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INSTITUTIONS
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RETIREMENT PLAN INVESTOR
Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:
IF YOUR PLAN ID BEGINS WITH IRK, BRK, 1 OR 2
Visit americanfunds.com/retire
IF YOUR PLAN ID BEGINS WITH 34 OR 135
Use this table to see a side-by-side comparison of traditional and Roth IRA features and benefits.
This table will help you compare the key features of benefits of traditional and Roth IRAs.
Traditional IRAs |
Roth IRAs |
|
---|---|---|
Eligibility* † |
You (or your spouse if filing a joint return) can contribute if you have taxable compensation (a salaried job, investments or other sources). |
You (or your spouse if filing a joint return) can contribute if you have taxable compensation and your income level is under certain limits. Single filer, with MAGI of:
Joint filers, with MAGI of:
Married, filing separately, with MAGI of:
|
Maximum annual contribution‡ |
The total contribution you can make to all of your IRAs for 2023 is $6,500 or 100% of your compensation, whichever is less. |
Same as traditional IRA, subject to phase-out range depending on MAGI as explained in Eligibility. |
Deductible contributions |
For 2023: Single filer, covered by a retirement plan at work, with MAGI of:
Single filer, not covered by a plan at work:
Joint filer, covered by a plan at work, with MAGI of:
Joint filer, only a spouse is covered by a plan at work, with MAGI of:
Married, filing separately, with MAGI of:
|
Roth contributions are not tax-deductible. |
Tax credit for contributions |
You can claim a nonrefundable tax credit for contributions if you are eligible. |
Same as traditional IRA.. |
Federal income-tax treatment on contributions |
Taxes are deferred until distributions are made; taxable distributions are treated as ordinary income. |
Contributions are made with after-tax money; therefore, withdrawals from the contribution amount (basis amount) are tax-free. |
Federal income-tax treatment on earnings |
Earnings grow tax-deferred until distributions begin. Distributions are taxed as ordinary income. |
Qualified distributions are tax-free. |
Conversions |
Conversion to a Roth IRA**: allowed, regardless of MAGI or tax-filing status. The taxable portion of the converted amount will be treated as taxable income. |
Recharacterizations: Investors can’t recharacterize (undo) Roth conversions that occurred on or after January 1, 2018. |
Rollovers |
To employer-sponsored plans: pretax contributions can be rolled over to a 401(k) or to another qualified plan, as well as to 403(b) and 457(b) plans. However, the receiving plan must accept IRA rollovers. |
From/to another Roth IRA: allowed. |
Distributions†† |
Distributions from contributions and earnings can be taken after age 59½ without federal tax penalty.
Distributions to your beneficiaries are also exempt from the 10% penalty. |
Distributions from contributions can be made any time without taxes or federal tax penalty.
Payments made to your beneficiaries after the five-year period are also tax and penalty free. Payments made before the end of the five-year period are penalty free. |
Required minimum distributions (RMDs) |
You must begin taking RMDs no later than April 1 of the year following the year you turn 73.‡‡ |
No RMDs apply during your lifetime. |
* If you are eligible, you can contribute to both a traditional and Roth IRA as long as the combined amount does not exceed the applicable contribution limits shown in the table.
† Your MAGI is calculated by subtracting certain expenses and allowable adjustments from your gross income. To determine your MAGI, contact your tax advisor or financial professional.
‡ Future contribution limits may be adjusted for cost-of-living increases. Contributions for the current tax year must be made by April 15 of the following year, unless that date falls on a Saturday or Sunday.
** Converting to a Roth IRA is a taxable event, and the rules and tax calculations can be complicated. State income-tax rules for conversions may differ from federal rules. We encourage you to discuss conversion options with your tax advisor or financial professional.
†† For beneficiaries, distribution rules vary depending on your age at death and the beneficiary‘s relationship to you. For help with distributions and tax-related issues, we encourageyou to talk to your personal tax advisor or legal professional.
‡‡ The SECURE 2.0 Act increased the age when RMDs must begin from 72 to 73, effective for individuals turning 72 on or after January 1, 2023. If you reached age 72 before this date, you are still required to take RMDs.
You can learn more about traditional and Roth IRAs in IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), and IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). We also encourage you to discuss your financial goals, eligibility and individual tax situation with your tax advisor or financial professional.
Learn about the IRAs available through American Funds.
Learn more about the differences between Roth and traditional IRAs.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
American Funds Distributors, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.