Can You Contribute to Both a Traditional and Roth IRA? (2024)

Can You Contribute to Both a Traditional and Roth IRA? (1)

Individual retirement accounts (IRAs) are one of the most popular ways to save for retirement. Traditional IRAs provide tax deductions on your contributions, effectively reducing your current taxable income. In contrast, Roth IRAs are funded with after-tax dollars, allowing for tax-free withdrawals during retirement. The Internal Revenue Service (IRS) permits you to contribute to both a traditional and Roth IRA in the same year, so long as your contributions don’t exceed the defined limit within the year.

A financial advisor can help pick investments and plan for retirement. Find a fiduciary advisor today.

IRA Contribution Rules

Having a clear understanding of the contribution rules for both types of IRAs plays a crucial role in making the most of their benefits.

First and foremost, you must have earned income to be eligible to contribute to either type of IRA. Earned income may include wages, salaries, tips, bonuses or even alimony if it’s taxable to you. Passive sources like rental income, interest and dividends won’t qualify you for an IRA.

IRAs are also subject to annual contribution limits set by the IRS. In 2023, the total contribution limit across both traditional and Roth IRAs is $6,500 for individuals under age 50, and $7,500 for those 50 and older, regardless of how the contributions are divided between the two IRAs. However, contributing more than the allowable limit to your IRA can result in penalties. It’s essential to monitor your contributions to avoid this.

Unlike traditional IRAs, Roth IRAs have specific income limits that determine whether you can make direct contributions. These limits vary based on your filing status. If your income exceeds these ceilings, you may still be able to use a backdoor Roth IRA strategy.

Lastly, you have until Tax Day each year to make IRA contributions for the previous tax year.

Eligibility for Traditional IRAs

While there currently is no age limit to contributing to a traditional IRA, this hasn’t always been the case. Previously, you became ineligible for a traditional IRA at age 70 ½, but this age limit no longer applies. Traditional IRAs are, however, subject to required minimum distributions (RMDs). This means you must begin withdrawing from your account at age 72, or 73 if you turned 72 after Dec. 31, 2022. The RMD age will rise to 75 in 2033.

Traditional IRA Deduction Limits

The contributions to a traditional IRA are usually tax-deductible for the tax year they are made, which can decrease your annual tax liability. However, if you or your spouse is covered by a workplace retirement plan like a 401(k), the amount you can deduct for your traditional IRA contributions may be limited based on your modified adjusted gross income (MAGI).

If you are single or the head of your household and have a workplace retirement plan in 2023, your traditional IRA contribution is:

  • Fully deductible if your MAGI is $73,000 or less
  • Partially deductible if your MAGI is more than $73,000 and less than $83,000
  • Non-deductible if your MAGI is $83,000 or higher

If you are married, file jointly and have a workplace retirement plan in 2023, your traditional IRA contribution is:

  • Fully deductible if your MAGI is $116,000 or less
  • Partially deductible if your MAGI is more than $116,000 and less than $136,000
  • Non-deductible if your MAGI is $136,000 or higher

If you are married, file jointly and have a spouse with a workplace plan in 2023 – but you do not – IRA contributions are:

  • Fully deductible if your MAGI is $218,000 or less
  • Partially deductible if your MAGI is more than $218,000 and less than $228,000
  • Non-deductible if your MAGI is $228,000 or higher

Eligibility for Roth IRAs

Like a traditional IRA, you must have earned income in order to contribute to a Roth IRA. Additionally, your income must fall within certain ranges, which are set by the IRS and can change annually.

