintain a $25,000 balance or execute 25 trades each month. Otherwise it's just $4.50 per trade. See details.
Not only can you open a Roth IRA and/or Traditional IRA at Zecco Trading, but you can also rollover a 401(k) retirement account to your new Roth IRA or Traditional IRA. Talk with your plan administrator for more information. To contribute to any IRA, you must have earned income equal to or greater than the contribution you'd like to make. Take a look at the chart below for more detailed information on Traditional IRAs and Roth IRAs.
Quick Overview of a Traditional IRA vs. Roth IRA | Traditional IRA | Roth IRA |
| Contributions may be tax deductible. | Contributions are not tax deductible. |
| Any and all contributions and earnings compound are tax-deferred until they are withdrawn at age 59 1/2 or later. | Withdrawals of contributions at any age, or earnings after age 59 1/2 and after account has been open for 5 years are penalty and tax free. |
| Qualified distributions are considered ordinary income and are taxed at your current tax rate. | Federal tax-free growth. |
| Required Minimum Distributions begin before April 1st of the year after you turn 70 1/2. | There are no Required Minimum Distributions. |
| Provides flexibility in using assets immediately for qualified home purchase, college costs, or any major medical expense. | After five years you may withdraw earnings for qualified expenses such as the purchase of a first home, unreimbursed major medical expenses, or college, all free of penalty. |
| No limits on income. | Income limits apply (see below). |
Maximum Contribution
The yearly maximum contribution is $5,000 in 2009 or 100% of earned income, whichever is less. If you are over age of 50, you may contribute to each IRA an additional $1,000 of earned income. Consult the IRS website to calculate maximum contributions.
401(k) Rollover Eligibility
Balances in 401(k) or other employer-sponsored retirement plans may be rolled over to a Roth IRA or Traditional IRA.
Still Having difficulty deciding between a Roth IRA and Traditional IRA?
Compare these detailed differences and choose the IRA that's right for you. There are significant differences when comparing the IRAs, especially with regard to income limits and tax benefits.
Detailed Overview of Traditional IRA vs. Roth IRA
| Traditional IRA | Roth IRA |
| Eligibility: |
| You must be between the ages of 18 and 70 1/2 and have earned income equal to or greater than your IRA contribution amount. Income limits are not applicable to Traditional IRAs. However, your contributions may not be deductible. | You must be age 18 or older and meet one of these Adjusted Gross Income (aka AGI) qualifications: Single, head of household or married filing separately and you did not live with your spouse at any time during 2008: - If your AGI was less than $101,000 you qualify for a full contribution.
- AGI from $101,000-$116,000 you are eligible for a partial contribution.
Married, filing joint or qualified widow(er): - If your AGI is less than $159,000 you qualify for a full contribution.
- If your AGI is from $159,000-$169,000 you are eligible for a partial contribution.
Married, filing separately but lived with spouse for part of 2008: - If your AGI was less than $10,000 you qualify for a full contribution.
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| Contributions and Tax Deductions: |
| Contributions may be deductible from your gross income tax return for the year in which the contributions are made.* | Contributions are made on an after-tax basis and are not deductible. |
| Federal Income Tax Treatment: |
| Earnings grow on a tax-deferred basis. Deductible contributions and earnings are subject to federal income tax when withdrawn. | Earnings accrue free from federal taxes. You won't receive a tax deduction now but you won't have to pay taxes on earnings for qualified distributions. |
| Penalties for Withdrawal: |
| You can withdraw or use your traditional IRA assets at any time. However, a 10% additional tax generally applies if you withdraw or use IRA assets before you are age 59 1/2. Consult the IRS IRA website for more information. | If you withdraw funds from your Roth IRA in less than 5 years or before you reach 59 1/2 (whichever is longer) you could incur penalties. Consult the IRS IRA website for more information. |
*Talk to your tax advisor or refer to the IRA website to determine if you qualify for tax-deductibility or contributions.