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Roth IRA vs. traditional IRA: Which should you choose?

The devil is in the (tax) details.

Written byRobyn Conti

Fact-checked byNancy Ashburn

Young woman standing by two roads, outdoors, rear view

Two paths toward retirement security.

If you’re exploring ways to save for retirement, an individual retirement account (IRA) offers tax advantages that can help your savings grow. Each type, Roth and traditional, has unique benefits and rules, particularly when it comes to eligibility and how contributions and withdrawals are taxed. With a traditional IRA, your contributions are tax deductible and grow tax deferred, but your withdrawals in retirement are taxed at your ordinary income tax rate.

Key Points

Roth and traditional IRAs are both tax-advantaged retirement accounts, but the similarities end there.
Contributions and withdrawals are taxed differently, so your decision may depend on whether you want to pay taxes now or later.
Other considerations include marital status, whether you’re participating in a retirement plan at work, and your income.

With a Roth IRA, your contributions are made after tax, allowing your money to grow tax-free. Qualified withdrawals in retirement are also tax-free.

To be eligible to contribute to an IRA, you must have earned income—meaning money you’ve worked for, such as from a job or self-employment. Your income impacts how much you can put away in a Roth IRA.

How Roth and traditional IRAs stack up

The annual contribution limit is the same for both Roth and traditional IRAs. For the 2024 tax year, it’s $7,000 (or your earned income, whichever is lower) if you’re under age 50, and $8,000 if you’re age 50 or older, including the additional $1,000 catch-up contribution. These limits remain the same for 2025.

**Key differences between Roth and traditional IRAs**
Roth IRA	Traditional IRA
You can make after-tax contributions.	You can make pretax contributions.
No up-front tax advantages.	Making pretax contributions has immediate tax benefits—it lowers your current income.
Earnings and qualified withdrawals are tax-free.	Earnings and withdrawals are generally taxed.
2024 and 2025 annual contribution limit: $7,000 (or your earned income, whichever is lower) for those under age 50; $8,000 for those age 50 or older, including the $1,000 catch-up contribution.	2024 and 2025 annual contribution limit: $7,000 (or your earned income, whichever is lower) for those under age 50; $8,000 for those age 50 or older, including the $1,000 catch-up contribution.
You (and your spouse, if filing jointly) must have earned income below a certain level.	You can contribute if you have earned income, but specific income thresholds if you also have an employer plan such as a 401(k).
Penalties apply for withdrawals made before age 59½, except under certain circumstances, such as a first-time home purchase or birth or adoption of a child.	Penalties apply for withdrawals made before age 59½, or minimum distributions not taken by April 1 of the year following the year you reach age 72.
You can make contributions on behalf of a nonworking spouse.	You can make contributions on behalf of a nonworking spouse.
No maximum age limit to contribute.	No maximum age limit to contribute.
No minimum distributions required (for original IRA owners).	Minimum distributions are required by April 1 of the year following the year you reach age 72.

Understanding your eligibility

If you or your spouse has taxable income earned as an employee or through self-employment, you can contribute to an IRA.

AGI vs. MAGI

If you’re navigating IRA contribution limits, understanding the difference between adjusted gross income (AGI) and modified adjusted gross income (MAGI) is essential.

Adjusted gross income (AGI): Your total income minus certain adjustments like traditional IRA contributions and student loan interest.
Modified adjusted gross income (MAGI): Starts with your AGI and adds back specific deductions, such as tax-exempt interest, depending on the tax benefit being calculated.

MAGI is used to determine eligibility for Roth IRA contributions, the deductibility of traditional IRA contributions, and other tax benefits.

Traditional IRA eligibility. If you or your spouse is covered by a retirement plan at work, the deductibility of your traditional IRA contributions depends on your modified adjusted gross income (MAGI) and filing status.

For 2024

Single filers: You can take a full deduction if your MAGI is below $77,000. The deduction decreases as your MAGI climbs to $87,000 and isn’t available if your MAGI exceeds $87,000.
Married filing jointly: If you’re covered by a workplace plan, you can take a full deduction if your household MAGI is below $123,000. The deduction phases out as your MAGI increases to $143,000 and isn’t available if your MAGI is higher than $143,000.
If you’re not covered by a workplace plan but your spouse is, you can take a full deduction if your household MAGI is below $230,000. The deduction phases out as your MAGI rises to $240,000 and isn’t available if your MAGI exceeds $240,000.

