Guide1 min read
Roth vs. Traditional IRA: Which Fits You?
Pay tax now or later? How the two IRA types differ, and the question that usually decides it.
- By
- Lynktor Editorial Team
- Reviewed by
- Lynktor Research Desk
- Updated
The core difference: when you pay tax
- Traditional IRA: contributions may be tax-deductible now. Withdrawals in retirement are taxed as income.
- Roth IRA: contributions are made with after-tax money. Qualified withdrawals in retirement, including growth, are tax-free.
The deciding question
Do you expect your tax rate in retirement to be higher or lower than today?
- Expect a higher rate later, as many early-career savers do? A Roth often wins.
- Expect a lower rate later? A traditional IRA's deduction is worth more now.
You are choosing which tax rate to pay: today's or tomorrow's.
Other differences that matter
- Income limits: high earners may not be able to contribute directly to a Roth IRA, and traditional IRA deductions phase out for some people with workplace plans.
- Required minimum distributions: traditional IRAs require withdrawals starting in your 70s; Roth IRAs do not during the original owner's lifetime.
- Flexibility: Roth contributions (not earnings) can generally be withdrawn at any time without tax or penalty.
You do not have to choose only one
Many savers split contributions between both to diversify their future tax exposure. Contribution limits apply to your combined IRA total, and rules change, so check the current IRS figures each year.
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