Roth vs Traditional IRA: Which One Should You Choose?

Planning for retirement? One of the biggest decisions is whether to invest in a Roth IRA or a Traditional IRA. Both accounts help you grow your money tax-advantaged, but they work in opposite ways when it comes to taxes.

Key Differences Between Roth and Traditional IRAs

• Roth IRA: Pay taxes on your contributions now, and enjoy tax-free withdrawals in retirement.
• Traditional IRA: Contributions may be tax-deductible now, but withdrawals are taxed in retirement.

Contribution Limits for 2025

• Under age 50: Up to $7,000 total contributions across all IRAs.
• Age 50 or older: Up to $8,000 total (includes a $1,000 catch-up contribution).

These limits apply whether you choose Roth, Traditional, or a mix of both.

Income Limits for Roth IRA Contributions

High earners may be limited in how much they can contribute to a Roth IRA. For 2025:

• Single filers: Contributions begin to phase out at $146,000 and end at $161,000 of modified adjusted gross income (MAGI).
• Married filing jointly: Phase-out starts at $230,000 and ends at $240,000 of MAGI.

Withdrawal Rules

• Roth IRA: No required minimum distributions (RMDs). Withdraw your contributions anytime tax- and penalty-free. Earnings can be withdrawn tax-free after age 59½ if the account has been open at least 5 years.
• Traditional IRA: Required minimum distributions begin at age 73. Early withdrawals before age 59½ are taxed and penalized (with some exceptions).

Example Scenario

Mike is 30 years old and earns $60,000 per year. He expects his income and tax bracket to be higher in retirement. Mike chooses a Roth IRA to pay taxes now while his rates are lower and enjoy tax-free withdrawals later.

Sarah is 55 years old and earns $120,000. She wants to lower her taxable income today and expects her retirement income to be lower. Sarah chooses a Traditional IRA for the current tax break.

Pros and Cons Summary

✅ Roth IRA Pros:

• Tax-free withdrawals in retirement
• No RMDs
• Best for younger earners or those expecting higher future tax rates

⚠️ Roth IRA Cons:

• No tax deduction upfront
• Income limits restrict eligibility for some earners

✅ Traditional IRA Pros:

• Potential tax deduction today
• No income limits for contributions (but limits apply for deductions if you have a workplace plan)

⚠️ Traditional IRA Cons:

• Withdrawals are taxed in retirement
• RMDs are required starting at age 73

Still Not Sure? Run the Numbers Yourself

Deciding between Roth and Traditional IRA depends on your personal situation. Try our free Roth vs Traditional IRA Calculator to estimate your tax savings and future withdrawals.

For the latest contribution and income limits, visit the IRS IRA guidelines.