Can you contribute to BOTH a ROTH IRA AND a Traditional IRA? In this video we share what you need to know. Watch for valuable personal finance tips for your retirement savings strategy.

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When it comes to saving for retirement, many people are familiar with the two primary options available: the Roth IRA and the traditional IRA. Both offer tax-advantaged savings for retirement, but they have different rules, limits, and tax benefits. One question that often arises is whether someone can contribute to both a Roth IRA and a traditional IRA. The short answer is yes, you can contribute to both types of accounts, but there are some restrictions to consider.

The key factor to understand is that the contribution limits for both types of IRAs are cumulative. This means that the total amount you can contribute to both accounts cannot exceed the annual limit set by the IRS. For example, if you are under 50 years old, the annual contribution limit for all IRAs in 2022 is $6,000. If you are over 50, you can contribute an additional catch-up contribution of $1,000, for a total of $7,000. This means that if you contribute $3,000 to a traditional IRA, you can only contribute up to $3,000 to a Roth IRA for that year.

Another important consideration is whether you are eligible to contribute to both types of IRAs. For a traditional IRA, anyone with earned income can contribute, regardless of their income level. However, for a Roth IRA, there are income limits that determine eligibility. In 2022, single filers with a modified adjusted gross income (MAGI) of $144,000 or more and married couples filing jointly with a MAGI of $214,000 or more are not eligible to contribute to a Roth IRA. If you fall within these income limits, you may only be able to contribute to a traditional IRA.

It’s also important to consider the tax implications of contributing to both types of IRAs. Contributions to a traditional IRA are tax-deductible, meaning they reduce your taxable income for the year in which you make the contribution. On the other hand, contributions to a Roth IRA are made with after-tax dollars, meaning they do not provide a current tax benefit, but qualified withdrawals in retirement are tax-free. Depending on your current financial situation and future retirement goals, you may need to evaluate whether it makes sense to contribute to both types of accounts.

Ultimately, the decision to contribute to both a Roth and traditional IRA will depend on your individual financial circumstances and goals. If you are eligible and able to contribute to both types of accounts, it may allow you to diversify your retirement savings and take advantage of the unique tax benefits of each. However, it’s important to be aware of the contribution limits, eligibility requirements, and tax implications before making any decisions. Consulting with a financial advisor can also help you make an informed decision that aligns with your overall retirement strategy.