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Roth IRAs vs. Traditional IRAs: Tax Implications for Retirees

February 12, 2024

Roth IRAs vs. Traditional IRAs: Tax Implications for Retirees


Traditional IRA



100% of Earnings


  • Tax-deferred Growth before withdrawal                            

Annual Contributions:

  • Accomplished using after-tax dollars
  • Deductible according to IRS income limit requirements

RMD-Required Minimum Distributions

  • Generally, requirements are to withdraw the minimum amount at age 73 if you reach age 72 in the year 2022. (As of the time of this writing Jan. 2024)


  • Taxes paid on all earned Income including contributions at the time the withdrawal is taken



Income Requirements

None. Any person 18 years or older with earned income may open and contribute to a traditional IRA. Additionally, contributions are only tax-deductible within specific income limits according to the IRS.



100% of Earnings

  • Tax-deferred Growth before AND at the time of withdrawal                          

Annual Contributions:


  • Accomplished using after-tax dollars
  • Not deductible from income


RMD-Required Minimum Distributions

  • None. There are no required minimum distributions necessary for Roth IRAs at any age. Taxes are paid when contributions are made.


  • Zero Tax AND Zero penalties on withdrawals at any age and time subject to the 5-year IRS rule
    Tax-free and penalty-free withdrawals according to IRS-qualified distribution requirements

Income Requirements

Any person 18 years or older with earned income may contribute to a ROTH IRA within specific IRS Income Limitations as noted:
2023 upper limits for a partial contribution are:

  • Under $153,000 single
  • Under $228,000 married joint filing



How does a Roth IRA Account differ from a traditional IRA Account?

Relative to a Roth IRA, your contributions are made “after-tax”.  You will pay tax on the dollars when you contribute to the ROTH IRA. 100% of the potential earnings within a Roth IRA grow tax-free while held in the account. Additionally, all withdrawals from a Roth IRA are free of federal income tax when taken.  Further, as long as the owner of the account has reached the age of 59 ½, or is disabled, or deceased, withdrawals come out penalty-free provided a 5-year aging period has been met since account inception. 

Roth IRAs are not subject to RMD’s Required Minimum Distribution rules throughout the life of the original account owner. One may leave their assets in the Roth IRA providing the potential for continued growth.
Also note that with a Roth IRA, you can withdraw at any time and for any reason, the contributions you've made without penalties or taxes due provided you are 59 ½ years of age.


Relative to a traditional IRA, contributions are made pre-tax and they are tax-deductible in the year the contribution is made provided certain IRS requirements are met. 100% of the earnings in the traditional IRA are tax-deferred as long as they remain in the account. Withdrawals of pre-tax dollars will be subject to ordinary income tax rates at the time of withdrawal.
Required Minimum Distributions from Traditional IRAs must be taken before April 1st of the year following the year in which you turn 73 years of age. If you wait until April 1st, you will be required to take the second distribution by that year's end.


For both ROTH & TRADITIONAL IRAs, distributions taken before the age of 59½ may be subject to a 10% early withdrawal penalty AND ordinary income taxes.


If I qualify to contribute to both a Traditional IRA and a Roth IRA, are there tax implications I should consider? Having a combination of pre-tax (Traditional IRA) and after-tax (Roth IRA) accounts can provide flexibility in retirement, of where to take money from to best allow for your various tax factors at that time to assist with the unknown- future tax rates.

A ROTH IRA could be beneficial if you expect high income in retirement.  If you expect your income to match or exceed your current income amounts, a ROTH may be the better option for you. 
For others who envision a higher income tax rate in retirement than their current rate, or younger generations who envision steady income growth throughout their careers, Roth IRA contributions might be the better option.

But if you feel that your tax rates will be lower in retirement than your current rate, you may want to take advantage of pretax vehicles- the Traditional IRA.  

What Amount Can You Contribute?
The maximum amount you can contribute across all of your IRA’s is: Either 100% of your earned income or the annual contribution limit - whichever is less.
For the 2023 year, the annual contribution limit is $6,500.00.  And for the 2024 year, the annual contribution limit is $7,000.00

Catch-up Provision: When you have reached the age of 50 and beyond, contribution limits on IRAs increase by $1,000.00. This allows for a "catchup" contribution of additional dollars for those nearing retirement.

Thank you for your interest

Get in touch:

Gloria Jean Cosentino, RF

Direct (630) 306-1703