If you’re considering adding an Individual Retirement Arrangement (IRA) as part of your overall retirement plan, you may be wondering whether a Roth or traditional account will work better.
Depending on your circumstances, it could be either, or it can even be both.
What is a Traditional IRA? – Basics
Traditional IRAs allow you to save up to $5,000 ($5,500 for 2013) in a self-directed, tax deferred account. You can also increase the amount of that contribution by $1,000 if you are age 50 or older.
Not only will this allow you to build your own retirement portfolio, but you can also contribute to an IRA even though you’re covered by another retirement plan. However there are limits on the tax deductibility if you are covered by another plan.
For single taxpayers, the IRA deductibility begins to phase out with an income of $58,000 per year. It completely phases out at $68,000.