Types of Roth Ira
There are five main categories of Roth IRA accounts, organized by their contribution and investment characteristics.
Main Categories
- Traditional Roth IRA — a type of retirement account that allows after-tax contributions, with Fidelity Investments being a prominent provider, known for its low fees and wide range of investment options.
- Roth IRA Conversion — a process that allows investors to convert a Traditional IRA into a Roth IRA, with Charles Schwab offering conversion services, including guidance on tax implications and investment strategies.
- Roth 401(k) — a type of employer-sponsored retirement plan that allows Roth contributions, with Boeing offering a Roth 401(k) option to its employees, featuring a range of investment choices and employer matching contributions.
- Backdoor Roth IRA — a strategy that involves converting a non-deductible IRA into a Roth IRA, with Vanguard providing investors with backdoor conversion services, including tax guidance and investment management.
- Spousal Roth IRA — a type of Roth IRA that allows a non-working spouse to contribute to a retirement account, with T. Rowe Price offering spousal Roth IRA accounts, featuring a range of investment options and low fees.
Comparison Table
| Category | Contribution Limit | Income Limit | Investment Options |
|---|---|---|---|
| Traditional Roth IRA | $6,000 (2022) | $137,500 (single) | Stocks, bonds, mutual funds |
| Roth IRA Conversion | No limit | No limit | Same as Traditional IRA |
| Roth 401(k) | $19,500 (2022) | No limit | Employer-selected investment options |
| Backdoor Roth IRA | $6,000 (2022) | No limit | Same as Traditional IRA |
| Spousal Roth IRA | $6,000 (2022) | $208,500 (joint) | Same as Traditional Roth IRA |
How They Relate
The Traditional Roth IRA and Roth 401(k) are often compared due to their similarities in contribution characteristics, but they differ in their investment options and employer sponsorship. The Roth IRA Conversion and Backdoor Roth IRA are commonly confused, as both involve converting a Traditional IRA into a Roth IRA, but they have different contribution limits and tax implications. The Spousal Roth IRA is often overlooked, but it provides a valuable opportunity for non-working spouses to save for retirement, with Fidelity Investments and Charles Schwab offering spousal Roth IRA accounts with competitive fees and investment options.