The choice depends on your tax bracket now versus what you expect in retirement
Choose a traditional IRA if you want to lower your taxable income this year and expect to be in a lower tax bracket when you retire. Choose a Roth IRA if you expect to be in the same or higher tax bracket in retirement, or if you want tax-free withdrawals later and don't mind paying taxes now. The real difference is timing: traditional IRA contributions reduce what you owe the IRS today, while Roth contributions are made with after-tax dollars but grow tax-free forever.
Most people choose based on one factor: their current income and whether they can deduct a traditional contribution. But that's only part of the picture. Your choice also affects how much you can withdraw penalty-free, whether you have to take money out at a certain age, and what you leave to heirs.
Key Takeaways
- Traditional IRA contributions may be tax-deductible in the year you make them if your income is below a certain threshold, lowering your tax bill immediately.
- Roth IRA contributions are made with money you've already paid taxes on, but all growth and withdrawals in retirement are tax-free.
- If you're covered by a workplace retirement plan, your ability to deduct a traditional IRA contribution phases out at higher incomes.
- Roth IRAs have no required withdrawals during your lifetime, while traditional IRAs force you to start withdrawing at age 73.
- Your tax bracket in retirement—not just your current income—should drive the decision, because you're betting on whether tax rates will be higher or lower later.
When a traditional IRA makes sense
A traditional IRA is the right choice if you're in a high tax bracket now and expect to be in a lower one in retirement. The immediate tax deduction is real money in your pocket—if you're in the 24% federal tax bracket and contribute $7,000 to a traditional IRA, you reduce your taxable income by $7,000, which saves you about $1,680 in federal taxes that year.
This matters most if you're self-employed or a high earner who can't use a 401(k). If you have a workplace 401(k) or similar plan, the IRS limits how much of your traditional IRA contribution you can deduct. For 2024, if you're single and covered by a workplace plan, the deduction phases out between $77,000 and $87,000 of income. If you're married filing jointly, it phases out between $123,000 and $143,000. These numbers change yearly. Above those limits, you can still contribute to a traditional IRA, but the contribution won't be deductible—which defeats most of the purpose.
You also want a traditional IRA if you're trying to lower your adjusted gross income (AGI) for other reasons—to stay under income limits for other tax credits, to reduce Medicare premiums, or to avoid the net investment income tax. The deduction is one of the few ways to directly reduce your AGI.
When a Roth IRA makes sense
A Roth IRA is the right choice if you expect to be in the same tax bracket or a higher one in retirement, or if you simply want to lock in today's tax rate and never pay taxes on that money again. You pay taxes on the contribution now, but every dollar of growth—and there can be decades of growth—comes out tax-free.
Roth IRAs are especially valuable if you're young, early in your career, or in a lower tax bracket than you expect to be later. A 25-year-old in the 12% bracket who contributes $7,000 to a Roth pays about $840 in taxes now, but if that money grows to $150,000 by age 65, all of it comes out tax-free. If tax rates rise—which many people expect they will—you've locked in a much better deal than a traditional IRA would have given you.
Roth IRAs also have no income limits if you use the backdoor Roth strategy, which lets higher earners convert after-tax traditional IRA money into a Roth. This is legal and common, though it requires careful record-keeping. You also have more flexibility: you can withdraw your contributions (not the earnings) penalty-free at any time, and you can leave the money untouched as long as you want—there are no required minimum distributions during your lifetime.
The tax bracket question: your real decision point
The core question is whether you think tax rates will be higher or lower when you retire. If you think rates will be lower, a traditional IRA wins because you deduct at a high rate now and pay at a low rate later. If you think rates will be higher, a Roth wins because you pay at today's rate and never pay again.
Most financial planners suggest that if you're uncertain, a Roth is the safer bet for younger people, because you have more time for tax-free growth and you're locking in today's rates. For people closer to retirement, a traditional IRA often makes more sense because the immediate tax deduction is valuable and you have less time to benefit from decades of tax-free growth.
You can also split the difference: contribute to both in the same year. There's no rule against it. Some people do a traditional IRA for the immediate deduction and a Roth for the long-term tax-free growth, as long as your total contributions across both accounts don't exceed the annual limit ($7,000 for 2024 if you're under 50, $8,000 if you're 50 or older).
