Roth IRA vs. traditional IRA: Which one is right for you?
Discover the key differences between a Roth IRA versus traditional IRA and how to choose the right retirement account.
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Tax treatment varies significantly: Roth IRAs offer tax-free growth and withdrawals in retirement, while traditional IRAs provide upfront tax deductions but require taxes on withdrawals later.
Income and eligibility rules differ: Roth IRAs have income limits for contributions, whereas traditional IRAs are available to anyone, though deductibility may vary based on income and other retirement plans.
Withdrawal rules and RMDs matter: Roth IRAs don’t require minimum distributions and allow penalty-free access to contributions at any time. Traditional IRAs impose RMDs and early withdrawal penalties unless exceptions apply.
What is the difference between a Roth IRA and a traditional IRA?
Understanding the differences between a Roth IRA vs. traditional IRA can help you decide how you want to save for retirement. While these two individual retirement accounts (IRAs) share many similarities, the main difference is how the two accounts are taxed.
A traditional IRA is a retirement account where contributions may be tax-deductible, reducing your taxable income in the year you contribute. When you withdraw money in retirement, both contributions and earnings are taxed as normal income.
A Roth IRA is a retirement account funded with after-tax money, meaning you don’t get an immediate tax deduction. With a Roth IRA, your withdrawals in retirement — both for contributions and earnings — are tax-free, as long as you meet specific rules.
It is possible to include both types of IRAs in your retirement portfolio, as long as your contributions don't exceed annual limits. You can have multiple retirement accounts if you are trying to diversify your retirement savings — therefore, you don’t necessarily have to choose between a Roth or traditional IRA if both work in your interest.
Roth IRA versus traditional IRA: An overview
Feature | Roth IRA | Traditional IRA |
Tax treatment | Contributions made with after-tax dollars, qualified withdrawals (contributions + earnings) are tax-free | Contributions may be tax-deductible, withdrawals (contributions + earnings) are taxed as income |
Contribution limits (2024 & 2025) | $7,000 if under 50, $8,00 if 50+, contribution limits are combined across all IRA | Same limits as Roth IRA |
Income eligibility | Must meet income limits to contribute | No income limits for contributing, high income may affect deductibility if you or your spouse are covered by a retirement plan |
Withdrawal rules | Contributions can be withdrawn anytime tax- and penalty-free, earnings withdrawals may be taxed and penalized if under age 59½ or account is less than five years old (five-year rule), certain exceptions apply | All withdrawals taxed as income, 10% penalty applies to withdrawals before age 59½ unless exception is met |
Required Minimum Distributions (RMDs) | No RMDs during the original owner’s lifetime | RMDs required starting at age 73 |
Tax advantages | Tax-free growth and qualified tax-free withdrawals, good for long-term savings, great for those expecting to be in higher tax brackets during retirement, can be passed down to heirs with tax-free distributions if account is 5+ years old | Upfront tax deductions on eligible contributions, tax-deferred growth, withdrawals are taxed in retirement |
Best for | May be more attractive if you expect to be in a higher tax bracket later, are younger, or want tax-free income in retirement | May be more appealing if you want a tax break now, expect to be in a lower tax bracket in retirement, or need immediate deductions |
Let’s explore these differences in more detail, to help you decide which one may better fit your needs.
Contribution limits and eligibility requirements
Both Roth and traditional IRAs have contribution limits and eligibility requirements set by the IRS. These limits can change periodically, so it is important to make sure you are always up-to-date on the limits for the tax year you are considering.
IRA contribution limits for 2025 and 2024 happen to be the same for both filing years and for both accounts. The contribution for a Roth IRA vs. traditional IRA is $7,000 if you are under 50, or $8,000 if you are 50 or older.¹ If you have multiple accounts, this limit applies across all accounts rather than individually.
While there are no income limits for contributing to a traditional IRA, there are certain thresholds in place for a Roth IRA. Therefore, when considering a Roth or traditional IRA, it is important to understand the income limits of a Roth IRA.
As an overview, if your modified adjusted gross income (MAGI) for 2025 is below $150,000 for single filers, or below $236,000 for married couples filing jointly² — or $146,000 for single filers and $230,000 for married couples filing jointly in 2024³ — you can make full contributions to your Roth IRA. Any income above these limits will reduce your contribution limits until you are no longer able to contribute. For a full list of income thresholds for Roth IRAs, turn to our article on Roth IRAs.
