Roth IRA vs Traditional IRA: Which is Best for You?

Roth Ira Vs Traditional Ira

Individual retirement accounts (IRAs) come in multiple forms. Two of the most common types, the Roth IRA and traditional IRA, have different income requirements, tax treatments, contribution limits, and withdrawal rules.

Knowing these disparities will help you build a retirement plan that works for you.

Table of Contents

  1. Income requirements for Roth vs traditional IRA
  2. So which one should you pick? The bottom line

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Income requirements for Roth vs traditional IRA

Both limit your contributions to either A) the IRS-imposed contribution limit or B) your income, if you make less than the contribution limit for the tax year.

Roth vs. traditional IRA tax treatments

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Comparing contribution limits

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Withdrawals in Roth IRA and traditional IRA

So which one should you pick? The bottom line

Choosing between a Roth and traditional IRA depends on your income. If you can expect to be in a higher tax bracket when you retire, or if you want your investments to grow tax free, Roth IRAs can help you build wealth. However, traditional IRAs have their perks, so it’s important to make a decision based on what works for you (they don’t call it personal finance for nothing!).

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FAQ's

Can I max out an IRA?

There is no lifetime max for IRA retirement contributions, but there are annual contribution limitations. More on that below!

What is the deadline for making IRA contributions in a given year?

You usually have until tax filing day (typically April 15) to make IRA contributions that count for the previous year.

Can I contribute to a Roth IRA, traditional IRA, and 401(k) at once?

Yes, but IRA contribution limits apply to all IRAs, not each individual account. Your 401(k) is a separate type of account, so you can contribute at the same time as IRA savings accounts up to the employer-sponsored retirement plan maximum in addition to the IRA account limits.

Can I convert a traditional IRA to a Roth IRA?

Yes, you can convert part or all of your traditional IRA to a Roth IRA.

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