facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Military Finances 201: Contributing to Roth AND Traditional IRAs Thumbnail

Military Finances 201: Contributing to Roth AND Traditional IRAs

Retirement Funding Taxes

Whether you're retired from the military or still on Active Duty, you can more likely than not contribute to an IRA. But if you want to contribute to both a Traditional IRA and Roth IRA, how does that work?

IRA Contribution Limits

It may help to understand what IRA actually stands for. Technically IRA stands for Indvidual Retirment Arrangement. And you have one Arrangement. Your contribution limit to your arrangement is $7,000 (in 2025) plus $1,000 if you are age 50 or older (also 2025). The amount you can contribute is indexed for inflation.

Splitting Contributions Between Roth and Traditional IRAs

You have one IRA (or at least think of it that way) with a single annual contribution limit plus catch-up if applicable. Roth versus Traditional is a tax treatment you elect. That means you can split that annual limit any way you want between Roth and Traditional as long as you don't exceed the annual limit.

But Wait. There's More to Roth Contributions

While you can split contributions between Roth and Traditional if you so desire, you might not be able to contribute to Roth IRA at all. There are income limits that prohibit some taxpayers from contributing to a Roth IRA. For 2025, married taxpayers can't contribute to a Roth IRA if their Adjusted Gross Income (AGI) exceeds $246,000 and for single taxpayers the limit is $165,000. There are phase outs to the limits so if you're under but close to the limit, you may be able to make partial Roth contributions.

You Can Always Make Traditional IRA Contributions

Assuming you or your spouse has earned income, you can contribute to a Traditional IRA. But...you might not be able to deduct those contributions. If you're covered by a retirement plan at work (yes military retirement counts) there are income limits to be able to deduct the IRA contributions. That income is pretty low and if you're an O-5 or above you're probably over the limit to deduct IRA contributions. If your spouse is covered by a retirement plan at work, there are still income limits but they're higher. In fact, they're the same as for contributions to a Roth IRA. If your AGI exceeds these amounts, you can't deduct IRA contributions (but you can still make the contributions).

But Wait (Again). You Might Still be Able to Get Money into a Roth IRA

If you can't make contributions directly to a Roth IRA, you might be able to do what is called a Backdoor Roth Conversion. To accomplish this, make non-deductible contributions to a Traditional IRA and convert them to a Roth IRA. This transaction should be nearly tax-free, and you'll reach your goal of getting money into a Roth. The amount you can contribute to the Traditional IRA is limited to the annual amount but the amount you can convert isn't (say in the case where the funds grow while they're in the Traditional IRA). Just beware that if you have pre-tax funds in your Traditional IRA a portion of the conversion will be of that pre-tax money and you'll owe taxes on it. If this situation applies to you, make sure you fully understand the tax treatment of the conversion.

How Does Money I Contribute to a 401(k) Affect the Amount I can Contribute to an IRA?

The short answer is, "it doesn't". A 401(k) (or 403(b) or TSP) isn't an IRA so they're not related. You can contribute as much as you want (up to the annual limit) to a 401(k) and still max out contributions to an IRA.

Military Finances are Different

The rules covering IRA contributions are the same for all taxpayers. But their application might be different for Active or Retired Military Members. For example, deploying to a combat zone might lower your income enough to be allow you to contribute to a Roth IRA or make deductible contributions to a Traditional IRA. Your military pension might make your income too high to contribute to a Roth IRA, but all your civilian co-workers are talking about how they contribute to Roth IRAs. A financial advisor that doesn't routinely work with active and retired military members might not be aware of those nuances. That's why we think Active and Retired Senior Military Officers and SNCO's should work with a financial planner or advisor that deals with your issues every day. If you'd like to find out how we work with people just like you, use the button below to schedule a free, initial consultation.

If you found this article useful, you might like the following blog posts:

Retired Military Finances 401: The Mega Backdoor Roth IRA Conversion


Military Tax Benefit: Rollover of SGLI Proceeds to a Roth IRA


Military Finances 101: Should I Use My Roth IRA as an Emergency Fund?




Disclaimer
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.