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Maximize Contributions-Traditional v. Roth

Tax Help - Traditional vs. Roth IRA

Choosing which retirement account to go with can be difficult and confusing. Here are some facts to help when you are trying to decide: Both Traditional and Roth IRAs have the same amount for the maximum contribution level. However with a traditional retirement account you may be eligible to deduct your contributions (i.e., get a tax break for the year that you’ve made your contribution). Your filing status and modified adjusted gross income may affect whether you can take a deduction and how much of a deduction you can actually take.


You also need to consider how long you want to contribute into your account. For a traditional IRA you can't make contributions the year you reach the age of 70 ½. With a Roth IRA you can make contributions after the age of 70 ½.


Another consideration when determining which retirement plan to go with is your filing status and how much income you have coming in. You are not eligible to contribute to a Roth IRA if any of the following applies to you:

  • If your modified Adjusted Gross Income (AGI) is equal to or more than $196,000 and are married filing jointly or qualifying widow(er).
  • If your modified AGI is equal to or more than $10,000 and are married and lived with your spouse for any part of the tax year, but are filing separately.
  • If your modified AGI is equal to or more than $133,000 and are filing single, head of the household, or married and filing separately if you did NOT live with your spouse at any time during that tax year.

If you already have a Roth IRA and your income falls into a certain range, then your Roth contribution limit may be lowered. With a traditional IRA you don't have any income caps to deal with.

Another difference between a traditional and Roth IRA is that with a traditional IRA you’re required to start taking out what are called required minimum distributions (RMDs). This means you have to start taking money out of your account by April 1 of the year following the year in which you reached 70 ½, whether you need the money or not. With a Roth IRA you do not have any required minimum distributions until after the death of the owner.

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