The fundamental difference between Roth and Traditional IRAs is when you pay tax. Traditional IRA contributions are tax-deductible now, but withdrawals in retirement are taxed. Roth IRA contributions are made with after-tax money, but withdrawals in retirement are completely tax-free.
The 2025 contribution limit for both is $7,000, or $8,000 if you are 50 or older. You can contribute to both, but the combined total cannot exceed the limit.
Traditional IRA: best if you expect to be in a lower tax bracket in retirement than you are now. If you are in the 24% bracket today and expect to be in the 12% bracket in retirement, you save 12% on every dollar contributed. Deductibility phases out if you or your spouse has a workplace retirement plan and your income exceeds certain thresholds.
Roth IRA: best if you expect to be in a higher tax bracket in retirement, or if you want tax-free growth and no required minimum distributions (RMDs). Roth has income limits: in 2025, single filers cannot contribute directly if their MAGI exceeds $165,000 (phase-out begins at $150,000). For married filing jointly, the limit is $246,000 (phase-out begins at $236,000).
A key advantage of the Roth IRA is that there are no RMDs during your lifetime. Traditional IRAs require you to start taking distributions at age 73. This makes the Roth better for estate planning and for leaving money to heirs.
Another advantage: you can withdraw your Roth contributions (not earnings) at any time without penalty or tax. This makes it a more flexible savings vehicle.
For young people early in their careers, the Roth IRA is almost always the better choice. Your income and tax rate are likely at their lowest, so paying tax now at a low rate and getting tax-free growth for decades is a powerful advantage.
The backdoor Roth conversion allows high earners above the income limit to contribute to a Traditional IRA (non-deductible) and then convert it to a Roth. This is legal and widely used.
Use our 401(k) calculator to project retirement savings and compare growth scenarios.