For 2025

Single filers: You can take a full deduction if your MAGI is below $79,000. The deduction decreases as your MAGI rises to $89,000 and isn’t available if your MAGI exceeds $89,000.
Married filing jointly: If you’re covered by a workplace plan, you can take a full deduction if your household MAGI is below $126,000. The deduction phases out as your MAGI increase to $146,000 and isn’t available if your MAGI is higher than $146,000.
If you’re not covered by a workplace plan but your spouse is, you can take a full deduction if your household MAGI is below $235,000. The deduction phases out as your MAGI climbs to $245,000 and isn’t available if your MAGI exceeds $245,000.

Roth IRA eligibility. If you’ve earned income and your modified adjusted gross income falls within the allowed range, you can contribute to a Roth IRA. Your eligibility depends on your MAGI and filing status.

For 2024

Single filers: Full contributions are allowed for MAGI less than $146,000. The contribution limit is phased out for MAGI $146,000 to $161,000. No contribution is allowed for MAGI above $161,000.
Married filing jointly: Full contributions are allowed for MAGI less than $230,000. The contribution limit is phased out for MAGI $230,000 to $240,000. No contribution is allowed for MAGI above $240,000.

For 2025

Single filers: Full contributions are allowed for MAGI less than $150,000. The contribution limit is phased out for MAGI $150,000 to $165,000. No contribution is allowed for MAGI above $165,000.
Married filing jointly: Full contributions are allowed for MAGI less than $236,000. The contribution limit is phased out for MAGI $236,000 to $246,000. No contribution is allowed for MAGI above $246,000.

Roth vs. traditional IRA: Which should you choose?

Both IRAs offer valuable tax advantages to help you save for the future. Choosing between them often depends on whether you want to pay taxes now or later. If you think you’ll be in a lower tax bracket when you retire, then you might consider contributing to a traditional IRA during your peak earning years, then taking a smaller tax hit (in theory, anyway) when you withdraw the money in retirement.

Predicting your tax bracket several decades from now is difficult. With a Roth IRA, you’ll pay taxes now, but when you withdraw those funds in retirement, you won’t pay federal taxes on the amount you invested or on the appreciation.

Although “tax-free withdrawal” sounds great, remember that with a Roth you’re taxed up front, so your initial pool of funds is smaller than it would be in a traditional, pretax IRA. For instance, if you’re in the 20% tax bracket, you’re investing just 80 cents of every dollar you contribute to a Roth IRA. The money grows tax-free, of course, but that initial tax bite is the trade-off between contributing to a Roth versus a traditional IRA.

Other important considerations

Your age. If you’re early in your career, a Roth IRA may be especially compelling. With many years until retirement, you can take greater advantage of the tax-free growth and compounding that a Roth IRA provides.
Your potential life span. Many individuals are living and working longer. If you envision a retirement that could last well into your 80s or 90s, the flexibility and tax-free benefits of a Roth IRA may make it an appealing option.
You can choose both. You can mix and match your contributions to a Roth and a traditional IRA—as long as you stay within the government’s guidelines. Both types of tax-advantaged retirement accounts provide great tax perks and savings opportunities for your future.

The bottom line

As you compare a Roth versus traditional IRA, it’s important to consider factors like making sure your portfolio is diversified, and that you’re investing in line with your ability to handle risk and your timeline until retirement.

And remember: Choosing between a Roth and a traditional IRA isn’t a critical decision with potentially dire financial consequences if you don’t make the perfect choice. It’s simply a way to optimize your retirement savings plan for your personal situation. Either way, you’re making a commitment. You’re building a solid foundation for a financially secure retirement.

Building a comfortable retirement typically involves combining Social Security with other sources of income.

Encyclopædia Britannica, Inc.

References

This article was most recently revised and updated by Robyn ContiThis article was most recently revised and updated by Nancy Ashburn