How do I know if my retirement is a Roth IRA or Traditional IRA? (2024)

FAQs

How do I know if my retirement is a Roth IRA or Traditional IRA? ›

If you're unsure which type of IRA you have, you'll want to check the paperwork you received when you first opened the account. It will explicitly state what type of account it is.

With a Roth IRA, you contribute after-tax dollars, your money grows tax-free, and you can generally make tax- and penalty-free withdrawals after age 59½. With a Traditional IRA, you contribute pre- or after-tax dollars, your money grows tax-deferred, and withdrawals are taxed as current income after age 59½.

You can also know whether you have a Roth 401(k) by checking the retirement paperwork you received when opening the retirement account. These documents should include information on whether you have a traditional 401(k) or Roth 401(k) account.

Information about contributions to your Roth IRA can be found on the year-end summary statement from the bank, broker, or mutual fund that holds your account. If you had a Roth retirement plan at work, contributions to it will be indicated on your W-2 in Box 12 with code: AA: Roth 401(k) plan. BB: Roth 403(b) plan.

For a traditional IRA, enter Codes 1 and 8, if applicable, in box 7; for a Roth IRA, enter Codes J and 8, if applicable. These earnings could be subject to the 10% additional tax under section 72(t).

401(k) vs.

A big difference between Roth IRAs and 401(k)s lies in their tax treatment. You fund Roth IRAs with after-tax income, meaning your withdrawals are not taxable retirement income. Conversely, you fund 401(k)s with pre-tax income. This makes your 401(k) withdrawals subject to taxation in retirement.

The matching contributions provided by an employer were historically placed in a traditional 401(k), while employee contributions were held in the Roth 401(k). The SECURE 2.0 Act changed this in December 2022, making it possible for employers to make matching contributions to employees' Roth 401(k)s.

IRA contributions will be reported on Form 5498: IRA contribution information is reported for each person for whom any IRA was maintained, including SEP or SIMPLE IRAs. An IRA includes all investments under one IRA plan. The institution maintaining the IRA files this form.

Traditional and Roth IRA contributions are reported on Form 5498, IRA Contributions Information. Your IRA trustee or issuer—not you—is required to file this form with the IRS, usually by May 31.

What box on W-2 shows retirement contributions? ›

Form W-2, Box 13

The "Retirement plan" indicator in Box 13 shows whether an employee is an active participant in your company's plan.

In the case of a Roth 401(k), you contribute with after-tax dollars. So, your employer would include your contributions in box 1 from your W-2. Whether you own a traditional or Roth 401(k), as long as you didn't take out any distributions, you don't have to do a thing on your federal or state return!

The IRS requires the 1099-R for excess contributions to be created in the year the excess contribution is removed the from your traditional or Roth IRA. Box 7 of the 1099-R will report whether you removed a contribution that was deposited in the current or prior year for timely return of excess requests.

If you're unsure which type of IRA you have, you'll want to check the paperwork you received when you first opened the account. It will explicitly state what type of account it is.

Your 401(k) might be a "designated Roth 401(k)", meaning that you made contributions after-tax. A distributions from a designated Roth 401(k) should have code B in box 7 along with a number code. If there is no letter code, the account is probably a pre-tax 401(k).

You'll receive Form 1099-R, the second form, during the years you take distributions from your Roth IRA. The IRS requires you to submit Form 1099-R when you file taxes. If you took a distribution before age 59.5 or before owning the Roth IRA for at least five years, you'd pay taxes on the income.

A SIMPLE IRA can be set up as either pre-tax (traditional) or after-tax (Roth). The Roth SIMPLE IRA was created by the 2022 SECURE Act 2.0, so employers may not offer it yet. If the SIMPLE IRA is traditional, any employee contribution goes into the account before tax.

A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA. You cannot deduct contributions to a Roth IRA. If you satisfy the requirements, qualified distributions are tax-free. You can make contributions to your Roth IRA after you reach age 70 ½.