Can I Have Both a Roth IRA & a Traditional IRA at the Same Institution?

by Jane Meggitt

You can open a traditional Individual Retirement Account and a Roth IRA at the same financial institution, but these are completely separate accounts. Virtually all banks, brokerage houses, mutual fund companies and similar financial institutions offer traditional and Roth IRA accounts. Talk to a financial adviser at your institution about the type of IRA and investment best suited to your needs to achieve your financial goals in retirement.

Traditional IRAs

Depending on your income and whether you or not you are enrolled in an employer-sponsored retirement plan, contributions to traditional IRAs may be tax-deductible. There is no income limit for traditional IRA contributions, and anyone not covered by an employer-sponsored retirement plan, such as a 401k, may take a full deduction. At the time of publication, single taxpayers with an adjusted gross income (AGI) between $56,000 and $66,000 could take a full or partial deduction even if covered by an employer retirement plan, with married couples filing jointly eligible if the AGI is between $90,000 and $110,000. Traditional IRAs are tax-deferred, and taxed as ordinary income when withdrawn. The minimum age to take distributions from a traditional IRA without penalty is 59 1/2, and mandatory distributions must be taken by age 70 1/2.

Roth IRAs

Although a Roth IRA is not tax-deductible, contributions are made with after-tax dollars and distributions are tax-free, as long as the account owner is the minimum age of 59 1/2 and the account was established a minimum of five years previously. Unlike traditional IRAs, there is no mandatory age for withdrawal, and contributions may continue past the age of 70 1/2 if the account owner earns income. However, income limits apply for Roth IRA eligibility. Single filers with an AGI of less than $107,000 may make a full contribution, while those with an AGI between $107,000 and $122,000 make may a partial contribution. Married couples filing jointly must have an AGI under $169,000 to make full contributions, and between $169,000 and $179,000 for partially contribute.

Annual Contributions

For either type of IRA, the annual maximum contribution at the time of publication is $5,000 for those under the age of 50 and $6,000 for those aged 50 and up. Contributions may be made to more than one account, and to a mix of Roth and traditional IRAs, but the total cannot exceed these limits.

Roth Versus Traditional IRA

Deciding on which type of IRA to open, or how much money to invest in either, depends on your present and future financial goals and retirement plans. Splitting annual investments between the two types of IRAs may offer short-term tax deductibility and long-term tax-free investing. The traditional IRA may also be used to fund retirement, since distributions are mandatory, while the Roth IRA may be used for estate planning purposes to pass on to beneficiaries if the funds are not needed for personal use.

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