IRA’s, or individual retirement savings accounts, were established in 1974 so that individuals or couples could conservatively fund a retirement account. Depending on your situation, either a Roth IRA or a traditional IRA may be better, and there are restrictions on both. What’s the difference between the two? Traditional IRA Establishment of a traditional IRA is subject to the following stipulations: An individual must be less than 70 years and 6 months old. There are no income limits for establishing a traditional IRA. Contributions have annual limits, for 2019 the limit is $5,500 for those under 50 years of age, $6,500 for those who are 50 years or older. Withdrawal restrictions apply unless the individual meets one or more of the following caveats: Wants to use $10,000 of the account to buy a first home. Becomes disabled before the age of 59 years and 6 months. Needs money for college. Needs money for unexpected and substantial medical bills. A comprehensive list of exceptions to the withdrawal penalty can be found here. Funds withdrawn from a traditional IRA after the age of 59 years and 6 months are treated as taxable income because at the time the funds are contributed to the account, they reduce the tax liability for that year. Distributions are mandatory after the age of 70 years and 6 months. Roth IRA Sometimes, a Roth IRA may be the best option, particularly for those who expect to be in a higher tax bracket when the funds are withdrawn. Funds contributed to a Roth IRA are taxed when they are contributed, so when they’re withdrawn, they’re treated as non-taxable income. The penalties for early withdrawal from a Roth IRA are the same as those for a traditional IRA, but a Roth differs from a traditional IRA in the following ways: There are no annual contribution limits, except that an annual contribution can’t exceed that year’s income. There are no mandatory distributions at any age. There is no age restriction on the establishment of a Roth. Roth IRA’s are subject to annual income limits of $135,000 for single filers and $205,000 for joint filers. Those who make more than that cannot establish a Roth IRA. When it comes to choosing between a traditional and a Roth IRA., there is no right or wrong selection, it’s a matter of which type of IRA will best help you to meet your retirement goals.