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An IRA can be a great tool for retirement savings and investing. It’s an individual account, and it offers tax benefits depending on your situation.

There are two types of personal IRAs (we’re going to exclude talking about the SIMPLE IRA and SEP IRA in this case).

The Traditional IRA allows you to contribute “pre-tax” money, which means you get a tax deduction on the funds you put in (assuming you qualify for the deduction). Money inside the Traditional IRA grows tax-deferred and is then taxed as income when withdrawn according to normal retirement age rules.

The Roth IRA works in reverse. The money contributed to a Roth IRA is not tax-deductible (it is “after tax” money). It grows tax-deferred, and then any withdrawals are tax-free when withdrawn at retirement. Again, this assumes you qualify to contribute to a Roth IRA.

Both types of IRAs have annual contribution limits. In 2022, the limit is $6,000 for those under age 50 and $7,000 for those over age 50. This increases in 2023 to $6,500 and $7,500, respectively.

So can you contribute to both at the same time?

The short answer is: yes, but the limits are across both types of IRA in total.

Let’s say you are under 50 and qualify for both types of IRA. You cannot contribute $6,000 into your Traditional IRA and another $6,000 into your Roth IRA. This would be double the amount you are allowed to contribute.

You can, however, contribute $3,000 to your Traditional IRA and another $3,000 into your Roth IRA for a total of $6,000. Or you could contribute $1,000 into your Traditional IRA and $5,000 into your Roth IRA. Or any other combination that totals $6,000 between the two of them.

In fact, you could even have multiple Traditional IRA and/or multiple Roth IRAs (though it generally doesn’t make sense) and contribute to all of them as long as the total amount contributed does not exceed $6,000 when added up across all of them.

So what happens if you over-contribute? Typically, the process involves doing a “removal of excess contribution” from one or more of your accounts. This can usually be done with the help of your investment custodian or your financial advisor. It means that you need to remove the extra funds that were contributed.

So if you want to take advantage of the tax benefits of both a Traditional IRA and a Roth IRA – you can! You just need to stay under the annual limits across both accounts in total.