Can I Contribute to a Roth IRA and a Traditional IRA?
Yes, you can, assuming you meet other requirements related to earned income and maximum contribution limits. However, your cumulative total annual IRA contributions cannot exceed the maximum contribution amounts set by the IRS.
IRAs offer outstanding potential for tax-advantaged saving.
So good, in fact, that the IRS limits how much any one person can contribute to these accounts annually.
IRAs were originally designed to help lower and middle-class workers as defined benefit pension plans steadily retreated from their historic role in retirement saving.
Left uncapped, there can be little doubt that these plans would be used by people with various levels of wealth, affording an opportunity for everyone to shelter capital gains from taxes and leave Uncle Sam with less tax revenue.
Alas, some restrictions had to be put in place, and at an annual contribution limit of $6,500 in 2023 ($7,500 if 50 or older), millions of Americans must engage in strategic planning around their IRAs to ensure optimal results.
Those with sufficient room in their budgets to save beyond the annual contribution caps will naturally wonder, “Can I contribute to a Roth IRA AND a Traditional IRA?
Fair question.
And the answer is yes, but not for the full $6,500 in each.
Let’s look a little more closely at each plan and talk about what one is and isn’t allowed to do with them.
Traditional IRAs
Traditional IRAs allow for contributions to be made on a pre-tax basis, while withdrawals are fully taxed as regular income.
This means any money you deposit into a traditional IRA will be deductible from your income taxes (assuming your income doesn’t disqualify you) and any earnings are left to grow unhindered by taxes until you make withdrawals.
The primary benefits of a Traditional IRA are 1) the tax deduction, 2) the ability of earnings to grow tax-deferred, and 3) your ability to control when withdrawals are made and for how much*.
There is no doubt, Traditional IRAs provide an incredible tax-advantaged retirement savings opportunity.
*You will eventually be forced to begin taking required minimum distributions at age 73 or 75, depending on when you were born.
Roth IRAs
As you probably already know, Roth IRAs are taxed in an opposite or reciprocal fashion to Traditional IRAs.
Contributions to a Roth IRA are not tax deductible, but all withdrawals from a Roth IRA can be made completely tax-free.
This means you take the tax hit before you invest your savings, but there is no further tax impact on Roth dollars.
The primary benefits of a Roth IRA are 1) The ability of your investments to grow tax-free, 2) the flexibility to withdraw contributions at any time without penalty, and my favorite, 3) the ability of your investments to grow tax-free.
That’s not a typo, my absolute favorite feature of Roth IRAs is the ability to excuse Uncle Sam as your silent investment partner, forever. Roth IRAs effectively allow one to take tax risk almost completely off the table.
I know some people fear that the government will reverse course on Roth IRAs one day and start taxing those withdrawals, but I have serious doubts. I’m not going to get off track explaining why, but I’ve made a note to write a complete post about it soon.
After-Tax Contributions to Traditional IRAs
There are restrictions that prevent higher-income individuals or households from making tax-deductible contributions to a Traditional IRA ($83k single, $136k MFJ) if they also have access to a workplace retirement plan.
There are also income limitations for contributing to Roth IRAs directly ($153k single, $228k MFJ).
However, anyone can make contributions to a Traditional IRA on an after-tax or non-deductible basis.
Naturally, you might wonder why anyone would want to make an after-tax contribution to an IRA and basically prevent themselves from being able to withdraw the money until they turn 59.5 years old for no additional benefit compared to a taxable brokerage account.
There’s only one I can think of…
I won’t go into detail, but the backdoor Roth IRA basically provides a path for higher-income individuals to make contributions to a Roth IRA.
I’m only bringing it up here for those of you who might think you can’t make contributions to an IRA. Maybe you can after all.
Contribution Limits
We touched on contribution limits to IRAs earlier. Here is a table with more details about who can and can’t make contributions and how much is allowed.
