Overview
Roth IRA
A Roth Individual Retirement Account offers tax-free growth and tax-free withdrawals in retirement. Contributions are made with after-tax dollars, meaning you pay taxes on the money now but not when you withdraw it.
Try Calculator →Traditional IRA
A Traditional Individual Retirement Account offers tax-deductible contributions and tax-deferred growth. Contributions may be tax-deductible, and you pay taxes on withdrawals in retirement.
Try Calculator →Feature Comparison
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Tax Treatment on Contributions | Made with after-tax dollars (not tax-deductible) | Pre-tax dollars (often tax-deductible) |
| Tax Treatment on Withdrawals | Tax-free in retirement | Taxed as ordinary income |
| Required Minimum Distributions (RMDs) | None during your lifetime | Yes, starting at age 73 |
| Early Withdrawal Penalties | Contributions can be withdrawn anytime tax-free | 10% penalty (with exceptions) before age 59½ |
| Income Eligibility Limits | Income limits for direct contributions | No income limits |
| Age Contribution Limit | No age limit | Must be under 73 |
| Best For... | Those who expect to be in higher tax bracket in retirement | Those who expect to be in lower tax bracket in retirement |
Roth IRA
Pros
- Tax-free withdrawals in retirement
- No required minimum distributions (RMDs)
- No age limit for contributions
- Can withdraw contributions penalty-free anytime
- Beneficiaries receive tax-free distributions
- Flexible for early retirement planning
Cons
- Contributions are not tax-deductible
- Income limits for eligibility
- Higher current tax bill
- No immediate tax benefit
Traditional IRA
Pros
- Contributions may be tax-deductible
- Lowers current taxable income
- No income eligibility limits
- Immediate tax benefit
- Tax-deferred growth
- Available to all earners
Cons
- Taxed upon withdrawal in retirement
- RMDs required starting at age 73
- Must stop contributions at age 73
- 10% early withdrawal penalty (with exceptions)
- Less flexibility for heirs
Which Should You Choose?
Choose Roth IRA if...
Choose a Roth IRA if you expect your tax rate to be higher in retirement than it is now, you want to avoid required minimum distributions, you want to leave tax-free money to heirs, or you're a younger investor with a long time horizon for tax-free growth.
Choose Traditional IRA if...
Choose a Traditional IRA if you expect your tax rate to be lower in retirement, you need an immediate tax deduction to lower your current taxable income, you earn too much to contribute to a Roth IRA, or you're closer to retirement and want to maximize tax-deferred growth.