For single filers, heads of households and married couples who file separately (but do not live together), the income limits for Roth IRA eligibility in 2023 are as follows:

  • You can make a full contribution if your MAGI is less than $138,000
  • You can make a partial contribution if your MAGI is more than $138,000 and less than $153,000
  • You are no longer eligible to contribute to a Roth IRA if your MAGI is $153,000 or above

For married couples filing jointly, the income limits for Roth IRA eligibility in 2023 are as follows:

  • You can make a full Roth contribution if your MAGI is less than $218,000
  • You can make a partial contribution if your MAGI is between $218,000 and $227,999
  • You are no longer eligible to contribute to your Roth IRA if your MAGI is $228,000 or higher

How to Divide Your Contributions

Can You Contribute to Both a Traditional and Roth IRA? (3)

If you’re in a higher tax bracket now and expect to be in a lower one during retirement, a traditional IRA may offer more immediate tax savings. Conversely, if you anticipate being in a higher tax bracket later, a Roth IRA might be more advantageous since your withdrawals will be tax-free.

However, not everyone has a clear picture of what their tax situation will be in retirement. As a result, you may consider dividing your contributions between a traditional and Roth IRA.

One approach could involve contributing to a traditional IRA up to the point where your taxable income falls to a lower bracket. You could then divert the remaining amount to your Roth IRA. This tactic offers immediate tax savings while also securing future tax-free income.

For example, a 35-year-old could potentially divide her $6,500 contribution by investing $2,500 in a traditional IRA for the tax deduction and the remaining $4,000 in a Roth IRA.

In deciding how to divide your contributions, keep in mind that Roth IRAs also have potential estate planning benefits. Since they aren’t subject to RMDs, you can pass on your Roth IRA to heirs tax-free, potentially creating a lasting legacy.

Choosing Which IRA to Invest the Most Money

The decision on which IRA to prioritize requires careful consideration of several factors. These can range from your current tax rate, expected tax rate in retirement, basic eligibility and the importance of future tax savings vs. current tax savings.

The optimal choice can differ based on your financial situation. For instance, a young worker in a low tax bracket might lean toward Roth IRA contributions for tax-free income during retirement. Conversely, a high-income worker could favor traditional IRA contributions to benefit from immediate tax reductions. With so many factors to consider, the aid of a financial advisor can be invaluable in evaluating current and future tax rates as well as retirement expectations to align personal financial goals.

Bottom Line

Understanding the rules that govern IRAs and strategically distributing your contributions across traditional and Roth IRAs can potentially improve your financial stability in retirement. Identifying which account to prioritize based on your unique circumstances can help you maximize the potential of your retirement savings.

Retirement Planning Tips

  • Do you know how much money you need to retire? SmartAsset’s retirement calculator can help you estimate your magic number.
  • A financial advisor can help you manage your retirement accounts and plan for your golden years. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you canhave a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/designer491, ©iStock.com/kupicoo, ©iStock.com/Fly View Productions

Can You Contribute to Both a Traditional and Roth IRA? (2024)

FAQs

Can You Contribute to Both a Traditional and Roth IRA? ›

The Internal Revenue Service (IRS) permits you to contribute to both a traditional and Roth IRA in the same year, so long as your contributions don't exceed the defined limit within the year. A financial advisor can help pick investments and plan for retirement.

Can I contribute $5000 to both a Roth and traditional IRA? ›

You may contribute simultaneously to a traditional IRA and a Roth IRA (subject to eligibility) as long as the total contributed to all (traditional or Roth) IRAs totals no more than $7,000 ($8,000 if you're age 50 or older) for the 2024 tax year.

Can I contribute to a Roth and traditional IRA in the same year? ›

Fact: If you're eligible, you can contribute to different types of IRAs. Contributing to a Roth IRA and a traditional IRA is absolutely allowed as long as you're eligible.

Can you contribute $7000 to both Roth and traditional IRA? ›

For 2022, 2021, 2020 and 2019, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than: $6,000 ($7,000 if you're age 50 or older), or. If less, your taxable compensation for the year.

Can I combine traditional IRA and Roth IRA? ›

There is no limit on the number of IRAs you can have. You can even own multiples of the same kind of IRA, meaning you can have multiple Roth IRAs, SEP IRAs and traditional IRAs. That said, increasing your number of IRAs doesn't necessarily increase the amount you can contribute annually.

