Roth IRA vs. Traditional IRA
The main difference between a traditional and Roth IRA is how and when your money is taxed.
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Traditional IRAs offer a tax break upfront with deductible contributions, while Roth IRAs offer it in the future with tax-free withdrawals in retirement.
Unlike Roth IRAs, there are no income limits for contributing to a traditional IRA. However, deductibility depends on your income and whether you have a retirement plan through an employer.
You can contribute to both a traditional IRA and Roth IRA in the same year, as long as your total contributions don't exceed the annual limit.
An IRA is one of the most common retirement savings accounts, but some people may need to decide between two types: the Roth IRA and the traditional IRA.
If you're not sure which one is right for you, consider your age, annual income, tax brackets in retirement and whether you want a deduction for contributing this year.
The key 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 in the year they are made, but withdrawals in retirement are taxable as ordinary income. In comparison, contributions to Roth IRAs are not tax-deductible, but qualified withdrawals in retirement are tax-free.
While you can have both types of IRAs, deciding whether to contribute to a traditional IRA or a Roth IRA might come down to other differences between the accounts.
Roth IRA vs. Traditional IRA at a glance
Roth IRA | Traditional IRA | |
|---|---|---|
Annual contribution limit | $7,000 in 2025 ($8,000 if age 50 and older). The contribution limit for IRAs is a combined limit. | |
Income | Ability to contribute is phased out at higher incomes. | Ability to deduct contributions can be phased out depending on income and access to an employer retirement plan. |
Tax benefits | No immediate tax benefit for contributing; distributions in retirement are tax-free. | If deductible, contributions reduce taxable income in the year they are made. Distributions in retirement are taxed as ordinary income. |
Early withdrawal options | Roth IRAs allow contributions to be withdrawn at any time, but earnings distributed before age 59 ½, may be subject to a 10% penalty and income taxes, unless you meet an exception. There is also a five-year holding rule for Roth IRA investment earnings. | Unless you meet an exception, distributions from a traditional IRA before age 59 ½ are subject to taxes and a 10% penalty. This applies to both contributions and investment earnings. |
Distributions in retirement | No required minimum distributions. | There are required minimum distributions once you reach a certain age. That age was previously 72; in 2023, it increased to 73 and in 2033, it will increase again to 75. |
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Roth IRA vs. traditional IRA: Which one should you choose?
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 factor may be your eligibility: The IRS rules on contributions may make the 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.)
As a reminder, you can also choose to 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 2025 ($8,000 if age 50 and older).
» Want a Roth but don’t qualify? How a backdoor Roth IRA might allow you to get one anyway.
Benefits of a Roth IRA: Why it works for many savers
While a traditional IRA is advantageous for its immediate tax break for contributions, a Roth IRA's tax benefits come in the future with tax-free withdrawals.
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 for those who qualify to go with the Roth IRA.
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 ½ 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 bottom line in choosing between a Roth IRA and a traditional IRA is to consider what your budget is today and what you think might happen in the future.
For some people, the upfront tax break of the traditional IRA is a great incentive to save for retirement. In the short term, the tax break is a reward for saving for retirement today by reducing the cost of your contributions. But contributions and investment growth come out with taxes in retirement, meaning you will have to face that tax burden in retirement.
For that reason — along with no RMDs — some people find the Roth IRA to be a more compelling choice, particularly if they can skip that immediate tax break for contributing.
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