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Compare Traditional vs. Roth IRA

Individual Retirement Accounts (IRAs) are specially designed to help you save for retirement.

Understanding your IRA choices

There are two main types of IRAs—Traditional and Roth—each with distinct advantages. 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, presumably in retirement. Additionally, depending on your income, your contribution may be tax deductible. Deferring taxes allows for a potentially greater accumulation of wealth.

Roth IRAs offer tax-free growth potential. Investment earnings are distributed tax-free in retirement, if a five-year waiting period has been met and you are at least age 59½, or as a result of your death, disability, or using the first time homebuyer exception. Since contributions to a Roth IRA are made with after-tax dollars, there is no tax deduction regardless of income.

To get started, choose your account or speak with 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)

Deferring taxes on your potential investment earnings to help your savings grow for retirement

Having tax-free, including early distribution additional tax, access to your contributions before retirement
Making tax-free distributions during retirement (if certain conditions are met)
Avoiding Required Minimum Distributions (RMDs) that begin at age 70 1/2
Contributing to an IRA in addition to your retirement plan at work, regardless of income

Consolidating before-tax retirement accounts without paying taxes

Consolidating designated Roth retirement accounts without paying taxes

Traditional IRA

Our IRA Eligibility Calculator can help determine if you are eligible for a tax deduction.

Investment earnings

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


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

Required Minimum Distributions

IRS regulations require that owners of retirement accounts including IRAs and qualified employer-sponsored retirement plans (QRPs) like 401(k)s must begin taking distributions annually from these accounts. These distributions are referred to as required minimum distributions or RMDs. Once you reach your required beginning date (RBD), generally April 1 following the year you turn age 70 1/2, you will begin taking RMDs from any Traditional, SEP, and SIMPLE IRAs that you have, as well as from any QRPs left at former employers. The RMD rules can be complex and penalties for not complying with the rules can be significant.

Qualified employer-sponsored retirement plans

Certain employers help their employees save for retirement by offering qualified employer-sponsored retirement plans (QRPs). Common types include 401(k), 403(b), and governmental 457 plans.