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IRA: Traditional IRA and Roth IRA

Posted on | April 26, 2011 | 4 Comments

When two things are present and you have to pick one, you should compare first the two before making a decision. Because that IRA has two forms which are the traditional IRA and the Roth IRA, it is then valuable to compare these two so that you can determine which of them is the best for you.

In order to distinguish one from the other, we will compare the Roth IRA and the traditional IRA with regards to their rules ad regulations.

Traditional IRA Rules and Roth IRA Rules

Of course, there are qualifications before an individual person can be eligible to set up an IRA account. And obviously, he or she must be an income earner. IRA is a retirement plan that is offered to benefit income earners. There is no point of opening an account in the IRA when you have nothing to deposit into it out of the income that you receive.

The traditional IRA has an age limit for eligibility. All individuals who are already 79 ½ years and beyond can no longer set up a traditional IRA account. The Roth IRA has no age limits.

Contribution Limits 2011

For both the traditional IRA and the Roth IRA, the contribution limits for 2011 are $5,000 and $6,000. The maximum amount of $5,000 is set for IRA contributors who are at the age of 49 and downwards. On the other hand, the $6,000 amount is the limit of contributors who are at the age of 50 and upwards.

Distribution Rules

The Roth IRA distribution rules are apart from the traditional IRA distribution rules. According to the Roth IRA rule, withdrawals of funds can be made by the contributor any moment of time but after the five-year taxable period has expired. The period begins during the year in which the first contribution is made.

Under the traditional IRA, withdrawals should be made when the contributor is 79 ½ years old. This is a compulsory withdrawal. But withdrawals can be made as an option of the contributor when he or she is 59 ½ years old and upwards until 79.

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