Traditional IRA vs. Roth IRA
Traditional and Roth IRAs are both individual retirement accounts, but they differ in when the tax benefit applies — up front for a Traditional IRA, or in retirement for a Roth IRA.
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Traditional IRA
Contributions may be tax-deductible in the year they're made, with the funds growing tax-deferred and withdrawals in retirement generally taxed as ordinary income.
- Contributions may reduce taxable income in the current year
- Tax-deferred growth on investments while funds remain in the account
- Withdrawals in retirement are generally taxed as ordinary income
- Required minimum distributions generally apply starting at a certain age
Roth IRA
Contributions are made with after-tax dollars, with qualified withdrawals in retirement generally tax-free, including investment growth.
- Qualified withdrawals in retirement are generally tax-free
- No required minimum distributions during the original owner's lifetime
- No upfront tax deduction for contributions
- Income limits can restrict direct eligibility to contribute
Which one makes sense for you?
A Traditional IRA can suit those who want to reduce taxable income now and expect a lower tax bracket in retirement. A Roth IRA can suit those who expect to be in a similar or higher tax bracket later and want tax-free withdrawals and no required minimum distributions. Many savers use a combination of both for tax diversification.
Key cost factors.
- Current tax bracket compared to expected tax bracket in retirement
- Income level, which can affect Roth IRA contribution eligibility
- Desire for upfront tax savings now versus tax-free withdrawals later
- Preference regarding required minimum distributions in retirement
Before you decide.
- Do I expect to be in a higher or lower tax bracket in retirement than I am now?
- Am I within the income limits to contribute directly to a Roth IRA?
- How does each account's required minimum distribution rules fit my retirement plans?
Frequently asked questions.
Can I contribute to both a Traditional and a Roth IRA in the same year?
Yes, subject to combined annual contribution limits across both account types, which are set by the IRS and can change over time.
All figures on this page are illustrative examples for general education, not quotes, appraisals, or guarantees of actual pricing. Actual costs vary by provider, location, project scope, and market conditions — always get a specific quote before making a purchasing decision.
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