The choice depends on your income now versus what you expect in retirement
A Roth IRA makes sense if you think you'll be in a higher tax bracket when you retire than you are today. You pay taxes on the money going in, but withdrawals in retirement are tax-free. A traditional IRA makes sense if you think you'll be in a lower tax bracket in retirement. You get a tax deduction now, but you'll pay taxes on withdrawals later.
The catch is that nobody knows future tax rates, and most people can't predict their retirement income with certainty. So the real question becomes: which one lets you save more money overall, and which one fits the rules you're actually living under right now?
Key Takeaways
- Roth IRAs let you withdraw money tax-free in retirement, but you pay taxes on contributions now and have income limits that may lock you out entirely.
- Traditional IRAs give you a tax deduction this year, but you'll owe taxes on every dollar you withdraw after age 59½, and you must start withdrawals at age 73.
- If your income is above a certain threshold, you cannot contribute to a Roth IRA directly, though a "backdoor Roth" workaround exists.
- You can have both types of IRAs at the same time, but your total contributions across all IRAs cannot exceed the annual limit set by the IRS.
- If you have a workplace retirement plan like a 401(k), the tax deduction for a traditional IRA may be reduced or eliminated depending on your income.
How income limits affect your choice
The IRS sets income thresholds that determine whether you can contribute to a Roth IRA at all. For 2024, if you're single and earn more than $146,000, you cannot make a full Roth contribution. If you're married filing jointly, the limit is $230,000. These numbers change each year.
Traditional IRAs have no income limit for contributions. However, if you have access to a workplace retirement plan—a 401(k), 403(b), or similar—and your income exceeds a certain threshold, the IRS will reduce or eliminate your tax deduction for traditional IRA contributions. For 2024, that threshold is $77,000 for single filers with a workplace plan, and $123,000 for married couples filing jointly. Again, these amounts shift annually.
This matters because a traditional IRA contribution that doesn't give you a tax deduction loses much of its appeal. You're paying taxes on the money going in and taxes again on the way out—essentially the same as a Roth, but without the tax-free growth. If you're above the income limits for a Roth and your traditional IRA deduction is phased out, you may want to skip the IRA altogether and focus on a 401(k) or other workplace plan instead.
Tax deductions now versus tax-free withdrawals later
A traditional IRA deduction reduces your taxable income for the year you contribute. If you earn $70,000 and contribute $7,000 to a traditional IRA, your taxable income drops to $63,000. That means you pay less in federal income tax that year. The money grows tax-free inside the account, but when you withdraw it after age 59½, every dollar is taxed as ordinary income at whatever your tax rate is then.
A Roth IRA works in reverse. You contribute after-tax dollars—no deduction, no immediate tax break. But the money grows tax-free, and when you withdraw it in retirement, you owe nothing. You also don't have to take withdrawals at any particular age, which gives you more control over your tax situation in retirement.
The math favors a Roth if you expect to earn more in retirement than you do now, or if you expect tax rates to rise. It favors a traditional IRA if you expect to earn less in retirement, or if you need the tax deduction this year to lower your current tax bill. Most people in their 20s and 30s choose Roth because they're likely earning less now than they will later. People closer to retirement often choose traditional because they need the deduction now and expect lower income later.
Required withdrawals and access to your money
A traditional IRA requires you to start taking withdrawals—called required minimum distributions, or RMDs—at age 73. The IRS calculates how much you must withdraw each year based on your age and account balance. If you don't take the full amount, you pay a penalty of 25% on the shortfall (reduced to 10% if you correct it within two years). You cannot avoid this by leaving the money alone.
A Roth IRA has no required withdrawals during your lifetime. You can leave the money untouched for as long as you want, which means you can control when and how much you withdraw for tax purposes. This flexibility is valuable if you have other sources of retirement income and want to minimize your tax bill in a given year.
Both types of IRAs penalize you if you withdraw money before age 59½. With a traditional IRA, you pay income tax plus a 10% penalty. With a Roth IRA, you can withdraw your contributions (the money you put in) penalty-free at any time, but earnings (the growth) are locked until 59½. This makes a Roth slightly more flexible if you face an emergency, though it's not a substitute for an emergency fund.
What happens if you have a workplace retirement plan
If your employer offers a 401(k), 403(b), or similar plan, that changes the math. Most workplace plans let you contribute much more than an IRA—$23,500 in 2024, compared to $7,000 for an IRA. If your employer matches contributions, that's assistance programs you should capture before maxing out an IRA.
Many workplace plans now offer both traditional and Roth options. You can contribute to a Roth 401(k) at work and a traditional IRA, or vice versa. The contribution limits are separate, so you're not choosing one or the other—you're deciding how much of each to use.
The key constraint is the tax deduction for a traditional IRA. If you have a workplace plan and earn above the income threshold, you lose the deduction. In that case, a Roth IRA becomes more attractive because at least you get tax-free growth. Alternatively, you could contribute to a Roth 401(k) at work instead, which has no income limits.
The backdoor Roth strategy for high earners
If your income exceeds the Roth IRA limit, you can use a workaround called a backdoor Roth. You contribute money to a traditional IRA (which has no income limit), then immediately convert it to a Roth IRA. You'll owe taxes on any earnings that accumulated during the conversion, but the contribution itself moves into the Roth tax-free.
This strategy works only if you have no other traditional IRA balances. If you already have money in a traditional IRA from previous years, the IRS treats all your traditional IRAs as one pool for tax purposes, and the conversion becomes complicated and potentially costly. A tax professional can walk you through the numbers, but the basic rule is: backdoor Roth is simple only if you're starting from zero.
Comparing the two side by side
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Tax deduction now | No | Yes (if income below threshold and no workplace plan) |
| Tax-free withdrawals in retirement | Yes | No |
| Income limits | Yes ($146,000 single, $230,000 married in 2024) | No, but deduction phases out with workplace plan |
| Required withdrawals at age 73 | No | Yes |
| Can withdraw contributions early | Yes, penalty-free | No, 10% penalty plus taxes |
| Annual contribution limit (2024) | $7,000 (age 50+: $8,000) | $7,000 (age 50+: $8,000) |
Frequently Asked Questions
Can I contribute to both a Roth and traditional IRA in the same year?
Yes, but your total contributions to all IRAs combined cannot exceed the annual limit—$7,000 in 2024, or $8,000 if you're 50 or older. If you contribute $4,000 to a Roth, you can only contribute $3,000 to a traditional IRA that year.
What if I change my mind after opening one type of IRA?
You can convert a traditional IRA to a Roth, though you'll owe taxes on the amount converted. You cannot convert a Roth back to a traditional IRA. You can also open a second IRA of the opposite type, as long as your total contributions stay within the annual limit.
Do I have to choose just one for the rest of my life?
No. Your situation changes—income rises, you get a workplace plan, you retire—and you can adjust your strategy. You can have both types open at the same time, and you can shift how much you contribute to each one year to year.
What if my income is too high for a Roth but I don't have a workplace plan?
You can still use a backdoor Roth if you have no existing traditional IRA balance. If you do have a traditional IRA, consult a tax professional before converting, because the tax bill can be substantial.
Which one should I pick if I'm not sure about my future income?
If you're young and early in your career, a Roth usually wins because you're likely earning less now than you will later. If you're close to retirement or in a high tax bracket now, a traditional IRA's immediate deduction is more valuable. When in doubt, prioritize getting money into retirement savings at all—the type matters less than the habit.