Can you put 6000 in a Roth and traditional IRA in the same year? ›

How much can I contribute? The most you can contribute to all of your traditional and Roth IRAs is the smaller of: For 2021, $6,000, or $7,000 if you're age 50 or older by the end of the year; or your taxable compensation for the year.

Should I put money in both Roth and traditional IRA? ›

It may be appropriate to contribute to both a traditional and a Roth IRA—if you can. Doing so will give you taxable and tax-free withdrawal options in retirement. Financial planners call this tax diversification, and it's generally a smart strategy when you're unsure what your tax picture will look like in retirement.

What is a backdoor Roth IRA? ›

A backdoor Roth IRA is a conversion that allows high earners to open a Roth IRA despite IRS-imposed income limits. Basically, you put money you've already paid taxes on in a traditional IRA, then convert your contributed money into a Roth IRA, and you're done.

Is it smart to have multiple Roth IRAs? ›

Having more than one Roth IRA is a way to diversify your investments through accounts with different financial institutions that may offer different investment options. Tax diversification. Open a Roth and a traditional IRA and you'll have a mix of tax benefits.

How does the IRS know my Roth IRA contribution? ›

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.

How much can you contribute to a traditional and Roth IRA? ›

These limits are set and adjusted for inflation annually and are published by the Internal Revenue Service (IRS). The maximum contribution limit for Roth and traditional IRAs for 2024 is: $7,000 if you're younger than age 50. $8,000 if you're age 50 or older.

Can you contribute $6000 to both Roth and 401k? ›

You can contribute to both a Roth IRA and an employer-sponsored retirement plan, such as a 401(k), Simplified Employee Pension (SEP), or Savings Incentive Match Plan for Employees (SIMPLE) IRA, subject to income limits.

When to stop contributing to Roth IRA? ›

With a traditional IRA, you must stop making contributions at age 73. Roth IRAs come with no such rule. In turn, you can continue contributing to it for as long as you live, making them valuable assets for those who want to build up wealth to transfer to their heirs.

Can I max out both a traditional and Roth IRA? ›

You may contribute simultaneously to a Traditional IRA and a Roth IRA (subject to eligibility) as long as the total contributed to all (Traditional and/or Roth) IRAs totals no more than $6,500 ($7,500 for those age 50 and over) for tax year 2023 and no more than $7,000 ($8,000 for those age 50 and over) for tax year ...

Can I contribute to a Roth IRA and a traditional IRA the same year? ›

The Internal Revenue Service (IRS) permits you to contribute to both a traditional and Roth IRA in the same year, so long as your contributions don't exceed the defined limit within the year. A financial advisor can help pick investments and plan for retirement.

Can you switch between Roth and traditional IRA? ›

You can transfer some or all of your existing traditional IRA or employer-sponsored retirement account balance to a Roth IRA, regardless of your income. Once the conversion is complete, congratulate yourself. You've just signed on for years of tax-free growth.

Can I put money in both a Roth and traditional 401k? ›

Yes, you can contribute to both a designated Roth account and a traditional, pre-tax account in the same year in any proportion you choose.

Can you contribute to a Roth IRA if you make over a certain amount? ›

The 2024 Roth IRA income limits are less than $161,000 for single tax filers and less than $240,000 for those married filing jointly. The Roth IRA contribution limits are $7,000, or $8,000 if you're 50-plus. Use our calculator to see if you're eligible.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Ray Christiansen

Last Updated:

Views: 6242

Rating: 4.9 / 5 (69 voted)

Reviews: 84% of readers found this page helpful

Author information

Name: Ray Christiansen

Birthday: 1998-05-04

Address: Apt. 814 34339 Sauer Islands, Hirtheville, GA 02446-8771

Phone: +337636892828

Job: Lead Hospitality Designer

Hobby: Urban exploration, Tai chi, Lockpicking, Fashion, Gunsmithing, Pottery, Geocaching

Introduction: My name is Ray Christiansen, I am a fair, good, cute, gentle, vast, glamorous, excited person who loves writing and wants to share my knowledge and understanding with you.