Roth Vs Traditional IRA Comparison

At DFCU Financial, we’re proud to offer both Roth and Traditional IRAs to our members.

Selecting the right IRA for you depends on your income and if you participate in a retirement plan at work. Speak with our Certified IRA Professionals who can provide objective guidance about the option that’s best for you. See the following chart about how Roth and Traditional IRAs compare:

 

Roth IRA

Traditional IRA

Who’s eligible to invest?

Individuals of any age with earned income, whose adjusted gross income is below $131,000 (single) or $193,000 (joint). Allowed contributions begin to phase out at $116,000 (single) or $183,000 (joint).

Individuals under age 70½ who have earned income or whose spouses have earned income.

Maximum annual contribution

100% of earned income to a maximum of $5,500. Total contributions to combination of Traditional and Roth IRAs cannot exceed $5,500 for one year.

100% of earned income to a maximum of $5,500. Total contributions to combination of Traditional and Roth IRAs cannot exceed $5,500 for one year.

Tax advantage

Possibility of tax-free investment growth.

Tax-deferred investment growth and possible tax deduction for contributions.

Contribution tax deductible?

There is no tax deduction. Contributions are made from after-tax dollars with the benefit of tax-free earnings after five years and attainment of age 59½ or other qualified reason.

Possibly. You may generally deduct contributions if you do not have an employer-sponsored retirement plan. You may also deduct them if you have an adjusted gross income below $71,000 (single) or $118,000 (joint). Allowed deductions begin to phase out at $61,000 (single) or $98,000 (joint).

Withdrawal of Assets

Withdrawal from a share certificate prior to maturity may result in a Credit Union penalty. Earnings withdrawn prior to age 59½ may be subject to income tax and IRS penalty.

Withdrawals made prior to age 591/2 may be subject to income tax and additional 10% IRS penalty. Withdrawal from a share certificate prior to maturity may result in a Credit Union penalty.

Mandatory distributions?

There are no withdrawal requirements or deductions.

Distributions must begin the year you attain age 70½.

Catch up

Individuals attaining age 50 or older in 2016 may make an additional catch-up contribution of up to $1,000.

Individuals attaining age 50 or older in 2016 may make an additional catch-up contribution of up to $1,000.

Michigan State Withholding

Effective January 1, 2012, Michigan’s tax treatment of pension and retirement benefits changed and these benefits became subject to income tax for many recipients. Michigan law now requires the administrators of pension and retirement benefits to withhold income tax on payments that will be subject to tax for all Michigan residents.

Questions?

Contact us. Our Certified IRA Professionals can answer your questions and help you find the IRA that fits your unique financial needs.

*Consult your tax advisor. This is for informational purposes only and it is not intended to be tax, legal or other professional advice.
 

NCUA Your savings federally insured to at least $250,000 and backed by the full faith and credit of the United States Government.

 

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While the DFCU Financial Board of Directors intends to pay Cash Back every year, and has done so since 2006, Cash Back is not guaranteed and will depend on our financial performance and other factors. Annual Cash Back payments are limited to an aggregate of $25,000 for each tax-reported owner. The IRS requires that Cash Back for an IRA be paid to the same IRA account, and that it be open when Cash Back is deposited. Cash Back to Business Banking members is subject to additional terms. Anyone who causes DFCU Financial a loss for any reason is not eligible for Cash Back.