How Do Income Limits Vary Between Traditional And Roth IRA

One of the most effective ways to save for retirement is by investing in a retirement account, such as a Traditional IRA or a Roth IRA. These two types of accounts have some similarities, but there are also some key differences. One of the differences between the two is the income limits associated with each type. In this article, we’ll take a closer look at how income limits vary between Traditional and Roth IRAs.

What is a Traditional IRA?

A Traditional IRA is an individual retirement account that allows individuals to save for retirement on a pre-tax basis. Contributions to this type of account are made with pre-tax dollars, meaning that you are able to deduct the amount of your contribution from your taxable income. This can result in a lower tax bill in the current year. Earnings and withdrawals from a Traditional IRA are subject to taxes, however.

What is a Roth IRA?

A Roth IRA is also an individual retirement account, but it has some key differences from a Traditional IRA. Contributions to a Roth IRA are made with after-tax dollars, meaning that you do not get an immediate tax deduction for your contribution. However, withdrawals from a Roth IRA are tax-free, as long as certain conditions are met.

What Are the Income Limits for Traditional and Roth IRAs?

The income limits for Traditional and Roth IRAs vary based on a number of factors, including filing status and income level. Generally, the income limits for Traditional IRAs range from $0 to $137,000 for single filers and from $0 to $203,000 for married couples filing jointly.

The income limits for Roth IRAs are slightly different. Single filers with an income of more than $137,000 and married couples filing jointly with an income of more than $203,000 are not eligible to contribute to a Roth IRA. However, individuals with an income between $137,000 and $203,000 may still be eligible to contribute, depending on their filing status.

Are There Other Factors to Consider?

In addition to the income limits, there are also other factors to consider when deciding between a Traditional and Roth IRA. For example, the age of the account holder is a factor, as some Traditional and Roth IRAs have different age limits. Additionally, the type of investment can be a factor, as some Traditional and Roth IRAs allow for different types of investments.

Conclusion

Deciding between a Traditional and Roth IRA is an important decision, and understanding the income limits associated with each type of account is key. In general, the income limits for Traditional IRAs range from $0 to $137,000 for single filers and from $0 to $203,000 for married couples filing jointly.

The income limits for Roth IRAs are slightly different, with single filers with an income of more than $137,000 and married couples filing jointly with an income of more than $203,000 not being eligible to contribute.

However, individuals with an income between $137,000 and $203,000 may still be eligible to contribute, depending on their filing status. Additionally, other factors such as the age of the account holder and the type of investment can be important to consider when deciding between a Traditional and Roth IRA.