- Choose a Roth IRA if you expect your tax rate in retirement to be higher than today, want tax-free qualified withdrawals, and dislike required minimum distributions (RMDs).
- Choose a Traditional IRA if you want a tax deduction now (lower taxable income today) and expect your tax rate in retirement to be lower.
- Often the best answer: both (split contributions) or start Traditional and convert to Roth later (backdoor or planned conversions).
Table of Contents
Step-by-step: How to decide (SEO-friendly structure)
Step 1 — Know the headline rules (numbers for 2025)
- Contribution limit (all IRAs combined): $7,000 for 2025; $8,000 if you’re age 50 or older. IRS+1
- Roth IRA income phase-outs (who can contribute directly) for 2025:
- Married filing jointly: $236,000–$246,000 MAGI phase-out.
- Single / Head of household: $150,000–$165,000 MAGI phase-out. IRS
- Traditional IRA deduction phase-outs (when you’re covered by a workplace plan) for 2025:
- Single/HOH: $79,000–$89,000 MAGI; Married filing jointly (if contributor is covered): $126,000–$146,000. IRS
- Required Minimum Distributions (RMDs): You generally must start RMDs from a Traditional IRA at age 73 (2025 rules); Roth IRAs do not require RMDs for the original owner while alive. IRS
(These are IRS figures for 2025 — always confirm numbers each tax year.)
Step 2 — Understand the tax flow (the core difference)
- Traditional IRA: contributions are pre-tax (often deductible) → contributions + earnings grow tax-deferred → withdrawals taxed as ordinary income in retirement.
- Roth IRA: contributions are after-tax (no deduction) → contributions + earnings grow tax-free → qualified withdrawals are tax-free (subject to the 5-year/age rules). IRS+1
Qualified Roth distribution note: to be tax-free the account must meet the 5-year rule and one of the qualifying events (age 59½, disability, or death, or first-time home rules). IRS
Step 3 — Match it to your situation (practical checklist)
Answer these in order:
- Do you need a tax break today?
- Yes → Traditional may help.
- No / you prefer tax certainty later → Roth may be better.
- What’s your current vs expected retirement tax rate?
- If you expect higher tax rate later → Roth.
- If lower → Traditional.
- Can you contribute directly to a Roth?
- Check 2025 MAGI phase-outs above. If over the limit, you can still use backdoor Roth (contribute to a Traditional nondeductible IRA then convert), but be careful about the pro-rata rule. (Conversion strategies exist but have tax consequences.) Investopedia
- Are you concerned about RMDs?
- If yes → Roth avoids RMDs while you’re alive. IRS
- Do you want flexibility for heirs?
- Roths often provide tax-free distributions to beneficiaries (but beneficiaries now face 10-year rules in many cases). See Pub. 590-B for details. IRS
Step 4 — Side factors that change the recommendation
- Young saver with many years to grow: Roth tends to shine (tax-free compounding).
- High earner close to retirement wanting immediate tax relief: Traditional deductible could be preferable.
- If you expect big income spikes now (e.g., stock sale): pay tax now (Roth) might be expensive; consider timing conversions across years.
- If you already have a large Traditional balance: conversions to Roth trigger tax on converted amount — plan across years to manage tax brackets.
Step 5 — Example scenarios (short)
- Age 28, early career, currently low tax bracket → Roth (pay low tax now; tax-free later).
- Age 58, high earner, retiring soon and expects lower retirement income → Traditional (deduction now; lower tax later).
- High earner blocked from direct Roth by income limits → use backdoor Roth carefully (tax planning required). Investopedia
Quick comparison table
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| Tax on contribution | Often deductible (pre-tax) | After-tax (no deduction) |
| Tax on qualified withdrawal | Taxed as ordinary income | Tax-free if qualified |
| Income limits to contribute | No limit to contribute; deduction phases out by income. | Direct contribution limited by MAGI (see 2025 ranges). IRS |
| RMDs | Yes (start at age 73). IRS | No for original owner while alive. IRS |
| Best if you expect | Lower tax rate in retirement | Higher tax rate in retirement |
| Conversions | Can convert to Roth (taxable) | Can’t convert from Roth to Traditional |
FAQ (SEO-friendly snippets)
Q: Can I have both types?
A: Yes — you can split money between both types to diversify tax exposure. You still must obey the combined annual contribution limit. IRS
Q: What is a backdoor Roth?
A: It’s contributing to a Traditional nondeductible IRA and then converting to a Roth. It’s legal but taxed on any pre-tax amounts and can trigger pro-rata complications. Consult a tax pro. Investopedia
Q: Are Roth withdrawals always penalty-free?
A: Qualified Roth withdrawals (5-year rule + age 59½ or other qualifying reasons) are tax- and penalty-free; non-qualified distributions can have taxes/penalties. IRS