Skip to main content Download Acrobat Reader 5.0 or higher to view PDF files.

Financial Education


Learn Whether a Roth IRA or a Traditional IRA is Right for You

Choosing a Roth IRA or a Traditional IRA

Work toward your retirement dreams with an IRA

With life expectancies increasing, many people are spending decades in retirement. While that’s good news, there’s also a vexing side to the equation: You need to make your retirement savings last as long as you do. Saving more is the obvious solution.

Boost your savings with an IRA

Fortunately, individual retirement accounts (IRAs) — tax-deferred retirement accounts available to income-earners and their spouses — offer tax advantages that can help you grow your savings. Since earnings in an IRA grow tax-deferred, your money can grow faster than it would in an equivalent taxable account earning the same return. 1

There are two basic types of IRAs to choose from — traditional and Roth — and each offers its own set of benefits. You can contribute up to $5,500 a year to either one or a combination of the two. 2 If you are age 50 or older, you can make an additional $1,000 catch-up contribution per year. The deadline for contributions each tax year is the tax filing deadline, April 15. For instance, you can make contributions for the 2014 tax year up until April 15, 2015.


Traditional IRAs
With a traditional IRA, you may be able to take a tax deduction for the contributions you make. Your eligibility for the deduction depends on your (and your spouse’s) participation in an employer-sponsored retirement plan and — if one of you participates in an employer plan — your income. See your tax advisor for details. For those who are eligible, that means immediate savings on your current taxes. You must be younger than 70½ to be eligible to contribute to a traditional IRA.

In addition, your contributions and the earnings on them grow tax-deferred until you begin making withdrawals in retirement. That saves you money on taxes as your savings grow. And when you take distributions in retirement, you may be in a lower tax bracket, so you may owe a smaller amount of tax on your savings.

Roth IRA
In contrast to a traditional IRA, contributions you make to a Roth IRA are never tax-deductible. But Roth IRAs offer the advantage that you can take distributions in retirement entirely tax-free if you’re at least age 59½ and have held the account at least five years. They also offer additional flexibility. You can withdraw your contributions (but not the earnings on them) tax- and penalty-free at any time. You’re eligible to contribute to a Roth IRA if you have modified adjusted gross income below $129,000 (single) or $191,000 (married filing jointly).

Now is the perfect time to start saving

If you’re expecting a tax refund, you may already be dreaming of how to spend it. Consider investing it in an IRA! Last year, about three-quarters of tax filers received a refund, with an average amount of $2,792, according to the IRS. Instead of splurging on electronics, travel or entertainment, consider how much more valuable your refund could become if you invested it in an IRA for your retirement (see chart).

Visit a Rockland Trust branch near you to open, contribute to or review your IRA today.


1. Taxes will be due at ordinary income tax rates upon withdrawal from a traditional IRA. Premature withdrawals (generally, those made before age 59½) may be subject to a 10 percent tax penalty, too. Withdrawals from a Roth IRA are tax-free at retirement if the account holder is at least age 59½ and has held the account for at least five years. Premature withdrawals are subject to ordinary income tax and a 10 percent tax penalty.

2. This is the limit for 2014 and 2015. It is indexed to inflation for future years. Maximum contribution is $5,500 or your taxable compensation for the year, whichever is less. Non-wage-earning spouses of wage earners may also contribute to an IRA.

3. Rate of return is for illustration only and does not represent the return of any specific investment. Your returns will vary. Example assumes savings accumulate in a tax-deferred account. Taxes will be due at ordinary income tax rates upon withdrawal from a traditional IRA. Premature withdrawals (generally, those made before age 59½) may be subject to a 10 percent tax penalty, too. Required minimum distributions must begin after age 70½. Otherwise a penalty of 50 percent of the amount that should have been withdrawn, but wasn’t, may be imposed. Withdrawals from a Roth IRA are tax-free at retirement if the account holder is at least age 59½ and has held the account for at least five years. Premature withdrawals are subject to ordinary income tax and a 10 percent tax penalty.

Planning For the Future