The choice depends on whether you want to pay taxes now or later

A Roth IRA makes sense if you expect to be in a higher tax bracket when you retire, or if you want to withdraw money tax-free in retirement. You pay taxes on the money before it goes in, but the growth and withdrawals come out untaxed. A traditional IRA makes sense if you want to lower your taxable income this year, or if you expect to be in a lower tax bracket in retirement. You get a tax deduction now, but you pay taxes on withdrawals later.

The real difference is timing: Roth taxes you upfront, traditional taxes you on the back end. Neither is objectively better—it depends on your current tax situation and what you expect your retirement to look like. Most people can open either one. Some higher earners cannot contribute to a Roth directly, though they have workarounds. Some people benefit from having both.

Key Takeaways

  • Roth contributions are made with after-tax money, but withdrawals in retirement are completely tax-free, including all the growth your money earned.
  • Traditional contributions may be tax-deductible in the year you make them, but you pay ordinary income tax on withdrawals in retirement.
  • If you are young or expect higher earnings later, a Roth usually saves you more money over your lifetime because your money grows tax-free for decades.
  • If you are close to retirement or expect lower income in retirement, a traditional IRA may reduce your taxes more right now.
  • Income limits apply to Roth contributions but not traditional contributions, though traditional contributions may not be deductible if you have a workplace retirement plan.

When a Roth IRA usually makes more sense

Choose a Roth if you are early in your career, earning less now than you expect to earn later. Your money sits in the account for decades, growing tax-free. When you retire, you withdraw it all without paying a dime in taxes. That tax-free growth compounds year after year—the longer your money sits, the more you benefit.

A Roth also works well if you think tax rates will be higher in the future, or if you want flexibility in retirement. You can withdraw your contributions (the money you put in, not the growth) anytime without penalty. You can also leave money in the account as long as you want—there is no age when you must start taking it out. That matters if you do not need the money right away, or if you want to leave it to your heirs.

Roth accounts also let you withdraw earnings penalty-free after age 59½ if the account has been open at least five years. That five-year clock starts the moment you open the account, not when you turn 59½.

When a traditional IRA usually makes more sense

Choose a traditional IRA if you want to lower your taxable income this year. If you earn $65,000 and contribute $7,000 to a traditional IRA, your taxable income drops to $58,000. That can push you into a lower tax bracket, reduce the taxes you owe, or help you stay under an income limit for another benefit.

A traditional IRA also makes sense if you are close to retirement and expect to earn less once you stop working. If you earn $120,000 now but expect to earn $50,000 in retirement (or live on $50,000 from savings), you will pay less tax on that $50,000 withdrawal than you would pay on the same amount today. You are essentially deferring taxes to a year when your income is lower.

Traditional IRAs have no income limits—anyone can contribute, regardless of how much they earn. That matters if you are a high earner who cannot contribute to a Roth directly.

Income limits and who can contribute to each type

For 2024, you can contribute to a Roth IRA only if your income falls below certain thresholds. For single filers, the limit is $146,000. For married couples filing jointly, it is $230,000. These numbers change each year. If you earn above these limits, you cannot contribute to a Roth—period. There is no workaround through your employer.

A traditional IRA has no income limit on who can contribute. However, if you have access to a workplace retirement plan (like a 401(k) or 403(b)), your ability to deduct a traditional IRA contribution phases out at higher incomes. For 2024, single filers with a workplace plan lose the deduction between $77,000 and $87,000 in income. Married couples filing jointly lose it between $123,000 and $143,000. If you earn above these limits, you can still contribute to a traditional IRA—you just cannot deduct it from your taxes that year.

If you earn too much for a Roth but want one anyway, some people use a "backdoor Roth" strategy: they contribute to a traditional IRA (which has no income limit) and then convert it to a Roth. This works, but it has tax complications if you already have other traditional IRA money. Talk to a tax professional before trying this.

Tax deductions and how they work in practice

A traditional IRA deduction is straightforward: you contribute money, you deduct it on your tax return, your taxable income goes down. If you contribute $7,000 and your tax rate is 22%, you save $1,540 in taxes that year. That is real money in your pocket right now.

