IRA Plans, Roth and Traditional

Traditional IRA plans provide a tax deduction, and distributions are taxable when received. Roth IRA plan contributions do not provide a tax deduction and distributions when received are not taxable income.

There are annual contribution limits for both the Traditional IRA and the Roth IRA plan, and they are equal amounts. There are also income limitations which deny the ability to contribute to either plans if the taxpayer's income is high enough.

Roth IRA versus Regular IRA

Roth IRA advantages and disadvantages can be viewed at the link below-

Roth IRA's: Advantages and Disadvantages

Contributions for a traditional IRA are not allowed after age 70 1/2, and distributions must begin at this age. Roth IRAs have no age limit or mandated distributions, so they make good estate planning vehicles.

Roth IRA Rules


Roth IRA's for Minors

Tax-free compounding of earnings inside an IRA is a beautiful idea — and a powerful one. The longer you can keep your money invested in a tax-free vehicle, the greater your wealth accumulation. What better way to accumulate a large amount of savings than to start during childhood? When tax-free compounding has more than 50 years to run its course, a relatively modest savings plan can produce substantial wealth.
There's no minimum (or maximum) age to set up a Roth IRA. And there's no requirement that the same dollars that were earned be used to fund the IRA. If your child earned money on a summer job and spent it on whatever kids spend money on these days,* there's nothing wrong with using money provided by parents to establish the IRA. The child has to have earned income, though.

Roth IRA's For Minors

Roth IRA Conversion Rules

	Roth IRA	Traditional IRA
Contribution Limit	$5,000 plus a catch-up contribution for those at least 50 years old	$5,000 plus a catch-up contribution for those at least 50 years
Deductibility	Contributions are never deductible	Contributions might be deductible, subject to tax-filing and active participant statuses, as well as income amount
Age Limitation	No age limitations	No contributions after age 70.5
Tax Credit	Available for 'Saver's Tax Credit'	Available for 'Saver's Tax Credit'
Income level for Contributions	Income levels may prevent taxpayers from contributing	Can contribute, but income levels will prevent taxpayers from tax deduction
Treatment of Earnings on Investments	Withdrawals after age 59 ½ are tax free. Earnings grow on a tax-deferred basis	Earnings are taxed upon distribution
Distributions Rules	Distributions may be taken at anytime. Distributions are tax free after 59 1/2 Distributions may be taken at any time.	Distributions will be treated as ordinary income and may be subjected to an early- withdrawal penalty if taken out while under age of 59 1/2.
Required Minimum Distribution Post Updated  April 23, 2015	No minimum withdrawal rules	Withdrawals must start at age 70 1/2