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

Traditional IRAs allow tax-deductible contributions. However, some participants are limited to making only non-deductible contributions. Your ability to deduct contributions to a Traditional IRA depends on your modified adjusted gross income. Assets placed in a Traditional IRA grow tax-deferred, meaning you don't pay taxes on earnings until they are withdrawn. A required distribution from a Traditional IRA must take place as follows:

  • If you were born June 30, 1949 or earlier (turn age 70 ½ on or before December 31, 2019), there is no change in that the year that you turn 70 ½, the IRS will require you to take a Required Minimum Distribution (RMD) from your IRA. 
  • If you were born on or after July 1, 1949 (turn 70 ½ on or after January 1, 2020), the IRS will require in the year you turn 72 to take a Required Minimum Distribution (RMD) from your IRA.

A Traditional IRA can also be used to receive transfers or rollovers from other IRAs or rollovers from an employer-sponsored 401(k) or 403(b) plan.

With a Roth IRA, you must pay taxes on initial contributions, but once assets are in the account, they grow tax-deferred. Withdrawals are tax-free, provided certain IRS requirements are met. There are no required distributions; therefore, money you invest will continue to grow tax-free until you choose to withdraw it. A Roth IRA can also be used to receive transfers or rollovers from other Roth IRAs, Roth 403(b) or Roth 401(k) plans. You may also convert an employer-sponsored 403(b) or 401(k) plan to a Roth IRA, but keep in mind that any amount converted is considered a taxable event.

Learn more about GuideStone IRAs


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