Roth IRA vs. Traditional IRA

An IRA is one of the most common retirement savings accounts, and when opening one, you'll need to choose between two main types: Roth or traditional.

The difference between Roth and traditional IRAs

The main difference between a Roth IRA and a traditional IRA is how and when you get a tax break. Contributions to traditional IRAs are tax-deductible, but withdrawals in retirement are taxable as income. In comparison, contributions to Roth IRAs are not tax-deductible, but the withdrawals in retirement are tax-free.

And while you can have both types of IRAs, deciding to contribute to a traditional IRA vs. a Roth IRA might come down to other differences between the accounts.

Quick comparison: Roth vs. traditional IRA

How to choose whether a Roth or traditional IRA is right for you

Most advice on the Roth IRA vs. traditional IRA topic begins with a question: Do you think your tax rate will be higher or lower in the future?

If you can answer that question definitively, you can theoretically choose the type of IRA that will give you the biggest tax savings: If you expect to be in a higher tax bracket in retirement, consider a Roth IRA and its delayed tax benefit. If you expect lower rates in retirement, consider a traditional IRA and its upfront tax advantage.

But it's hard to anticipate what your tax rate will be in retirement, particularly if you're decades away from leaving the workforce. Fortunately, there are other ways to determine whether a Roth or traditional IRA is best for you.

The biggest may be your eligibility: The IRS rules on IRA contributions may make the Roth vs. traditional decision for you. Your income will determine:

• If you're eligible to contribute to a Roth. At higher incomes, you may not be. View the current Roth IRA contribution and income limits.

• How much of your contribution to a traditional IRA you can deduct from this year’s taxes. Traditional IRA deductibility is restricted only if you or your spouse has access to a workplace savings plan like a 401(k). View the current traditional IRA income limits for taking a deduction.

» Want a Roth but don’t qualify? Read how a backdoor Roth IRA might allow you to get one anyway.

Worth noting: You can contribute to both a traditional and a Roth IRA during the same year, as long as the total amount does not exceed the maximum allowable contribution limit, which is $7,000 in 2024 and 2025 ($8,000 if age 50 and older).

» Our picks for the best Roth IRAs and best traditional IRAs

Why the Roth IRA works for many savers

If you can't decide, many financial advisors suggest either splitting the difference or going with a Roth IRA, especially if you're far from retirement age. Here’s why it may be better to go with the Roth vs. a traditional IRA, for those who qualify.

1. Early withdrawal rules are much more flexible with a Roth. Although early withdrawals from retirement accounts are generally discouraged, if you do have to break the seal on the cookie jar, the Roth allows you to withdraw contributions — the money you put into the account, not earnings — at any time without having to pay income taxes. Note that if you do withdraw earnings early, that money may be taxed and an additional penalty may be applied.

Dip into a traditional IRA before age 59 1/2 and the IRS isn’t as lenient: You’ll likely be socked with a hefty 10% early withdrawal penalty and owe taxes at your current income tax rate on the money you take out, even if you only remove your contributions. There are a few exceptions to this rule — see our page on traditional IRA withdrawal rules for details — but you’ll need to proceed much more carefully than you would with a Roth.

2. The Roth has fewer restrictions for retirees. Traditional IRAs require you to start taking required minimum distributions (RMDs) at certain ages. That age was previously 72; it increased to 73 in 2023 and will increase again to 75 in 2033.

Unless you’re inheriting the Roth IRA, Roths have no required minimum distribution rules: You’re free to let your savings stay put in the account to continue to grow tax-free as long as you live.

3. Unless you’re an extremely disciplined saver, you’ll end up with more after-tax money in a Roth IRA. Yes, both types of IRAs offer a tax break. But there’s an oft-overlooked benefit to the way the Roth treats taxes: Because your tax break doesn’t arrive until retirement (via tax-free withdrawals), you won’t be tempted to spend it before then. With a traditional IRA, the tax benefit is delivered annually when you file your taxes, which makes it easy to fritter the money you saved on taxes away on any number of things.

To come out even in terms of after-tax savings, you have to be disciplined enough to invest the traditional IRA tax savings you get every year back into your retirement savings. If that seems unlikely to happen, then you’d be better off saving in a Roth, where you’ll arrive at retirement with more after-tax savings.

4. Funding a Roth in conjunction with your 401(k) provides tax diversification. The classic 401(k) plan offered by most employers provides the same tax benefits as a traditional IRA. Although some workplaces offer a Roth 401(k) option for employees, if yours doesn’t, diverting some of those retirement savings dollars into a Roth IRA will give you more options for managing your tax burden in retirement.

5. Roth IRAs can be used for estate planning. Whatever money you don't use, you can pass to your beneficiaries tax-free in an inherited Roth IRA.

Making the call

The sole advantage of a traditional IRA for most people is the upfront tax break. And that can be a huge advantage for high earners and a great incentive for people who might otherwise skip saving for retirement. In the short term, it effectively makes it “cheaper” to save for retirement, since the tax savings each year reduces the cost of your contributions.