But here is the catch: when you withdraw that money in retirement, you pay ordinary income tax on it. If you withdraw $50,000 from a traditional IRA at age 70, you owe income tax on that $50,000 as if it were salary. If your tax rate is 22% then, you pay $11,000 in taxes. You saved $1,540 now and paid $11,000 later—a net loss if your tax rate stayed the same or went up.

A Roth has no upfront deduction, but the payoff is the opposite: you pay taxes now on the money you contribute, and you never pay taxes on it again. If you contribute $7,000 at a 22% rate, you pay $1,540 in taxes upfront. But when you withdraw $50,000 in retirement (your original $7,000 plus $43,000 in growth), you owe zero in taxes. That growth—the $43,000—is completely tax-free.

Contribution limits and how much you can put in

For 2024, you can contribute up to $7,000 per year to either a Roth or traditional IRA. If you are 50 or older, you can contribute an extra $1,000 as a "catch-up" contribution, for a total of $8,000. These limits apply to the combined total across all your IRAs—if you have both a Roth and a traditional IRA, your $7,000 limit is split between them.

The contribution limit changes most years based on inflation. The IRS announces the new limit in October for the following year. You can contribute to an IRA for a given year until the tax filing deadline the following year—usually April 15.

These limits are much lower than workplace retirement plans like 401(k)s, which allow much larger contributions. If you have access to a 401(k) at work, you can contribute to both the 401(k) and an IRA in the same year, up to each plan's separate limit.

Withdrawal rules and when you can access your money

With a Roth IRA, you can withdraw your contributions anytime, tax-free and penalty-free. If you contributed $7,000 and it grew to $9,000, you can pull out the $7,000 whenever you want. You cannot touch the $2,000 in growth without penalty until age 59½, unless you meet an exception (like a first-time home purchase, up to $10,000 lifetime).

With a traditional IRA, you cannot withdraw money before age 59½ without paying a 10% penalty on the amount withdrawn, plus income tax on it. There are exceptions—disability, medical expenses above a threshold, first-time home purchase up to $10,000—but they are narrow. If you think you might need the money before retirement, a Roth gives you more flexibility.

At age 73, you must start taking withdrawals from a traditional IRA, whether you need the money or not. These are called required minimum distributions (RMDs). The IRS calculates how much based on your age and account balance. You pay income tax on whatever you withdraw. With a Roth, there is no age when you must withdraw—you can leave it alone forever and pass it to your heirs.

Frequently Asked Questions

Can I have both a Roth and a traditional IRA at the same time?

Yes. Your $7,000 annual contribution limit is split between them, so if you put $4,000 in a Roth, you can only put $3,000 in a traditional IRA that year. Some people do this intentionally to get some of each benefit—a traditional IRA deduction now and some tax-free growth in the Roth.

What happens to my IRA if I change jobs?

Your IRA stays yours. It is not tied to your employer. If you leave a job, your IRA keeps growing. If your new job has a 401(k), you can contribute to both the 401(k) and your IRA in the same year, up to each plan's limit. You can also roll a 401(k) into an IRA when you leave a job, though this has tax implications if you have other traditional IRA money.

If I earn too much for a Roth, can I contribute to a traditional IRA instead?

Yes, but check whether your deduction is limited. If you have a workplace retirement plan and earn above the phase-out range, you can still contribute to a traditional IRA—you just cannot deduct it. That contribution sits in the account as "non-deductible" money, which complicates taxes later. A tax professional can help you decide if this is worth doing.

Which grows faster, a Roth or a traditional IRA?

The account itself grows at the same rate regardless of type—it depends on what investments you choose inside the account. The difference is taxes. A Roth's growth is tax-free forever. A traditional IRA's growth is tax-deferred, meaning you pay taxes on it when you withdraw. Over decades, the Roth usually comes out ahead if you expect higher tax rates in retirement.

Can I convert a traditional IRA to a Roth?

Yes, this is called a Roth conversion. You move money from a traditional IRA to a Roth and pay income tax on the amount converted that year. This can make sense if you expect tax rates to rise, or if you are in a low-income year. It is complicated if you have other traditional IRA money, so consult a tax professional first.