How to decide between a traditional and Roth IRA (IRA)

If you have a traditional job and earn wages, you'll need to choose between a traditional and a Roth IRA or will need to split contributions among both accounts. To decide:

• Determine whether you need the tax break to help save:

  Taking a tax break when you make contributions means take-home income isn't reduced as much. If you're in the 22% tax bracket, a $6,000 contribution saves up to $1,320 on taxes, so take-home income is only reduced by $4,680. This makes saving easier and cheaper. But if you have plenty of cash to max out your IRA, you may be better off using a Roth and taking the tax break later.

• Consider whether your tax rate will be lower in the future:

  If you think you'll be in a higher tax bracket at retirement, open a Roth. But, if you think you'll be in a lower tax bracket later, take the tax savings now at your current higher rate.

• Determine if you want to be required to take money out as a senior:

  If you contribute to a traditional IRA, you must begin taking required minimum distributions at 70 1/2. You don't have to do this with a Roth IRA. If you don't want to be forced to make withdrawals on a schedule set by the government, a Roth is a better choice.

If you're self-employed, things get more complicated. SIMPLE and SEP IRAs are generally better because they offer higher contribution limits -- but choosing between them is hard. Look at which allows you to contribute the most and, if you have people working for you, whether you'll be required to contribute to their retirement accounts too. Often, it's best to talk with an accountant or other tax professional to help you choose. You can also check out our guide to choosing between a SIMPLE or SEP IRA.

Income limit for traditional IRAs:

If your spouse has access to a workplace retirement plan but you don't, this table shows the income level in 2019 at which your deduction begins to phase out and is lost.

Income limits for Roth IRAs:

The following table shows how much you can make before your eligibility to contribute to a Roth IRA begins to phase out or is lost entirely.