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by Roger Chartier www.HowCanIRetire.net - HomePage


Difference Between Roth IRA and Designated Roth Account

For retirement planning know the distinction between these two.
Here is the fight card for the match.

The Roth IRA vs
The Designated Roth Account

The issues are maximum Roth IRA contributions, Roth IRA distributions and IRA withdrawal penalties to name a few.

You can decide the winner.
Which plan works better for you?

But, then it could be something else altogether for investment.

There are lower contribution limits on the Roth IRA but both start at 50 years of age.

Withdrawal rules might be safer for you with the Roth IRA.

But, if you aren't as worried, then the Designated Roth Account is OK.

There are so many points to consider here that it gives me a headache.

Here's a list of differences from the IRS

  Roth IRA Designated Roth Account
Number of investment choices Many as long as not prohibited As offered by the plan
Participation Anyone with earned income Participant in a 401K, 403B or 457 governmental plan that allows designated Roth contributions
Contribution Limits $5,000.00
$6,000.00 if age 50 or over
$22,000.00 if age 50 or over
Recharacterization of rolled over amounts Allowed Not Allowed
Required Minimum Distributions Only after the original IRA owners death. Yes
Tax on nonqualified distributions Nonqualified distributions are distributed in this order:
1. Non Taxable contributions
2. Taxable earnings
Nonqualified distributions are pro-rated between Roth Contributions (non-taxable) and earnings (taxable)
Withdrawals Anytime. Maybe subject to tax if not a qualified distribution. Only when allowed by the terms of the plan. Subject to tax if not a qualified distribution.
Loans No Yes, if plan allows
5 year holding period for qualified distributions begins January 1 of the year a contribution is made t any Roth IRA Separate for each Roth Account and begins on January 1 of the year contributions made to that account.
If one Roth Account is rolled into another the earlier start date applies.
Beneficiary Anyone Anyone but, if married the spouse must consent to nonspouse beneficiary.


Disclaimer: Before you make an investment get legal or professional advice.