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Compare Traditional vs. Roth IRA

Individual Retirement Accounts (IRAs) are specially designed to help you save for retirement. There are two IRAs for individuals: Traditional and Roth. The table below compares the features of each one, based on what may be most important to you.

Summary

Traditional IRAs may be a good choice if you are seeking a tax deduction, your income is too high to be eligible for a Roth IRA, or you believe you will be in a lower tax bracket in retirement.

Roth IRAs may be a good choice if you are seeking tax-free withdrawals in retirement, want to avoid required minimum distributions beginning at age 70 1/2, or feel you will be in the same or a higher tax bracket in retirement.

You can open and manage your Traditional or Roth IRA in a number of ways. To get started, select your account or talk to a Wells Fargo retirement professional at 1-877-493-4727.

What's important to you:

Traditional IRA

Roth IRA

Getting a tax deduction on your contribution (if certain conditions are met)
Yes
Receiving tax-free growth on your potential investment earnings (if certain conditions are met) to help your savings grow for retirement
Yes
Deferring taxes on your potential investment earnings to help your savings grow for retirement
Yes
Having tax- and penalty-free access to your contributions before retirement
Yes
Making tax-free withdrawals during retirement (if certain conditions are met)
Yes
Avoiding Required Minimum Distributions (RMDs) after age 70 1/2
Yes
Contributing to an IRA in addition to your retirement plan at work
Yes
Yes
Consolidate before-tax retirement accounts without paying taxes
Yes
Consolidate after-tax retirement accounts without paying taxes

 

Yes

Traditional IRA

The ability to deduct your traditional IRA contribution is determined by your income and access to a retirement plan at work. Our IRA Eligibility Calculator can help determine if you are eligible for a tax deduction.

Tax-free growth

Roth IRAs offer the potential for tax-free growth, which means you do not owe taxes on any earnings within your account while they are accruing or when you withdraw them. Because you will never owe taxes on earnings, they are able to stay in your account and accumulate faster than those in a taxable account.

Roth IRA

Your eligibility to contribute to a Roth IRA is determined by your income. Our IRA Eligibility Calculator can help determine if you are eligible.

Tax-deferred growth

Traditional IRAs offer the potential for tax-deferred growth, which means you do not owe taxes on any earnings within your account while they are accruing. Instead, you pay taxes on your contributions and any earnings whenever you withdraw them. By not paying taxes each year, your earnings stay in the account and have the potential to accumulate faster than those in a taxable account.

Investment earnings

Investment earnings, or returns, are the amount of money you earn on the assets you’ve invested, or the investment’s overall increase in value.

Contributions

Your contributions are the amount of money you add or deposit into your account each year.

Roth IRA

Your eligibility to contribute to a Roth IRA is determined by your income. Our IRA Eligibility Calculator can help determine if you are eligible.

Required Minimum Distributions

At age 70½, IRS regulations require you to begin withdrawing a minimum amount of money from certain tax-advantaged retirement accounts each year. These withdrawals are called Required Minimum Distributions or RMDs.

Workplace retirement plan

Certain employers help their employees save for retirement by offering a workplace retirement plan. Common types include 401(k), 403(b), and 457 plans.