How does a Traditional IRA differ from a Roth IRA?

With a Traditional IRA, your contributions are tax-deductible if you’re eligible. Your earnings grow tax-deferred, so you will not pay income taxes on your investment earnings until you make withdrawals. Both deductible contributions and earnings are then taxed at your regular income tax rate when the money is withdrawn.

Traditional IRAs also require a minimum amount to be distributed from your IRA each year once you reach a certain age called the required minimum distribution (RMD) age. The age when RMDs must generally begin was increased from age 70½ to age 72. (Effective for distributions required in 2020 and later years, for those who reach age 70½ in 2020 or a later year.) The SECURE 2.0 Act of 2022 increased the RMD age again to age 73 in 2023 and to age 75 in 2033.

Generally, you must begin taking RMDs from a Traditional IRA by April 1 of the year following the year you attain your RMD age. This date is often referred to as your “required beginning date,” or RBD. After this date, you must continue to satisfy your RMD going forward by December 31 of each year.

Contributions you make to a Roth IRA are never tax-deductible, so they will always be tax-free upon distribution. Your earnings grow tax-deferred, so you will not pay income taxes on your investment earnings until you make withdrawals. And if you take a “qualified distribution,” your earnings are tax-free.

Unlike Traditional IRA owners, Roth IRA owners do not have to take RMDs when they reach a certain age. While RMDs are not mandatory during the IRA owner’s lifetime, Roth IRA beneficiaries are generally required to take distributions.