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Can I Contribute to Both Traditional IRA and Roth IRA at the Same Time

2/24/2014

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Q. Can I contribute to both traditional IRA and Roth IRA at the same time?

A. Y
es, but there is a caveat - your contributions to the Traditional IRA and Roth IRA will be combined and counted towards one annual limit - $5,500 in 2014.

Tax Treatment
Both Traditional and Roth IRAs offer tax-deferred growth on earnings, but the money you put into your traditional IRA is tax-deductible, up to an annual cap, while Roth investments are not tax deductible upfront, you can withdraw money from Roth IRA tax free once you turn age 59 1/2.

Eligibility
Eligibility rules often change and it's best to consult IRS Publication 590.  For example, as Publication 590 notes, you can have a traditional IRA if you have taxable compensation, but you might not be able to deduct all or part of your contributions if you or your spouse invests in a workplace plan. You can contribute to a Roth IRA if you have taxable compensation and your modified adjusted gross income, or AGI, falls below a certain level (this level could change by year).

Withdraw Considerations
The IRS requires you to keep the Roth IRA a minimum of five years before making withdrawals without penalty, even if you are past age 59 1/2. The IRS does not apply this stipulation to traditional IRAs. But you must start withdrawing traditional IRA money annually in the year after you turn 70 1/2. The IRS does not apply this regulation to Roth

Compare Benefits
You will benefit from contributing to a traditional IRA over a Roth IRA if your future tax rate will be lower.  Run the calculator below to compare the two benefit numbers.

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