Traditional vs Roth IRAs

Traditional and Roth IRAs are Individual Retirement Accounts. These are accounts you setup yourself (not employer sponsored) with the financial institution of your choice. The current maximum contribution for both Traditional and Roth IRAs in 2023 is $7,500. If you are 50 or older, you are allowed to contribute $7,500. Your annual contributions may not exceed your annual taxable income. The limit is for the combined contributions to both Traditional and Roth IRAs. [1]

For example:

> Mortimer is 47 and contributes 5,500 to his Roth IRA. He has reached his contribution limit for the year and may not make any contributions to a Traditional IRA.

> Eliza is 51 and has both a Traditional IRA and a Roth IRA account. She contributes 5,500 to her Roth IRA. Because of her age, her total contribution limit for the year is $6,500. She is able to make an additional $1,000 contribution to her Traditional IRA before maxing out her total allowed contributions.

See SIMPLE IRAs for more information on the employer sponsored plan with a similar name. Also note that high income earners have additional restrictions on deductions and contributions.

[1] irs.gov - Updated: 21-Dec-2022 - IRA Contribution Limits

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