Both Roth and Traditional IRAs are retirement accounts with tax advantages. The difference is when you get the tax break: now or later. A Traditional IRA gives you a tax deduction today but taxes you when you withdraw in retirement. A Roth IRA gives you no deduction now but lets you withdraw everything tax free in retirement. Which one saves you more depends on a bet about your future tax rate.
Traditional IRA: pay taxes later
You contribute pre-tax money (or take a deduction on your tax return). The money grows without being taxed. When you withdraw in retirement, you pay income tax on everything: the original contributions and all the growth.
If you’re in the 22% tax bracket and contribute $7,000, you save $1,540 on this year’s taxes. That’s real money now. But when you withdraw $7,000 in retirement, you owe income tax on it at whatever rate applies then.
The Traditional IRA is a bet that your tax rate in retirement will be lower than your tax rate now. If you’re earning a lot during your working years and expect to live on less in retirement, paying taxes later at a lower rate saves money.
Required minimum distributions (RMDs) start at age 73. You have to start pulling money out whether you need it or not, and you owe tax on every withdrawal. This forces taxable income during retirement, which can affect your Social Security taxation and Medicare premiums.
Roth IRA: pay taxes now
You contribute after-tax money. No deduction. The money grows tax free. When you withdraw in retirement (after age 59 and a half, and the account has been open at least 5 years), you pay zero tax on the contributions and zero tax on the growth.
$7,000 contributed to a Roth today doesn’t save you anything on this year’s taxes. But if that $7,000 grows to $30,000 over 25 years, you withdraw the entire $30,000 without owing a cent. The $23,000 in growth is completely tax free.
The Roth is a bet that your tax rate in retirement will be the same or higher than it is now. If tax rates go up in the future (which many people expect given government debt levels), the Roth protects you from paying more.
No RMDs on a Roth IRA. You never have to withdraw if you don’t want to. The money can sit there growing tax free for your entire life and then pass to your heirs.
The tax bracket question
If you’re in a low tax bracket now (12% or 22%), a Roth usually wins. You’re paying a low rate on the contributions, and all the future growth escapes taxation entirely. The younger you are, the more growth happens, and the more the Roth’s tax free withdrawals are worth.
If you’re in a high tax bracket (32% or above) and expect to be in a lower bracket in retirement, the Traditional IRA’s upfront deduction is more valuable. You’re avoiding 32% now and might only pay 22% later.
If you’re in the middle (24% bracket) and you’re not sure where you’ll be in retirement, splitting contributions between Roth and Traditional gives you tax diversification. You’ll have some tax free money and some tax deferred money, and you can pull from whichever source makes the most sense each year in retirement.
Income limits
Roth IRA contributions phase out at higher incomes. For 2025, the phase-out starts at $150,000 for single filers and $236,000 for married filing jointly. Above those thresholds, you can contribute less or nothing directly to a Roth. (There’s a workaround called a backdoor Roth that involves contributing to a Traditional IRA and converting, but it adds complexity.)
Traditional IRA deductions also phase out if you or your spouse have a retirement plan at work and your income exceeds certain limits. You can still contribute, but the deduction disappears, which removes the main advantage.
If your income is too high for a deductible Traditional IRA, the Roth (or backdoor Roth) is usually the better option since you’re not getting a deduction either way.
The case for Roth when you’re young
If you’re in your 20s or early 30s and earning a modest income, the Roth is almost always the better choice. Your tax rate is probably at its lowest right now. The money has decades to grow. And all of that growth comes out tax free.
$500 per month into a Roth IRA starting at age 25, growing at 8% annually, is about $1.4 million by age 65. Every dollar of that $1.4 million is tax free. In a Traditional IRA, you’d owe income tax on every withdrawal. At a 22% rate, that’s roughly $300,000 in taxes. At a 24% rate, $336,000. The Roth saves you hundreds of thousands in retirement taxes on the same investment.
Contribution limits
Both Roth and Traditional IRAs share the same annual contribution limit: $7,000 for 2025, or $8,000 if you’re 50 or older. That limit is combined. You can split between the two, but you can’t put $7,000 in each.
$7,000 per year might not sound like much, but maxing out a Roth IRA from age 25 to 65 at 8% growth produces over $1.8 million. The discipline of contributing the maximum each year is one of the simplest paths to a comfortable retirement.
If you can’t max it out, contribute whatever you can. $200 a month is $2,400 per year. That still grows substantially over 30 to 40 years.
You can have both
You don’t have to choose one forever. Many people use a Traditional IRA or 401(k) during high earning years and a Roth during lower earning years. Some contribute to both in the same year, splitting the $7,000 limit.
Having both types of accounts in retirement gives you flexibility. In years when you want to minimize taxable income (to stay in a lower bracket or reduce Medicare premiums), withdraw from the Roth. In years when some taxable income is fine, pull from the Traditional.
The short answer
Low income now, young, expect your earnings to grow: Roth.
High income now, expect lower income in retirement: Traditional.
Unsure: split between both, or lean toward Roth since tax free growth is hard to beat if you have decades ahead of you.
The most common regret from retirees who used Traditional accounts exclusively is the tax bill. Having at least some money in a Roth gives you a pool of tax free cash to draw from, which is worth more than most people realize until they need it.