Broker Check

IRAs

Traditional IRA (deductible)

Pros:

  • Contributions are tax deductible
  • Earnings grow tax-deferred
  • Penalty-free withdrawals for first time home purchase, higher education, death, disability and certain health/medical insurance bills. Certain limitations and restrictions apply

Cons:

  • Early withdrawals (before age 59½) incur a penalty and taxes if no exceptions apply
  • Contributions are not deductible if MAGI (Modified Adjusted Gross Income) is too high
  • Participation in a company retirement plan is a factor in determining the amount of contribution allowed
  • Distributions must begin after age 70½

Traditional IRA (non-deductible)

This may be good for individuals that do not qualify for a traditional deductible IRA or a Roth IRA due to income limits.

Pros:

  • Available to anyone under 70½ who has compensation
  • Earnings grow tax deferred
  • Penalty-free withdrawals for first time home purchase, higher education, death, disability and certain health/medical insurance bills. Certain limitations and restrictions apply

Cons:

  • Contributions are not tax-deductible
  • Early withdrawals (before age 59½) incur a penalty and taxes on earnings if no exceptions apply
  • Withdrawals are calculated pro rata for tax paid and tax due portions
  • Distributions must begin after age 70½ and contributions cannot continue after age 70½