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Traditional IRA vs. Roth IRA
 

Comparison Traditional IRA Roth IRA
Eligibility Anyone under the age of 70 ½ with earned income. Anyone with earned income (no age restrictions) whose MAGI is not in excess of $166,000 for 2007, $169,000 for 2008 (joint returns) or 114,000 for 2007, $116,000 for 2008 (single returns).
Establishment Deadline Tax filing due dates, no extensions. Tax filing due dates, no extensions.
Total Contributions 100% of compensation or $4,000 for 2007 or $5,000 for 2008 (combined limit between Traditional and Roth IRA) per individual, whichever is less. 100% of compensation or $4,000 for 2007 or $5,000 for 2008 (combined limit between Traditional and Roth IRA) per individual, whichever is less.
Federal Tax Penalty-Free Distributions Distributions are allowed after age 59 ½, or due to death, disability, using 72(t) method, certain medical expenses, medical insurance during long-term unemployment, first-time home purchases and higher education expenses. Distributions of contributions are tax-free and penalty-free at any time. Earnings distributed penalty-free after age 59 ½, or due to death, disability, using 72(t) method, certain medical expenses, medical insurance during long-term unemployment, first-time home purchases and higher education expenses.
Required Minimum Distributions Must start by April 1st of the year following the year the individual reaches age 70 ½ or within certain time limits after death. Failure to take out minimums may result in a 50% penalty tax on required amounts not withdrawn. Mandatory distributions are not required at age 70 ½ but mandatory post-death distribution rules apply.
 
Morgan Stanley and its Financial Advisors do not offer tax advice. Individuals should consult their personal tax advisor before making any tax-related investment decisions.
 
 
 
 
 
 
 
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