Traditional IRAs:
Filing Status | MAGI | Deductible Amount |
Single, Married Filing Jointly or Head of Household NOT Covered by Work Retirement Plan | Any Amount | Up to Max Contribution Limit |
Single or Head of Household Covered by Work Retirement Plan | < $73,000 | Up to Max Contribution Limit |
Between $73k and $83k | A reduced amount | |
> $83,000 | No Deduction | |
Married Filing Jointly Covered by Work Retirement Plan | < $116,000 | Up to Max Contribution Limit |
Between $116k and $136k | A reduced amount | |
> $136,000 | No Deduction | |
Married Filing Jointly NOT Covered by Work Retirement Plan, but spouse is | < $218,000 | Up to Max Contribution Limit |
Between $218k and $228k | A reduced amount | |
> $228,000 | No Deduction |
Roth IRAs:
Filing Status | MAGI | Contribution Limit |
Married Filing Jointly | < $218,000 | $6,500 if under 50; $7,500 if 50 or older |
Between $218k and $228k | A reduced amount | |
> $228,000 | Nothing | |
Single or Head of Household | < $138,000 | $6,500 if under 50; $7,500 if 50 or older |
Between $138k and $153k | A reduced amount | |
> $153,000 | Nothing |
The contribution limits in these tables are a cumulative total for all IRA contributions in a tax year. It represents the maximum amount of all your IRA contributions.
So, if your maximum allowable contribution is $6,500, and you put $6,500 into a Traditional IRA, you cannot make any contributions to a Roth IRA or vice versa.
If, under the same contribution limit of $6,500, you contribute $3,000 to a Traditional IRA, you can contribute up to $3,500 to a Roth IRA for that tax year.
But the total amount must be $6,500 or less.
I should note that none of this applies to SEP or SIMPLE IRA contributions. Contributions to SEP or SIMPLE IRAs have no impact on one’s ability to contribute to a Traditional or Roth IRA.
For more about the various types of IRAs, I invite you to read our post titled: What Is An IRA?
Other Options
If you’re aiming to save more than the IRA will allow you to contribute to an IRA in a year, there are other places you can go for additional tax-advantaged saving.
Employer-Sponsored Plans
The first place you should look to place any tax-advantaged retirement savings is an employer-sponsored retirement plan.
There are several (401ks, 457s, 403bs, TSPs, SIMPLE IRA), and all potentially allow for both Roth and Traditional contributions.
The reason you should look here first is due to the potential for employer-matching contributions.
Any money provided by an employer will come at no cost to you, which makes it free money. As in they are literally giving you money.
If you’re the type of person who hates free money, feel free to ignore this suggestion. However, since this post is based on the underlying assumption that you are actually trying to build wealth, start here by getting those free contributions.
Some employers also make contributions to Health Savings Plans (HSAs) on an employee’s behalf.
Again, don’t overthink this. It’s free money. Go get it. The IRA will still be available to you after you get these generous gifts from your employer.
Once you have maximized your free employer contribution options, go get that IRA.
Health Savings Accounts (HSAs)
If you’ve maxed out the IRA contributions and still need another place to save tax-advantaged money, consider opening an HSA.
Health Savings Accounts are similar to IRAs. You can make a limited contribution each year (up to $7,750 in 2023) and you can save the funds in nearly any investment vehicle.
There are a few differences:
- In order to contribute to an HSA, you must be covered by a High-Deductible Health Plan or HDHP.
- Both contributions AND withdrawals to HSAs are completely tax-free (no IRA can do that) as long as the funds are used for qualified medical expenses.
- Once you reach age 65, you can make withdrawals from an HSA on a tax-deferred basis, meaning you’ll own income tax for withdrawals that aren’t for medical expenses.
- There are others, but those are the biggies. You can read more about HSAs in this post.
Back to bullet #2, there is no other savings vehicle that can potentially shelter every dollar you put into it from being taxed, ever.
I’d fill up the HSA before the IRA.
Once you’ve filled up the IRA though, go back to your employer-sponsored plan until you fill it up.
Taxable Brokerage
Finally, you can save in a simple brokerage account.
No, you won’t get a tax deduction for your contributions, but withdrawals of capital gains and dividends are taxed at lower levels than regular income.
That’s a tax benefit, albeit smaller than what is available in the retirement plans we’ve already covered.
Once you’ve come this far, there aren’t many other places to go.
For more about how to prioritize your retirement savings, please check out our post about prioritizing your retirement savings.
You can say that again Curt!
Conclusion
In summary, yes, you can contribute to both a Traditional and Roth IRA in a single year, but the overall IRA contribution limits apply in total. Each account does not get its own limit.
Bummer.
Hopefully, if you didn’t find the answer you were looking for you learned something else.
Please check out some of the posts we linked above as well as our social and YouTube channels.
Thanks for reading!
