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Wanted to invest some new income in a simple 60:40 allocation. For the bond portion, I am wondering if it can be done in a new IRA to reduce taxes due to distributions/interest income. This won't be pre-tax (not eligible due to my current income), so no benefit in reducing current taxes due to deductions, but it should grow tax-sheltered. Are there any limitations on how much can be put in such IRA?
Contribution limits are generally the same for T-IRAs and for Roths: $6K (or $7K for those age 50 and above), not to exceed your compensation. That's a combined limit, i.e. you can split the amount allowed between Roth and Traditional.
Should your Roth contribution be capped, you are still free to contribute the remainder of the allowable amount into a traditional IRA, albeit without taking a deduction. For example, if you are allowed to make $7K in contributions, but your Roth contribution is capped at $3K, you could make a nondeductible contribution of $4K to your traditional IRA.
It doesn't matter whether you create a separate T-IRA for nondeductible contributions. They are all aggregated for tax purposes. You are making a commitment to keep track of your nondeductible contributions for life, or until you deplete all your traditional IRAs. The form is easy, but you're still stuck with it for life.
Roth IRA. As long as you meet the income limits , you can also contribute up to $6,000 (or $7,000 if you're turning 50 or older this year) to a Roth IRA. (If you exceed the income limits, you can still use a "backdoor " approach to contribute.) As with the Roth 401(k), all withdrawals from the Roth IRA become tax-free after you've had the account for at least 5 years and you're over age 59 ½. FROM FORBES
Comments
There is also an income cap on Roth contributions. Here's the IRS table:
https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020
Should your Roth contribution be capped, you are still free to contribute the remainder of the allowable amount into a traditional IRA, albeit without taking a deduction. For example, if you are allowed to make $7K in contributions, but your Roth contribution is capped at $3K, you could make a nondeductible contribution of $4K to your traditional IRA.
It doesn't matter whether you create a separate T-IRA for nondeductible contributions. They are all aggregated for tax purposes. You are making a commitment to keep track of your nondeductible contributions for life, or until you deplete all your traditional IRAs. The form is easy, but you're still stuck with it for life.