A Traditional IRA and a Roth IRA are both retirement savings accounts, but they differ in how and when you pay taxes. The right choice depends on factors like your current tax bracket, expected income in retirement, and personal savings goals.
If you’re eligible to deduct a Traditional IRA contribution, your taxable income will be reduced this year and you will postpone paying taxes until you make withdrawals later.
If you prefer to forego a tax deduction this year in order to avoid paying taxes on withdrawals in retirement, consider making a contribution to a Roth IRA.
Here’s a brief summary of how these IRAs differ:
| Traditional IRA | Roth IRA | |
| Can I contribute? | Yes, if you or your spouse have earned income*. | Yes, if you or your spouse have earned income* and your income is not too high. |
| How much can I contribute in 2024? | The overall contribution limit to these IRAs is the lesser of: |
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| How much can I contribute in 2025? | The overall contribution limit to these IRAs is the lesser of: |
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| Can I deduct my contributions when I do my taxes? | Maybe. If you or your spouse were covered by a retirement plan at work, you might not be able to deduct your contributions. | No. |
| Are distributions taxable? | Yes. | No, if your account has been open for five years and you're 59½ or older. |
| Am I required to take distributions annually at a certain age ? | Yes. Required Minimum Distribution information | No. |
*Note: Earned income includes wages, salaries, tips, professional fees, bonuses, commissions, self-employment income, nontaxable combat pay, military differential pay, taxable alimony, separate maintenance payments, difficulty of care payments and certain stipend, fellowship and similar payments to graduate and postdoctoral students.
Both Sit Traditional and Sit Roth IRAs can be opened using the Sit IRA Application.
Carefully consider the Fund’s investment objectives, risks, charges and expenses before investing. The prospectus contains this and other important Fund information and may be obtained by calling Sit Mutual Funds at 1-800-332-5580 or by downloading them from the Documents page. Read the prospectus carefully before investing. Investment return and principal value of an investment will fluctuate so that an investor’s shares when redeemed may be worth more or less than their original cost.
The content herein is for informational purposes only without regard to any particular user’s investment objectives, risk tolerances or financial situation and does not constitute investment advice, nor should it be considered a solicitation or offering to sell securities or an interest in any fund.
Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors, and readers should not rely on this publication as their sole source of investment information.
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