Finance · 5 min read

Roth IRA vs Traditional IRA: Which Should You Choose?

The core difference between a Roth IRA and a traditional IRA comes down to timing: a traditional IRA gives you a tax deduction now and taxes your withdrawals later, while a Roth IRA taxes your contributions today so that qualified withdrawals in retirement come out completely tax-free. Our Roth IRA calculator can project how that tax-free growth adds up over time, but choosing between the two accounts starts with understanding a few structural differences.

Taxed now or taxed later

With a traditional IRA, contributions are often tax-deductible in the year you make them, which lowers your taxable income immediately. The tradeoff is that every dollar you withdraw in retirement, including all the growth, is taxed as ordinary income. A Roth IRA works the other way around. You contribute money that has already been taxed, so there's no deduction up front, but growth inside the account and qualified withdrawals after age 59½ are not taxed at all, no matter how large the balance has grown.

Contribution limits

• Under 50: $7,000 per year (2024 limit)
• 50 and older: $8,000 per year, including a $1,000 catch-up contribution

This limit applies to your combined Roth and traditional IRA contributions, not to each account separately, so splitting money between both still counts against a single cap. The IRS adjusts this figure for inflation from time to time, so check the current year's limit before contributing the maximum.

Income limits on Roth eligibility

Traditional IRAs have no income cap on who can contribute, though the tax deduction itself phases out at higher incomes if you or a spouse are also covered by a workplace retirement plan. Roth IRAs are different: there's no deduction to phase out, but the right to contribute directly disappears once your modified adjusted gross income crosses a threshold the IRS sets annually. Earners above that threshold sometimes use a backdoor Roth conversion instead, contributing to a traditional IRA first and converting it to a Roth shortly after.

Required minimum distributions

Traditional IRAs require you to start taking required minimum distributions at a set age under current law, whether or not you actually need the money that year. Roth IRAs carry no required minimum distributions during the original owner's lifetime, which is one reason they're popular for anyone who wants the account to keep compounding untouched or to pass more of it to heirs.

Which one should you choose

A common rule of thumb is to lean traditional if you expect to be in a lower tax bracket in retirement than you are right now, since the deduction is worth more while your rate is higher. A Roth tends to make more sense if you expect your bracket to rise later, if you're early in your career and already in a low bracket, or if you simply want guaranteed tax-free income regardless of where rates end up. Neither answer is universal. Future tax policy and your own income path are both genuinely hard to predict decades out.

You don't have to pick just one

Nothing stops you from contributing to both a Roth and a traditional IRA in the same year, as long as the combined total stays under the annual limit. Splitting contributions between the two is a reasonable way to hedge against not knowing which direction tax rates will move by the time you retire.

Frequently asked questions