If lower, your taxable compensation for the year. You can contribute to both types of IRA as long as you meet all the requirements. You'll get the immediate benefits of tax-deductible contributions if you contribute to a traditional IRA. You may get the long-term benefits of tax-free retirement income if you contribute to a Roth.
Learn the differences between a Roth IRA and a traditional IRA and whether you should choose just one or contribute to both. Whether your traditional IRA contributions are tax-deductible and whether you are eligible to contribute to a Roth IRA will depend on your income and other factors. However, opening several Roth IRAs or traditional IRAs is not a way to get around contribution limits. The main difference between a Roth IRA and a traditional IRA is the characterization of the money you contribute to each one.
There is no general rule to follow, but I would suggest that those in the 25% or higher tax bracket make a tax-deductible IRA contribution instead of a contribution to a Roth IRA. Roth IRAs and traditional IRAs are good options for those seeking to maximize their retirement options. Once they make that maximum contribution to their retirement plans, they may want to consider making contributions to the IRA or the Roth IRA. It's hard to predict where tax rates will head in the future, so it's helpful to know that you can get the most out of these types of accounts by making contributions to a traditional IRA and a Roth IRA whenever possible.
The decision to invest in a traditional IRA or a Roth IRA depends on several factors, such as how much you can contribute to each of them, your long-term retirement goals and preferred tax treatment. In addition, traditional IRAs require the account holder to start receiving distributions at a certain age, while Roth IRAs do not. Some high-income taxpayers have limits on deducting IRA contributions, but income doesn't affect their ability to make contributions to the traditional IRA. Roth IRAs and traditional IRAs are great ways to save for retirement, and you can open them even if you already have an employer-sponsored retirement plan.