Roth IRA vs. traditional IRA: Which is better for you?

Both individual retirement account (IRA) types — traditional and Roth — offer valuable retirement-planning benefits, but with different structures, income limits, and pros and cons.

How the traditional IRA works

A traditional IRA helps you save for retirement and might give you a tax break today. For example, if you contribute $4,000 to a traditional IRA this year, you may be able to deduct that amount on your tax return. This allows you to enjoy a nice break on your obligation to the IRS — subject to income limitations — while your investment continues to grow. Your money will grow tax-deferred until it’s withdrawn.

You can continue to contribute funds up to the annual contribution limit every year: $7,000 for those under 50 and an additional $1,000 (for a total of $8,000) for those over 50 in 2025.

You can start making penalty-free withdrawals at age 59 1/2, and you must begin making withdrawals by the age of 73 or you’ll pay stiff penalties to the IRS. Whenever you do start taking money out, though, you will pay income taxes on the deductible contributions you made and the investment gains.

How the Roth IRA works

A Roth IRA doesn’t provide any immediate tax benefits. So, if you decide to contribute $4,000 to a Roth IRA this year, it’s all after-tax money, meaning you won’t get to deduct the amount you save from your taxes. The benefits of a Roth shine when you begin to make withdrawals at age 59 ½ or later — all the compounded growth that has built up over the years is yours to keep tax-free.

Unlike a traditional IRA, there is no timestamp for when you must start making Roth withdrawals. You can wait longer to access the cash, or even leave money in the account forever so it passes to your heirs free of income taxes.

The annual contribution limits for a Roth IRA are the same as a traditional IRA: $7,000 for those under 50 and $8,000 for those over 50 in 2025.

What’s the difference between a traditional IRA and a Roth IRA?

The key distinctions between Roth IRAs and traditional IRAs involve two main considerations: taxes and timing.

Traditional IRAs offer the potential for tax deductibility in the present, while Roth IRAs are made with after-tax dollars (meaning there is no benefit in the here-and-now). Then, when you withdraw money after age 59 ½ in the future, traditional IRAs come with tax obligations on the money that hasn’t been taxed (deductible contributions and investment earnings), while Roth IRA withdrawals are tax-free.

Both of these IRAs are sound choices that will help you prepare for the future. It’s up to you when you reap the benefit: now or later.

How to check your IRA eligibility

If you or your spouse have earned income from a job, you’ve checked off the first box on IRA eligibility. Beyond that, there are some key factors that determine how much you’re allowed to contribute and what tax breaks you’re allowed to take. 

For example, if you file as single or head of household in 2025 and are covered by a retirement plan at work such as a 401(k), you need to make less than $79,000 (modified adjusted gross income) to enjoy the full deduction to a traditional IRA. If you’re married and earning $246,000 or more, you are unable to contribute to a Roth IRA.  

Three things to note as you consider your IRA options: 

1. Your income: Your modified adjusted gross income (MAGI) affects Roth and traditional IRA eligibility differently. 

For the Roth, income affects how much, if anything, you’re allowed to save in the account. Above a certain threshold, eligibility starts to phase out and eventually is completely eliminated.

In a traditional IRA, income determines how much of your contribution you’re allowed to deduct. However, even if you make too much to qualify for any deduction, you’re still allowed to contribute up to the maximum limit set by the IRS each year.

2. Your tax filing status: As noted in the tables above, income ranges for IRA contributions and deductions are determined by your tax filing status. Each year the IRS updates IRA contribution limits and deduction requirements, so be sure to check it out.

3. Whether you have access to a workplace retirement plan:  This factor applies solely to traditional IRA eligibility. If you or your spouse (if married and filing jointly) do not have access to a workplace-based retirement plan, you’re allowed to take the full deduction. If one or both of you are covered by a workplace plan (such as a 401(k)), deductibiliy will be based on your income.

If you’re concerned about income restrictions, you can consider setting up a backdoor Roth IRA, which involves some additional complications but can be worth it for high-income taxpayers.

