Roth IRA vs Traditional IRA: Which Retirement Account Will Make You Richer?

Have you ever looked at your retirement options and felt like you were trying to figure out a language you didn’t know? It’s easy to get confused about the “Roth IRA vs. Traditional IRA” debate when you’re just trying to figure out how to save for retirement.

I’ve spent countless hours researching these retirement accounts to find the simplest way to explain the differences. Truth is, picking the wrong one could cost you thousands in unnecessary taxes. But don’t worry – I’m breaking it all down for you in plain English.

The Big Picture: Roth IRA vs Traditional IRA

First, let’s take a quick look at the main differences before we get into the specifics:

The Tax Difference: Pay Now or Pay Later

The BIGGEST difference between these two accounts comes down to when you pay taxes

Traditional IRA: The “Tax Me Later” Account

With a Traditional IRA:

• You can deduct contributions from your income taxes now (if you qualify)
• Your money grows tax-deferred (you don’t pay taxes on the earnings as they grow)
• You’ll pay ordinary income tax on both your contributions AND earnings when you withdraw in retirement

It’s like telling the IRS, “Let’s postpone this tax conversation until I’m retired.”

Roth IRA: The “Tax Me Now” Account

With a Roth IRA:

• You contribute money that’s already been taxed (no immediate tax break)
• Your money grows tax-free
• You pay ZERO taxes when you withdraw in retirement (as long as you follow the rules)

In essence, you’re telling the IRS, “Let’s settle our tax bill now so you don’t bother me when I retire.” “.

Contribution Limits: How Much Can You Stash Away?

Good news! The contribution limits are actually the same for both accounts in 2025

• Under age 50: $7,000 per year
• Age 50 or older: $8,000 per year (includes $1,000 “catch-up” contribution)

Remember: This limit applies to the TOTAL of all your IRA contributions. So if you have both types, the combined contribution can’t exceed these limits.

Income Limits: Can You Even Contribute?

This is where things get tricky: your income may make it impossible for you to use these accounts.

Roth IRA Income Limits for 2025

For single filers:

• Full contribution if your income is below $150,000
• Partial contribution if your income is between $150,000 and $165,000
• No contribution allowed if your income is $165,000 or more

For married filing jointly:

• Full contribution if your income is below $236,000
• Partial contribution if your income is between $236,000 and $246,000
• No contribution allowed if your income is $246,000 or more

Traditional IRA Income Situation

The good news? Anyone with earned income can contribute to a Traditional IRA regardless of how much they make!

BUT… your ability to deduct those contributions (which is the main benefit) might be limited if you or your spouse have a retirement plan at work.

For single filers with a workplace retirement plan:

• Full deduction if your income is $79,000 or less
• Partial deduction if your income is between $79,000 and $89,000
• No deduction if your income is $89,000 or more

For married filing jointly where one spouse has a workplace plan:

• Full deduction if your income is $126,000 or less
• Partial deduction if your income is between $126,000 and $146,000
• No deduction if your income is $146,000 or more

Withdrawal Rules: Getting Your Money Out

Let’s be honest – retirement accounts can feel like money jail sometimes. How do you actually get your money when you need it?

Roth IRA Withdrawal Rules

This is where Roth IRAs really shine:

• You can withdraw your CONTRIBUTIONS (not earnings) anytime, tax and penalty-free
• After age 59½ (and account open for at least 5 years), all withdrawals are completely tax-free
• No required minimum distributions (RMDs) during your lifetime

Traditional IRA Withdrawal Rules

Traditional IRAs are more strict:

• Withdrawals before age 59½ typically face a 10% penalty PLUS income tax
• After age 59½, withdrawals are penalty-free but still taxed as income
• Required minimum distributions (RMDs) must start at age 73

This means with a Traditional IRA, the government eventually forces you to take money out whether you want to or not!

Who Should Choose a Roth IRA?

A Roth IRA might be your best bet if:

• You’re young and expect to be in a higher tax bracket later in life
• You want flexibility to access contributions if needed
• You don’t want to deal with RMDs in retirement
• You want to leave tax-free money to your heirs
• You’re okay paying taxes now for tax-free growth later

As Schwab’s website puts it, Roth IRAs are “best suited for individuals expecting to be in a higher tax bracket at the time of withdrawals.”

Who Should Choose a Traditional IRA?

A Traditional IRA might make more sense if:

• You want the tax deduction NOW
• You expect to be in a lower tax bracket in retirement
• You’re close to retirement and the immediate tax savings is more valuable
• You’re currently in a high tax bracket

According to Schwab, Traditional IRAs are “best suited for individuals expecting to be in the same or lower tax bracket at the time of withdrawals.”

Can You Contribute to Both?

Absolutely! You can split your retirement contributions between both a Roth and Traditional IRA if you want. Just remember that your COMBINED contributions can’t exceed the annual limit ($7,000 or $8,000 if you’re 50+).

This strategy can give you tax diversity in retirement, which many financial advisors recommend.

Special Situations Worth Knowing

Spousal IRAs

If your spouse doesn’t work, they can still contribute to an IRA based on your income! Both Vanguard and Fidelity mention this option as a “spousal IRA.” The total contributed by both spouses can’t exceed your joint income or the IRS limits.

Minor IRAs

Did you know minors with earned income can have IRAs too? According to Vanguard, “a minor with earned income can own and contribute to an IRA. The IRA is controlled by a parent or another adult, referred to as the custodian, until the minor reaches a certain age, typically 18 or 21.”

This is an amazing way to give your kids a head start on retirement savings!

Roth Conversions

If you already have money in a Traditional IRA, you can convert it to a Roth IRA. You’ll have to pay income tax on the amount converted, but then it grows tax-free from that point forward.

Exceptions to Early Withdrawal Penalties

Both types of IRAs have some exceptions that let you avoid the 10% early withdrawal penalty:

• First-time home purchase (up to $10,000)
• College expenses
• Birth or adoption expenses (up to $5,000)
• Certain medical expenses
• If you become disabled
• If you take substantially equal periodic payments

My Personal Take

After researching this topic extensively, I’ve come to a pretty simple conclusion: if you can qualify for a Roth IRA, it’s often the better choice for most people. The flexibility of being able to access contributions if needed, the tax-free growth, and no RMDs make it an incredible retirement vehicle.

That said, I’m not a tax professional, and everyone’s situation is different. The best account for you depends on your unique financial situation, tax bracket, and retirement goals.

How to Get Started

Ready to open an IRA? The process is super simple with most major investment companies:

1. Choose between Roth and Traditional (or both!)
2. Open an account online (takes about 10 minutes)
3. Link your bank account
4. Make your first contribution
5. Choose investments (target date funds are great for beginners)

All three companies mentioned (Schwab, Vanguard, and Fidelity) offer both Roth and Traditional IRAs with similar features and low costs.

The Bottom Line

The difference between a Roth IRA and a Traditional IRA comes down to when you pay taxes – now or later. Your choice should align with your current financial situation and your expectations about your future tax rate.

Remember, the BEST retirement account is the one you actually use! Don’t get so caught up in the perfect choice that you delay starting to save. Even small, regular contributions can grow significantly over time thanks to compound interest.

Have you already opened an IRA? Which type did you choose and why? I’d love to hear about your experiences in the comments!

Note: Tax laws change frequently, and this information is current as of October 2025. Always consult with a qualified tax professional before making important financial decisions.