Both traditional IRA and Roth IRA are great ways to save for retirement, and you can open them even if you already have an employer-sponsored retirement plan. You can own both a traditional IRA and a Roth IRA, and you can even open them in the same year. However, the amount you can contribute to each annually depends on eligibility factors and contribution limits.
Traditional IRA vs. Roth IRA: What are the differences?
The main difference between a traditional IRA and a Roth IRA is the tax classification of the money you contribute to each.
Contribution Limits for IRA
The total contribution limit for your IRA is set at $6,000 per year as of 2022, whether you have one type of IRA or both. However, you are allowed an additional $1,000 contribution, making the total $7,000 if you are 50 years old or older.
How does your income affect IRA contribution limits?
Some high-income taxpayers have limits on the deductibility of IRA contributions, but income does not affect your ability to make contributions to a traditional IRA. It only affects whether you can claim a tax deduction for contributing that money.
Should you contribute to both traditional IRA and Roth IRA?
You can contribute to both types of IRAs as long as you meet all the requirements. You will receive the benefit of immediate tax-deductible contributions if you contribute to a traditional IRA. You may receive long-term benefits from tax-free retirement income if you contribute to a Roth IRA.
Frequently Asked Questions (FAQs)
How many traditional and Roth accounts can I have?
When will IRA contribution limits for the next year be announced?
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Sources:
Internal Revenue Service. “IRA FAQs.”
Internal Revenue Service. “Traditional and Roth IRAs.”
Internal Revenue Service. “Retirement Topics – IRA Contribution Limits.”
Internal Revenue Service. “Amount of Roth IRA Contributions That You Can Make for 2022.”
Internal Revenue Service. “Retirement Topics — Required Minimum Distributions (RMDs).”
Internal Revenue Service. “Publication 550 (2021), Investment Incomes and Taxes.”
Internal Revenue Service. “Amount of Roth IRA Contributions That You Can Make for 2021.”
Source: https://www.thebalancemoney.com/contribute-to-both-types-of-iras-2894459
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