If you’ve been trying to figure out which retirement account is better for you: a Roth IRA or a traditional IRA, you’re not alone. Both are popular options, and both offer tax benefits. But the rules around how they work can feel unnecessarily complex. The truth is, the difference mostly comes down to how (and when) you want to deal with taxes. In this article, we’ll walk through how each IRA works, what makes them different, and how to decide which one makes more sense based on your income, age, and goals.
Let’s start with the basics: A Roth IRA is a type of individual retirement account where you contribute after-tax dollars. That means you pay taxes on the money now, but qualified withdrawals later on, including all your investment growth, are completely tax-free.
Roth IRAs were created to give people more flexibility and long-term tax advantages. They’re especially useful if you think your tax rate will be higher in the future than it is today.
A traditional IRA flips the tax timing. You may be able to deduct your contributions now, which lowers your taxable income today. But later — when you retire and start taking money out, those withdrawals will be taxed as ordinary income.
For many people, the appeal of a traditional IRA is immediate tax savings. But it comes with required minimum distributions (RMDs) once you reach a certain age, meaning you’ll be forced to start withdrawing whether you want to or not.
In 2025, the contribution limit for both traditional and Roth IRAs is $7,000 if you're under age 50. If you're 50 or older, you get an extra $1,000 catch-up contribution, bringing your total to $8,000.
These limits apply to your combined contributions not each account individually. You’ll also need to have at least that much in earned income (like wages or self-employment income) to qualify.
Let’s break down the tax impact:
If you expect to be in a lower tax bracket in retirement, a traditional IRA might make sense. But if you expect to be in a higher bracket, or want more control later, a Roth could offer better long-term benefits.
Anyone with earned income can contribute to a traditional IRA. But whether you can deduct your contribution depends on your income and whether you (or your spouse) have a retirement plan at work.
For Roth IRAs, it’s more straightforward but stricter. If you earn too much, you can’t contribute directly. That said, some people use a workaround called a backdoor Roth IRA, which involves contributing to a traditional IRA and then converting it. This strategy works, but it comes with tax traps, so talk to a financial advisor before trying it.
Traditional IRAs require minimum withdrawals once you reach age 73 (if born between 1951 and 1959) or age 75 (if born in 1960 or later). If you don’t take your RMD, the penalty can be steep.
Roth IRAs? No RMDs ever (as long as you're the original owner). That makes them attractive if you're not planning to rely heavily on those funds right away or want to pass assets to your heirs.
Here’s a quick cheat sheet:
Some people use both splitting contributions to create tax flexibility later in life. That’s called tax diversification, and it can give you more control over how much income you draw and what tax rate applies in retirement.
Roth and traditional IRAs both offer serious benefits. The difference mostly comes down to when you want to pay taxes now or later.
Before making your decision, look at your current income, projected retirement income, and whether your employer offers a match on a 401(k) (if so, take that first!). And as always, if you're unsure, talk with a licensed advisor or tax professional. Retirement planning is personal your IRA should be too.
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Women Financial Power® is an independent insurance and retirement planning firm. Neither Women Financial Power, nor any financial professionals acting on its behalf, should be viewed as providing legal or tax advice.
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