In 2017, you can put a maximum $5,500 in all IRAs combined, or $6,500 if you're age 50 or older. With a Traditional IRA, you might get an immediate tax deduction, but all withdrawals are taxable as ordinary income. Meanwhile, with a Roth IRA, there's no immediate tax deduction, but all withdrawals in retirement can be tax-free. You may also face this choice within your employer's retirement plan, where you may be able to opt for the Traditional 401(k), with your contributions coming out of pretax income, or you can go for the Roth 401(k), which is funded with after-tax income. Here's a brief overview of some factors to consider: Out of your hands For those who can't decide which IRA is better, here's the good news: You may not have a choice. If you aren't covered by a retirement plan at work and you have sufficient earned income, you are always eligible to fund a Traditional IRA, no matter how much you make. But if you are covered by your employer's retirement plan, you may not be able to deduct all of your Traditional IRA contributions if your income is above the allowable threshold. Meanwhile, with a Roth IRA, it doesn't matter whether you are covered by a retirement plan at work. Instead, all that matters is whether your income falls below the threshold for eligibility. For instance, in 2017, if you're single and covered by a retirement plan at work, you can only fully fund a tax deductible Traditional IRA if your modified adjusted gross income is $62,000 or less. But you can fully fund the Roth as long as your income is less than $118,000. Weighing the choice Still, let's assume you need to choose between a tax-deductible IRA and Roth account, either within your employer's plan or when making your annual IRA contribution. If you expect your tax rate to be lower in retirement, deductible retirement accounts, like the Traditional IRA, would provide you with a tax deduction today when you're in a higher tax bracket, while putting off taxes until retirement when you hope to pay Uncle Sam at a lower rate. #finance #instagood #instagram
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