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What is the difference between a Traditional IRA and a Roth IRA?

what is a brokerage ira

Important Differences Between Traditional IRAs & Roth IRAs

Traditional and Roth Individual Retirement Accounts (IRAs) have these features in common:

  • Both are vehicles to help provide for your long-term financial security; and
  • Each type of IRA is a personal retirement savings plan that offers certain tax advantages to those who qualify.

*Many of Prudential Retirement's Personal Retirement Services Retirement Counselors carry the distinct designation of Certified Retirement Consultants, an advanced certification available through the International Foundation for Retirement Education (InFRE). Certification includes mastery of retirement plan design, investment strategy, retirement income management, and retirement readiness and counseling.

1 If you or your spouse is eligible to participate in an employer-sponsored retirement plan, your contributions may only be tax deductible if you meet certain income and tax filing status requirements.

2 In order for distributions to be made from a Roth IRA free of penalties and federal income taxes, your Roth IRA must have been established at least five tax years before the withdrawal (period begins with the tax year for which your first contribution is made) and your distribution must be: 1) made on or after the date you attain age 59½; 2) made to your beneficiary or your estate after your death; 3) attributable to your being disabled; or 4) taken because you are a qualified first-time home-buyer (lifetime limit of $10,000).

3 For tax year 2010, you may contribute to a Roth IRA if you have taxable income and your modified Adjusted Gross Income does not exceed: a) $177,000-if you are married, filing jointly or a qualifying widow or widower; b) $120,000-if you are filing as single, head of household, or are married, filing separately, and did not live with your spouse at any time during the year;

or c) $10,000-if you are married, filing separately, and lived with your spouse at any time during the tax year. The amount that may be contributed to a Roth IRA begins to phase out beginning at $10,000 below these income limits.

4 Your plan may require that you begin your withdrawals earlier than noted here.

5 Does not apply to investment earnings on your account or dollars contributed to your account through a conversion.

Guarantees are based on the claims-paying ability of the issuing insurance company and are subject to certain limitations, terms, and conditions.

Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company, Hartford, CT, or its affiliates. (California COA # 1179). Insurance products and services offered by Prudential Retirement Insurance and Annuity Company, Hartford, CT or Prudential Insurance Company of America, Newark, NJ.   Each company is solely responsible for its financial condition and contractual obligations. Securities products and services are distributed by Prudential Investment Management Services LLC (PIMS), Three Gateway Center, 14th Floor, Newark, NJ 07102-4077. All are Prudential Financial companies.

Prudential Investment Management Services LLC's audited Statement of Financial Condition is available to view, print or download. You may request a hard copy of this document by contacting us at 888-244-6237.

PIMS Best Execution Quality Report (SEC 606 Information) is now available to view.

Neither Prudential Financial nor any of its representatives are tax or legal advisors. You are encouraged to consult your individual legal or tax advisor with any specific questions.

© 2014 Prudential Financial, Inc. and its related entities. Prudential, the Prudential logo, the Rock symbol and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

Prudential Retirement is a Prudential Financial business.

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