How to choose the right IRA for you

Beyond IRA eligibility rules, here are some other considerations to help you decide whether a Roth or a traditional IRA is a better choice for you:

• Your current age: If you’re young early in your career arc, chances are you’ve got higher earning years — and tax obligations — ahead of you. While the traditional IRA’s upfront tax break is attractive, it’s less valuable for those in lower tax brackets. Choosing a Roth is a gift to your future higher-earning self in the form of tax-free withdrawals.
• Where you are in your career: Those at the peak of their earning years may find the traditional IRA’s upfront tax break more valuable now, especially if you expect to be in a lower bracket after you retire.
• Whether you have access to a Roth 401(k) at work:  Roth 401(k)s have become more common at workplaces. It’s especially valuable for those who are boxed out of Roth IRA eligibility due to income ineligibility. (No such restrictions apply to Roth 401(k)s.) Even if you can contribute to a Roth IRA, higher 401(k) contribution limits mean you can max out the Roth option at work and direct your other investment dollars into a traditional IRA.
• If you think you’ll need to access the money before retirement: Though dipping into money earmarked for retirement before age 59 ½ is strongly discouraged, sometimes it’s necessary. Roth IRA early withdrawal rules are less strict than those that apply to traditional IRAs. You’re allowed to withdraw contributions (not earnings) tax-free at any time and for any reason. Non-qualified withdrawals from a traditional IRA come with a 10 percent early-withdrawal penalty on top of any taxes you’ll owe.
• Your family history: If you have a history of longevity in your family and can envision a retirement that stretches well into your 80s or 90s, a Roth IRA’s lack of requirements for withdrawing money can be especially important, allowing your investments to continue to grow. A traditional IRA requires that you start taking money out each year starting at age 73.
• Your estate plans: The rules around inherited IRAs are complex, but in general, assets in a Roth pass tax-free to heirs, which makes it a good tool for legacy planning. 

A financial advisor can also help you decide whether a Roth or traditional IRA makes sense for you and your goals. Bankrate’s financial advisor matching tool can be a great way to find an advisor in your area.

Traditional IRA: Pros and cons

Pros

• You may be able to enjoy a tax deduction now: The biggest upside to contributing to a traditional IRA comes at tax time. Depending on your income, you may be able to deduct some or all of your contributions, which lowers your annual earnings and reduces your financial obligation to the government.
• You can delay your tax bill on your earnings: While your investments grow in your IRA, you won’t need to worry about paying taxes on them, at least for a while. 

Cons

• You’ll pay taxes down the road: The tax man will take his cut when you begin making withdrawals from your traditional IRA in retirement. At that time, you’ll owe taxes on any contributions that you were able to deduct from previous tax filings, along with investment earnings. 
• You’re required to withdraw the money: The IRS doesn’t allow savers to leave money in a traditional IRA forever. At age 73, you’re required to start taking some money out. The required minimum withdrawal amount is determined by an IRS formula that includes the current value of your account and your life expectancy.
• You’ll probably pay penalties for early access: If you withdraw money early from a traditional IRA, those funds will be considered in your annual taxable income, and you’ll likely pay an additional 10 percent penalty. There are some exceptions to the rule — using the funds to cover medical bills, unemployment hardship or a down payment on a first home, for example — but you would want to use these funds as a last resort anyway.

Roth IRA: Pros and cons

Pros

• Your earnings and withdrawals are completely tax-free: Since you fund a Roth IRA with pre-tax dollars — taking care of the tax bill on the front end — you not only get the benefit of tax-free earnings growth, but you’ll also owe no taxes on the money you withdraw.
• You’re not ever required to withdraw anything: There are no required minimum withdrawals on Roth IRAs at any age. Instead, if you wanted to, you could leave your money in the account longer, or even forever, and hand it down to an heir or a charity tax-free.
• You can withdraw contributions penalty-free at any time: Since you’ve already paid your taxes on your contributions, there is no early withdrawal penalty to withdraw what you’ve contributed with Roth IRAs.

Cons

• There are no upfront tax benefits: Since your contributions are made after taxes, you won’t feel any immediate tax gratification from funding a Roth IRA.
• The ease of early withdrawals can be tempting: It may be convenient to be able to dip into your retirement funds at any time without penalty, but it’s not a wise move. Withdrawing those contributions early is a one-way street, too. You’re not allowed to make any additional contributions in later years to make up for any money you take out.

Bottom line

As you compare Roth vs. traditional IRAs, keep in mind that you don’t have to make an either-or decision. Provided that your annual contributions stay within the government’s guardrails, you can put both of these investing vehicles to work and enjoy a balance of tax breaks between now and years into the future.

— Bankrate’s Dayana Yochim contributed to an update of this article.