Contribution Limits

• The total amount you can contribute to a Roth IRA and a traditional IRA is $5,000 per person per year or your total income, whichever amount is smaller. If you are 50 years old or older, you may contribute $6,000 per year or your total income, whichever is smaller.
  
  

Traditional IRA

• Traditional IRA contributions are tax deductible in the year they are made. For example, if you contribute $3,000 to your traditional IRA, you may deduct $3,000 from your taxable income when you file your taxes.
  
  

Roth IRA

• Roth IRA contributions are not tax deductible when you make them. They are taxed as part of your income in the year that the contribution is made.
  
  

Growth of the Money

• While the money is in the Roth IRA or traditional IRA, it grows tax free.
  
  

Retirement with a traditional IRA

• When you withdraw money at retirement from your traditional IRA, you must pay taxes on it. Because of this, traditional IRAs are a better investment for people who are in a higher tax bracket when they put the money away than they will be when they withdraw it at retirement.
  
  

Retirement with a Roth IRA

• When you withdraw money at retirement from your Roth IRA, you pay no taxes on it. Because of this, Roth IRAs are a better investment for people who are in a lower tax bracket when they put the money away than they will be when they withdraw it at retirement.