Required withdrawals and flexibility
A traditional IRA forces you to start taking money out at age 73. These are called required minimum distributions (RMDs), and the IRS calculates how much you must withdraw each year based on your age and account balance. If you don't take it, you pay a 25% penalty on the amount you should have withdrawn (10% if you correct it within two years).
A Roth IRA has no RMDs during your lifetime. You can leave the money alone and let it grow, or take out as much as you want whenever you want. This is a huge advantage if you don't need the money or if you want to pass it to heirs. It's also an advantage if you want to control your taxable income in retirement—with a traditional IRA, large RMDs can push you into a higher tax bracket or trigger taxes on Social Security benefits.
If you inherit an IRA, the rules changed in 2023. Non-spouse beneficiaries now have to empty inherited traditional and Roth IRAs within 10 years, though the timing of withdrawals within that window is flexible. This doesn't change the traditional vs. Roth decision for you, but it's worth knowing if you're thinking about what you leave behind.
Income limits and who can contribute
Roth IRAs have income limits. For 2024, if you're single, you can contribute the full amount if your modified adjusted gross income (MAGI) is below $146,000. The contribution phases out between $146,000 and $161,000, and you can't contribute at all above $161,000. If you're married filing jointly, the limits are $230,000 to $240,000. These limits change yearly and are higher than traditional IRA limits.
Traditional IRAs have no income limit on contributions themselves, but as mentioned earlier, the tax deduction phases out if you're covered by a workplace plan and earn above a certain amount. If you earn too much to deduct a traditional IRA contribution and too much to contribute to a Roth, a backdoor Roth is the standard workaround.
A practical comparison table
| Traditional IRA | Roth IRA | |
|---|---|---|
| Tax on contribution | May be deductible now | Paid with after-tax dollars |
| Tax on growth | Taxed when withdrawn | Tax-free forever |
| Required withdrawals | Start at age 73 | None during your lifetime |
| Early withdrawal of contributions | 10% penalty plus taxes | Penalty-free (contributions only) |
| Income limits | No limit to contribute; deduction phases out if covered by workplace plan | Phases out at higher incomes; backdoor Roth available |
| Best for | High earners now, lower bracket in retirement | Lower earners now, higher bracket in retirement |
What happens if you change your mind
You can convert a traditional IRA to a Roth IRA at any time. You'll owe taxes on the amount you convert in that year, but after that, the money grows tax-free. This is useful if you made a traditional contribution and later realized a Roth would have been better, or if your circumstances change.
You can also recharacterize a contribution—meaning you undo it and move the money to the other type of IRA—but only within your tax filing deadline (usually April 15 of the following year). This is a safety net if you contribute to one type and realize the other would have been better.
Frequently Asked Questions
Can I contribute to both a traditional and Roth IRA in the same year?
Yes. Your total contributions to both accounts combined cannot exceed the annual limit ($7,000 for 2024 if you're under 50), but you can split that money between them however you want. Some people do $3,500 in each, or $5,000 in one and $2,000 in the other.
What if my employer offers a 401(k)—should I still open an IRA?
Often yes. A 401(k) and an IRA serve different purposes. Max out your 401(k) employer match first (assistance programs), then open an IRA if you have earned income. An IRA gives you more investment choices and lower fees than many 401(k)s, and a Roth IRA offers tax-free growth that a traditional 401(k) doesn't.
If I'm self-employed, which should I choose?
A traditional IRA is usually better for self-employed people because the deduction lowers your self-employment tax as well as your income tax. But a SEP-IRA or Solo 401(k) lets you contribute much more than a regular IRA—up to $69,000 for 2024—so explore those first. A Roth Solo 401(k) is also an option if you want tax-free growth.
What if I already have a traditional IRA and want to switch to Roth?
You can convert it, but you'll owe taxes on the pre-tax money in that year. If you have a large traditional IRA, converting all of it at once might push you into a higher tax bracket. Some people do partial conversions over several years to spread out the tax hit.
Do I lose the money if I don't use my IRA by a certain age?
No. Your money stays in the account as long as you want (with a Roth) or until you're required to withdraw it (age 73 with a traditional IRA). You don't lose it, and there's no "use it or lose it" deadline like some employer plans have.