There are two types of IRAs, Roth and Traditional. Both offer tax benefits and either can help you save for retirement.
- Answer four simple questions to find an IRA that works for your situation.
Traditional vs. Roth
Find out which IRA may work for you
Comparison of the Roth IRA and Traditional IRA
| Roth IRA | Traditional IRA | |
|---|---|---|
| Summary | A Roth IRA offers the opportunity for federally tax-free growth and withdrawals. There are income and eligibility requirements. | A Traditional IRA may allow you to deduct contributions on your income taxes now and pay the taxes when you make qualified withdrawals in retirement. There is no income eligibility limit to contribute. |
| How do I open one? | It takes just a few minutes to open a Roth IRA online. | It takes just a few minutes to open a Traditional IRA online. |
| What are the fees? | Fidelity IRAs have no set-up fee and no maintenance fee1. | |
| What's the minimum to invest? | $2,500 or $200 with Automatic Investments for most Fidelity funds2. | |
| Who's eligible? | Any age with employment compensation3. | Under age 70½ with employment compensation3. |
| Can I contribute to an IRA if I have a 401(k)? | Yes, you can contribute to both a 401(k) and an IRA. To help supplement your current employer-sponsored retirement plan, consider opening an IRA or contributing the maximum to an existing IRA. | |
| Can a non-working spouse or spouse not covered by a plan open this type of IRA? | Yes, if the couple files a joint federal income tax return and if combined contributions do not exceed $10,000 ($5,000 each) and $12,000 ($6,000 each) for both 2008 and 2009 or combined compensation, whichever is less. | |
| What are the income limits for making a contribution? | For single filers - up to $101,000 for 2008 and $105,000 for 2009 ($101,000-$116,000 in 2008 and $105,000-$120,000 for a partial contribution in 2009).
|
No income limits4.
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| What is the maximum annual contribution? | For 2008 and 2009, $5,000 or 100% of employment compensation, whichever is less5. | |
| What is the amount for catch-up contributions? | Individuals age 50 or older (in the calendar year of their contribution) can contribute an additional $1,000. | |
| Are contributions tax-deductible? | No. |
Yes, subject to retirement plan participation status and AGI limits. Spouses not covered by a workplace plan have a higher deductible MAGI limit6.
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| What are the federal tax advantages? | Tax-free7 growth. | Tax-deferred growth. |
| Can I withdraw without a penalty? | Roth IRA contributions can always be withdrawn at any time without penalty. For Roth earnings7 and Traditional IRAs8, penalty-free withdrawals include but are not limited to: qualified higher education expenses; qualified first home purchase (lifetime limit of $10,000); certain major medical expenses; certain long-term unemployment expenses; disability; or substantially equal periodic payments. | |
| Is there a mandatory withdrawal age? | No. | Yes. Distributions must start at age 70½. |
- There is no brokerage account fee on Fidelity's Traditional, Roth, SEP, and Rollover IRAs. Fund expenses and brokerage commissions still apply. Depending on your situation, fees may include low-balance fees, short-term trading fees and account closing fees.
- The minimum automatic contribution is $200 per month (or $600 per quarter). Non-Fidelity Funds and certain Fidelity Funds not eligible. Please ask for details.
- You must be at least 18 years old to open an IRA with Fidelity.
- At least one spouse must have employment compensation to use a Traditional IRA.
- Per person, per tax year (in total to both a Roth IRA and Traditional IRA).
- For a Traditional IRA, full deductibility of a contribution for 2008 is available to active participants whose 2008 Modified Adjusted Gross Income (MAGI) is $85,000 or less (joint) and $53,000 or less (single); partial deductibility for MAGI up to $105,000 (joint) and $63,000 (single). For contributions in tax year 2009, the full deductibility MAGI limits are raised to $89,000 or less (joint) and raised to $55,000 or less (single); partial deductibility for MAGI up to $109,000 (joint) and $65,000 (single). In addition, full deductibility of a contribution is available for working or nonworking spouses who are not covered by an employer-sponsored plan whose MAGI is less than $159,000 for 2008 and $166,000 for 2009; partial deductibility for MAGI up to $169,000 for 2008 and $176,000 for 2009.
- A distribution from a Roth IRA is tax-free and penalty-free provided that the five-year aging requirement has been satisfied and one of the following conditions is met: age 59½, death, disability, qualified first time home purchase.
- Withdrawals before age 59½ may be subject to a 10% early withdrawal penalty.
Fidelity Brokerage Services, Member NYSE, SIPC, 300 Puritan Way, Marlborough, MA 01752
