What is a traditional IRA and What is Roth IRA (Individual Retirement Account)?
What is a traditional IRA?
A traditional IRA is a retirement account, you get to invest without paying taxes during your contribution. The investment is taxed once withdrawn after age 59½. People who withdraw below the age of 59½ years are subjected to an additional 10% penalty.
“Contributions you make to a traditional IRA may be fully or partially deductible, depending on your filing status and income, and Generally, amounts in your traditional IRA (including earnings and gains) are not taxed until you take a distribution (withdrawal) from your IRA.” (IRS, 2023)
What is Roth IRA?
Roth IRA is a retirement account that you contribute after tax and withdraw tax-free after age 59½. People who withdraw below the age of 59½ are subjected to a 10% penalty.
What is the total IRA limit in 2023?
Irrespective of a Roth or Traditional account, you cannot exceed the IRS total limit of $6500 and 7,500 for ages above 50 years.