Individual Retirement Accounts (IRAs)

The Roth IRA Advantage

The benefits

If you meet the income requirements (Modified Adjusted Gross Income phase-out range of $95,000 - $110,000 for singles and $150,000-$160,000 for married, filing jointly) and are eligible to contribute to a Roth IRA, then you can take advantage of the unique benefits a Roth IRA offers.

Tax-free qualified withdrawals.
No required minimum distributions required at age 70½.

Unlike Traditional IRAs, the contributions you make to a Roth IRA are not tax-deductible. So when you withdraw from a Roth IRA, your contributions (which have already been taxed) come out first. So even before age 59½, you always have access to your principal, free of taxes.¹

Is the Roth IRA right for you?

For many investors, the tax-free compounding of a Roth IRA will be far more beneficial than the possible deductibility of a Traditional IRA contribution. The choice between a Traditional IRA and Roth IRA depends largely on your individual circumstances: eligibility, current tax bracket and anticipated tax bracket in retirement. Generally, you may be better off with a Roth IRA if you are eligible to contribute and expect your tax bracket to be higher or stay the same in retirement. Consult your financial advisor to see which option is right for you.

While both the Traditional IRA and Roth IRA offer the advantage of tax-sheltered compounding, with the Roth IRA, qualified withdrawals after five years are tax-free. Although both accounts may earn the same amount over time, at retirement a Roth IRA may provide more spendable income.

¹ Any earnings on your principal withdrawn before age 59½ for a non-qualified purpose will be subject to ordinary income taxes and a 10% IRS penalty tax.

² Assumes a January 1 investment of $3,000 each year at an 8% annual rate of return compounded annually over 25 years and a 25% tax bracket. These figures do not represent the impact of fees or sales charges. These figures are for illustrative purposes only and are not intended to represent the past or future results of any particular investment. Contributions made to the Traditional IRA and Roth IRA are non-deductible for this illustration. Results would be different if the Traditional IRA contributions were tax deductible.