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RETIREMENT PLAN INVESTOR

Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:

IF YOUR PLAN ID BEGINS WITH IRK, BRK, 754, 1 OR 2

Visit americanfunds.com/retire

IF YOUR PLAN ID BEGINS WITH 34 OR 135

Visit myretirement.americanfunds.com

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IRA comparison table

Use this table to see a side-by-side comparison of traditional and Roth IRA features and benefits.

This table will help you compare the key features and benefits of traditional and Roth IRAs.

 

Traditional IRAs

Roth IRAs

Eligibility* †

You (or your spouse if filing a joint return) can contribute if you have earned income (a salaried job, investments or other sources).

Prior to January 1, 2020, you couldn’t contribute if you were age 70½ or older.

You (or your spouse if filing a joint return) can contribute if you have earned income and your income level is under certain limits.

For 2024:

Single filer, with modified adjusted gross income (MAGI) of:

  • Less than $146,000 — full contribution

  • $146,001–$160,999 — partial contribution

  • $161,000 or more — not eligible

Joint filers, with MAGI of:

  • Less than $230,000 — full contribution

  • $230,001–$239,999 — partial contribution

  • $240,000 or more — not eligible

Married, filing separately, with MAGI of:

  • $0–$9,999 — partial contribution

  • $10,000 or more — not eligible

Maximum annual contribution

The total contribution you can make to all of your IRAs for 2024 is $7,000 or 100% of your compensation, whichever is less.

If you’re age 50 or older, you can make an additional contribution of $1,000, for a total of $8,000.

Same as traditional IRA, subject to phase-out range depending on MAGI as explained in Eligibility.

Deductible contributions

For 2024:

Single filer, covered by a retirement plan at work, with MAGI of:

  • $77,000 or less — fully deductible

  • $77,001–$86,999 — partially deductible

  • $87,000 or more — nondeductible

Single filer, not covered by a plan at work:

  • Fully deductible

Joint filer, covered by a plan at work, with MAGI of:

  • $123,000 or less — fully deductible

  • $123,001–$142,999 — partially deductible

  • $143,000 or more — nondeductible

Joint filer, only a spouse is covered by a plan at work, with MAGI of:

  • $230,000 or less — fully deductible

  • $230,001–$239,999 — partially deductible

  • $240,000 or more — nondeductible

Married, filing separately, with MAGI of:

  • $0–$9,999 — partial contribution

  • $10,000 or more — not eligible

Roth contributions are not tax-deductible.

Tax credit for contributions

You can claim a nonrefundable tax credit for contributions if you are eligible.

The maximum credit allowed is 50% of the annual contribution amount up to $2,000, so long as your household income doesn’t exceed certain limits.

Joint filers with a MAGI of $76,500 or less in 2024 and single filers with a MAGI of $38,250 or less in 2024 qualify for the credit.

Same as traditional IRA..

Federal income-tax treatment on contributions

Taxes are deferred until distributions are made; taxable distributions are treated as ordinary income.

 Withdrawals of nondeductible contributions are not taxed.

Contributions are made with after-tax money; therefore, withdrawals from the contribution amount (basis amount) are tax-free.

Federal income-tax treatment on earnings

Earnings grow tax-deferred until distributions begin. Distributions are taxed as ordinary income.

Qualified distributions are tax-free.

Nonqualified distributions:
earnings are taxed as ordinary income and may be subject to a penalty.

Conversions:
earnings are tax-free after the conversion amount satisfies the 5-year investment period.

Conversions

Conversion to a Roth IRA**allowed, regardless of MAGI or tax-filing status. The taxable portion of the converted amount will be treated as taxable income.

Recharacterizations: Investors can’t recharacterize (undo) Roth conversions that occurred on or after January 1, 2018.

Rollovers

To employer-sponsored plans: pretax contributions can be rolled over to a 401(k) or to another qualified plan, as well as to 403(b) and 457(b) plans. However, the receiving plan must accept IRA rollovers.

From employer-sponsored plans:
eligible pretax and after-tax distributions from qualified plans, as well as from 403(b) and 457(b) plans, can be rolled over.

From/to another Roth IRA: allowed.

From employer-sponsored plans: eligible Roth contributions and earnings in 401(k) and 403(b) plans can be rolled over. In addition, non-Roth balances can be rolled over. (See Conversions for more information.)

Distributions††

Distributions from contributions and earnings can be taken after age 59½ without federal tax penalty.

Mandatory withdrawals must begin no later than April 1 of the year following the year you reach age 73.

Distributions before age 59½ are subject to a 10% tax penalty unless you qualify for one of the following exceptions under section 72(t) of the Internal Revenue Code:

  • You’re disabled

  • You’re taking substantially equal periodic payments

  • The distribution is for certain medical bills

  • The distribution is used for health insurance premiums during unemployment lasting at least 12 weeks

  • The distribution is for post-secondary education expenses

  • The distribution is used to purchase a first home (up to $10,000 lifetime maximum)

  • You’re terminally ill

  • The distribution is due to a federally declared disaster (up to $22,000)

  • The distribution is for birth or adoption expenses (up to $5,000)

  • The distribution is for unforeseeable or immediate financial needs related to necessary personal or family emergency expenses (up to the lesser of $1,000 or the excess of your account balance over $1,000)
     
  • The distribution is due to domestic abuse (up to the lesser of $10,000 as adjusted for inflation or 50% of the account balance)
     

Distributions to your beneficiaries are also exempt from the 10% penalty.

Distributions from contributions can be made any time without taxes or federal tax penalty.

Distributions from earnings are tax-free if your initial contribution to the account was made at least 5years ago and you meet one of the following conditions:

  • You’re age 59½

  • You’re disabled

  • You’re purchasing a first home (up to $10,000 lifetime maximum)

Payments made to your beneficiaries after the 5-year period are also tax- and penalty-free. Payments made before the end of the 5-year period are penalty-free.

Distributions from earnings are not subject to the 10% penalty as long as you qualify for an exception — same as exceptions for traditional IRAs.

Distributions from a conversion amount must satisfy a 5-year investment period to avoid the 10% penalty. This pertains only to the conversion amount that was treated as income for tax purposes.

Required minimum distributions (RMDs)

You must begin taking RMDs no later than April 1 of the year following the year you turn 73.‡‡

All of your IRA balances are aggregated for the purposes of calculating RMDs. Withdrawals may be taken from one or more IRAs.

No RMDs apply during your lifetime.

* If you are eligible, you can contribute to both a traditional and Roth IRA as long as the combined amount does not exceed the applicable contribution limits shown in the table.

 Your MAGI is calculated by subtracting certain expenses and allowable adjustments from your gross income. To determine your MAGI, contact your tax advisor or financial professional.

 Future contribution limits may be adjusted for cost-of-living increases. Contributions for the current tax year must be made by April 15 of the following year, unless that date falls on a Saturday or Sunday.

** Converting to a Roth IRA is a taxable event, and the rules and tax calculations can be complicated. State income-tax rules for conversions may differ from federal rules. We encourage you to discuss conversion options with your tax advisor or financial professional.

†† For beneficiaries, distribution rules vary depending on your age at death and the beneficiary‘s relationship to you. For help with distributions and tax-related issues, we encourage you to talk to your personal tax advisor or legal professional.

You can learn more about traditional and Roth IRAs in IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) and IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). We also encourage you to discuss your financial goals, eligibility and individual tax situation with your tax advisor or financial professional.


Related products

Learn about the IRAs available through American Funds.


Other resources

Learn more about the differences between Roth and traditional IRAs.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

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This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.