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Traditional IRA or Roth IRA?
If you’re eligible to deduct a Traditional IRA contribution, your taxable income will be reduced this year and you will postpone paying taxes until you make withdrawals later.
If you prefer to forego a tax deduction this year in order to avoid paying taxes on withdrawals in retirement, consider making a contribution to a Roth IRA.
Here’s a brief summary of how these IRAs differ.
| Traditional IRA | Roth IRA | |
| Can I contribute? | Yes, if you or your spouse have earned income*. | Yes, if you or your spouse have earned income* and your income is not too high. |
| How much can I contribute in 2024? | The overall contribution limit to these IRAs is the lesser of: 100% of your earned income* or $7,000 if you're under age 50; $8,000 if 50 or older. |
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| How much can I contribute in 2023? | The overall contribution limit to these IRAs is the lesser of: 100% of your earned income* or $6,500 if you're under age 50; $7,500 if 50 or older. |
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| Can I deduct my contributions when I do my taxes? | Maybe. If you or your spouse were covered by a retirement plan at work, you might not be able to deduct your contributions. | No. |
| Are distributions taxable? | Yes. | No, if your account has been open for five years and you're 59½ or older. |
| Am I required to take distributions annually at a certain age ? | Yes. Required Minimum Distribution information | No. |
* Earned income includes wages, salaries, tips, professional fees, bonuses, commissions, self-employment income, nontaxable combat pay, military differential pay, taxable alimony, separate maintenance payments, difficulty of care payments and certain stipend, fellowship and similar payments to graduate and postdoctoral students.
Both Sit Traditional and Sit Roth IRAs can be opened using the Sit IRA Application.