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Roth IRAs

How does a Roth IRA work?

You'll pay taxes on your Roth IRA contributions but you won't pay any taxes when you withdraw your money (take a distribution) later in retirement. You can also contribute at any age and earnings may be withdrawn after age 59½ without penalty.

This "pay now and play later" approach is appealing to many people.

Am I eligible to contribute to a Roth IRA?

Unlike Traditional IRA contributions, your ability to contribute to a Roth IRA depends on your income. View the income limitations Opens a new window for Roth IRA contributions.

If your income exceeds the listed limits, you cannot contribute to a Roth IRA. Check with your tax advisor to determine the maximum amount you may contribute to a Roth IRA.

What are the Roth IRA contribution limits?

View the IRA contribution limits Opens a new window for the current year. This limit applies to all IRAs you have, whether it's at Capital One 360 or elsewhere.

If your earned income is less than the contribution limit, then you're only able to contribute up to the amount you earned for the year.

If you're 50 or older by the end of the year for which the contribution is made, you can add up to an additional $1,000 per year. This additional amount is referred to as a "catch-up contribution."

If you own multiple IRAs, the total of all contributions to all IRAs may not exceed this annual contribution maximum.

Can I have both a Traditional and a Roth IRA?

Yes, you can have both types of IRAs at the same time. You can make contributions to both types of IRA Plans in the same year as long all of your contributions don't exceed annual contribution maximum.

When can I start taking tax-free distributions from my Roth IRA?

You can start taking tax-free distributions after age 59½.

Do I have to take minimum distributions from a Roth IRA when I reach age 70½?

No, with a Roth IRA you are not required to start taking minimum distributions when you reach age 70½.

What's the difference between Traditional and Roth?

When deciding between a Traditional and Roth IRA, you may want to ask yourself: Do I want to save on taxes now with a Traditional IRA or when I retire with a Roth IRA?

Here are some key differences between a Traditional and Roth IRA Plan:

Traditional vs. Roth IRAs
Retirement Plan CriteriaTraditionalRoth
Eligibility Everyone can contribute (consult your tax advisor for additional information) Ability to contribute is determined by annual income
Tax Deductibility of Contributions Contributions may be tax deductible (amount is subtracted from gross income to reduce the amount of income subject to tax) Contributions are not tax deductible – you will have to pay income taxes on your contributions.
Earnings Earnings are tax-deferred if taken as normal distributions after age 59½ Earnings are tax-exempt if taken as normal distributions after age 59½
Distributions All earnings and principal distributions are taxed at the time of withdrawal Withdrawals prior to age 59½ are generally not permitted without penalty All earnings and principal distributions are tax free if taken after age 59½ You can withdraw your contributions (but not the earnings) after a waiting period without penalty
Mandatory Distributions Must start at age 70½ No mandatory distributions
Age Limitations for Contributions No contributions after age 70½ No age limit

As always, consult your tax advisor for additional information.

Traditional vs. Roth IRAs

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