Compare Traditional vs. Roth IRA

Understanding your IRA choices

There are two main types of IRAs—Traditional and Roth—each with distinct features. When analyzing whether a Traditional or Roth IRA is right for you, one of the key decision points is when you want to pay income taxes on your savings.

Traditional IRAs offer tax-deferred growth potential. You pay no taxes on any investment earnings until you withdraw or “distribute” the money from your account. Additionally, depending on your income, your contribution may be tax deductible. Deferring taxes allows for a potentially greater accumulation of wealth. There is no maximum age restriction for making a Traditional IRA contribution as long as you, or your spouse if filing jointly, have earned income.

Roth IRAs offer tax-free growth potential. Investment earnings are distributed tax-free when the account has been funded for more than five years and you are at least age 59½, or as a result of your disability, or using the first time homebuyer exception, or taken by your beneficiaries due to your death. Since contributions to a Roth IRA are made with after-tax dollars, there is no tax deduction regardless of income. You can contribute at any age as long as you, or if filing jointly your spouse, have earned income and are at or under MAGI limits.

To get started, choose your account or speak with a Wells Fargo retirement professional at 1-877-493-4727.