While traditional IRAs have no income limits for contributions, your income may affect tax deductibility.
Standard IRA vs Roth IRA: Withdrawal limitations
Both traditional and Roth IRAs allow you to make withdrawals at any time — but at different costs.
A Roth IRA allows penalty-free withdrawals on contributions at any time. However, withdrawing earnings may result in a 10% penalty and income tax if you withdraw before age 59½ or in the first five years of opening your account — this is known as the “five-year rule.”
Withdrawing distributions from a traditional IRA, for contributions or earnings, before age 59½ results in taxes and a 10% penalty on top of the taxed amount. Note that all withdrawals and distributions from traditional IRAs are taxable.
Both traditional and Roth IRAs have exceptions for early withdrawal penalties. You do need to qualify for these exceptions, so you may want to check with the IRS qualifications.
Required minimum distributions
Unlike traditional IRAs, Roth IRAs do not have required minimum distributions (RMDs). This means you do not have to make any withdrawals at a certain age, or at all during your lifetime. This can be an attractive benefit for those who wish to transfer their wealth, as beneficiaries of Roth IRAs may not owe income tax on withdrawals for a certain period of time.
Traditional IRAs require you to start distributions at age 73.⁴ Your first RMD would be required on April 1st of the year following the calendar year in which you turned 73.⁴ RMDs are mandatory for traditional IRAs and will be taxed. You can also use helpful tools, like worksheets from the IRS, to help you determine your annual RMD.
If you are unsure between choosing a Roth or traditional IRA, you may also want to ask yourself if you would need RMDs or would like to keep your IRA growing indefinitely.
Tax benefit of Roth vs. traditional IRA
The biggest difference between Roth and traditional IRAs is how and when you get a tax break. Both IRAs offer unique tax advantages, therefore it is important to understand the differences to see which option would work in your best interest.
Roth IRAs are funded using after-tax dollars, allowing your contributions to grow tax-free. While contributions to Roth IRAs are not tax-deductible, you will not be taxed on distributions withdrawn during retirement if you are past age 59½ or have had your account open for a minimum of five years. Roth IRAs can also be passed down, allowing beneficiaries to make tax-free withdrawals if the account has met the five-year rule.
In short, Roth IRAs allow for tax-free growth and qualified tax-free withdrawals, which make them an appealing option for those who anticipate being in a higher tax bracket during their retirement.
Traditional IRAs, on the other hand, offer up-front tax deductions on contributions in the year they are made. Tax deductions may be limited if you — or your spouse, if you are married — have a workplace retirement plan, like a 401(k), and exceed certain income levels. With a traditional IRA, your earnings are taxed once you withdraw money in your retirement, with taxes based on your current tax bracket. Up-front tax deductions may be more attractive to those seeking immediate tax deductions.
Which one is better, Roth or traditional IRA?
If you are still asking yourself which IRA is better” — Roth or traditional — the answer is, it depends. Everyone has a unique financial situation, therefore it is important to consider your needs to see if a Roth IRA or traditional IRA would work in your best interest.
If you are looking to save on taxes now and expect to be in a lower tax bracket in retirement, you may find a traditional IRA more attractive. However, if you want tax-free withdrawals later, and expect to be in a higher tax bracket in retirement, then you may consider a Roth IRA. Therefore, you may also want to consider how your future income will compare to where you currently stand.
You may also want to consider your age in respect to your retirement timeline. Younger investors may find Roth IRAs more appealing to benefit from tax-free growth for longer periods. Younger investors may also want to take advantage of tax-free growth offered by Roth IRAs while they meet the income requirements, in the event that they may not qualify in the future.
It is also crucial to consider when you plan to access your retirement funds, or if you may need to tap into your account before retirement. If you think you may need to use your IRA funds before reaching retirement age, it is important to know what penalties you may face.
There are many factors to consider when choosing between a Roth IRA vs traditional IRA. If you have a complex financial situation, or need more tailored advice, you may want to consider talking to your tax advisor or financial professional to determine which account is the best choice for you.
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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.