The choice depends on your tax bracket now versus later

A Roth IRA is better if you expect to be in a higher tax bracket when you retire. A traditional IRA is better if you expect to be in a lower tax bracket when you retire. That is the core difference, and it is the only reason to pick one over the other.

Here is why: With a traditional IRA, you deduct your contributions from your income this year, lowering your taxes now. You pay taxes on the money when you withdraw it in retirement. With a Roth IRA, you contribute money you have already paid taxes on, and you pay no taxes on withdrawals in retirement. If your tax rate drops between now and retirement, the traditional IRA saves you more money overall. If your tax rate rises, the Roth saves you more.

Most people cannot predict their retirement tax bracket with certainty. But you can make an educated guess based on your income trajectory, expected retirement spending, and whether you think tax rates will go up or down. The sections below walk through the real constraints that actually matter when you are deciding.

Key Takeaways

  • Traditional IRA contributions reduce your taxable income this year; Roth contributions do not, but Roth withdrawals in retirement are tax-free.
  • You can only contribute to a Roth IRA if your income is below a certain threshold, which changes each year and varies by filing status.
  • You must start taking withdrawals from a traditional IRA at age 73; Roth IRAs have no required withdrawal age during your lifetime.
  • If you have a workplace retirement plan like a 401(k), your ability to deduct traditional IRA contributions phases out at higher incomes.
  • You can convert a traditional IRA to a Roth at any income level, but you will owe taxes on the converted amount in that tax year.

Income limits: Roth has them, traditional does not

You can contribute to a traditional IRA at any income level. You can only contribute to a Roth IRA if your income falls below a limit set by the IRS each year. For 2024, the Roth income limit for single filers is $146,000 and for married filing jointly is $230,000. These numbers change annually, and the limits are lower if you are married filing separately.

If your income exceeds the Roth limit, you cannot use a Roth IRA directly. Some people in this situation use a "backdoor Roth" strategy—they contribute to a traditional IRA and then convert it to a Roth—but this involves tax complications and is not the right move for everyone.

If you have a workplace 401(k) or similar plan, the traditional IRA deduction also phases out at higher incomes. This means you can still contribute to a traditional IRA, but you cannot deduct the contribution from your taxes. When this happens, a Roth IRA (if you are under the income limit) often makes more sense, because at least your withdrawals will be tax-free.

Tax deductions now versus tax-free withdrawals later

The traditional IRA deduction is valuable only if you actually use it. If your income is too high to deduct a traditional IRA contribution, or if you have a workplace plan that phases out the deduction, the tax benefit disappears. In that case, contributing to a non-deductible traditional IRA creates a record-keeping headache later and does not save you money.

A Roth IRA has no deduction, so there is nothing to phase out. You contribute after-tax money, and that is the end of the tax story until you retire. For people in high tax brackets with workplace plans, this simplicity often wins.

The traditional IRA deduction is most valuable if you are in a high tax bracket now and expect to be in a lower one in retirement. The Roth is most valuable if you are in a low tax bracket now and expect to be in a higher one, or if you simply want to lock in today's tax rate and never worry about taxes on that money again.

Required withdrawals: Traditional IRA forces them, Roth does not

At age 73, you must start taking withdrawals from a traditional IRA, whether you need the money or not. These withdrawals are called required minimum distributions, or RMDs. The IRS calculates the amount based on your age and account balance, and you owe income tax on every dollar you withdraw.

A Roth IRA has no required withdrawal age during your lifetime. You can leave the money untouched for as long as you live, and your beneficiaries inherit it tax-free. This is a major advantage if you do not need the money in retirement or if you want to pass wealth to your heirs.

RMDs from a traditional IRA can push you into a higher tax bracket in retirement, which can also increase your Medicare premiums and the taxes you owe on Social Security benefits. If you have substantial savings and do not need the income, this can be expensive. A Roth IRA sidesteps this problem entirely.

Contribution limits are the same for both

You can contribute $7,000 per year to either a Roth or traditional IRA if you are under age 50. If you are 50 or older, you can contribute an additional $1,000 catch-up contribution, for a total of $8,000. These limits are the same for both account types and change periodically based on inflation.

You cannot contribute more than your earned income in a given year. If you earned $5,000 in 2024, you can contribute at most $5,000 to an IRA, whether Roth or traditional.

Conversions let you move money between types

You can convert money from a traditional IRA to a Roth IRA at any time, regardless of your income. When you do, you owe income tax on the amount converted in that tax year. If you convert $50,000, you will owe taxes on $50,000 of income.

People use conversions strategically when they are in a low-income year—perhaps they took early retirement or had a job loss—to move money into a Roth at a lower tax rate than they expect to pay later. You cannot undo a conversion after the tax year ends, so this is a decision to think through carefully.

Conversions are also useful if your income drops below the Roth limit after years of earning too much. You can convert old traditional IRA money into a Roth and lock in tax-free growth going forward.

Employer plans complicate the picture

If you have a 401(k), 403(b), or similar workplace plan, the traditional IRA deduction phases out at specific income levels. For 2024, if you are single and covered by a workplace plan, the deduction phases out between $77,000 and $87,000 of income. If you are married filing jointly, it phases out between $123,000 and $133,000.

This means that at higher incomes, you lose the main tax advantage of a traditional IRA. In this situation, a Roth IRA (if you are under the income limit) is often the better choice because you get tax-free growth without the phase-out problem.

Some employers offer both traditional and Roth 401(k) options. The same logic applies: if you are in a high tax bracket now and expect to be lower in retirement, traditional makes sense. If you expect taxes to be higher later, or if you want simplicity, Roth makes sense.

A simple framework for deciding

Start with your income. If it exceeds the Roth limit and you have a workplace retirement plan, a traditional IRA deduction may not be available to you anyway. In that case, a Roth IRA (if you can use it) or a backdoor Roth (if you cannot) is usually the move.

If your income is below the Roth limit and you do not have a workplace plan, you can deduct a traditional IRA contribution. Ask yourself: do I expect to earn more or less in retirement than I do now? If less, traditional. If more, Roth. If you are unsure, Roth is the safer choice because you lock in today's tax rate and never have to worry about future tax increases.

If you have a workplace plan and your income is low enough to deduct a traditional IRA, the traditional IRA is usually redundant—your 401(k) already gives you a tax deduction. A Roth IRA lets you diversify your tax situation and build a pool of tax-free retirement money alongside your traditional 401(k).

Frequently Asked Questions

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

Yes. Your total contribution across all IRAs cannot exceed the annual limit ($7,000 in 2024 for those under 50), but you can split that money between a Roth and a traditional IRA however you want. Many people use both to diversify their tax situation in retirement.

What happens to my Roth IRA if I die?

Your beneficiaries inherit the account tax-free. They must withdraw the money within ten years under current rules, but the withdrawals themselves are not taxable. This is one reason Roths are popular for people who want to leave money to heirs.

Can I withdraw my contributions from a Roth IRA early without penalty?

Yes. You can withdraw the money you contributed (not the earnings) at any time without penalty or taxes. Earnings are subject to a 10% penalty and taxes if you withdraw before age 59½, with some exceptions like first-time home purchases up to $10,000.

What if my income drops below the Roth limit after years of earning too much?

You can now contribute directly to a Roth IRA. You can also convert existing traditional IRA money to a Roth. The conversion triggers taxes on the amount converted, but it lets you move money into a tax-free account going forward.

Does my spouse's income affect my Roth IRA may be able to access?

Only if you file taxes jointly. The Roth income limit for married filing jointly is based on your combined income. If you are married filing separately, the limit is much lower and phases out quickly, so this filing status is rarely used for IRA purposes.