Investors have the opportunity to contribute to a Traditional IRA or a Roth IRA for the previous year (2016) if they take action prior to the tax deadline. You can contribute $5,500 to one or the other with people 50 and older able to contribute $6,500. There are potential tax benefits to both types of IRA. Both can offer tax-deferred growth as an advantage. Traditional IRAs may offer a tax deduction (subject to income limitations) and generally speaking withdrawals in retirement are taxable. Roth IRAs are funded with after-tax money and have the advantage of tax-free withdrawals if certain criteria are met. Not everybody can contribute directly to a Roth IRA due to income limits, but it can be a very valuable part of a balanced retirement income plan.
There are a lot of considerations when deciding which if any IRA you should fund in a given year. Income limits, retirement plan participation, non-retirement investment strategies, and tax scenarios only name a few. Working with an advisor who can point out the advantages and disadvantages of IRA contributions in the context of your individual situation can be an invaluable part of your comprehensive retirement plan.
You have approximately two months to develop and implement the best strategy for your 2016 contributions and if you have questions, consult a professional. For your reference, below is a link to the IRS website that covers IRA contribution limits and several rules to keep in mind. Happy investing!