Roth vs. traditional IRAs: Which should I choose?

Roth vs. traditional IRAs: Which should I choose?


The individual retirement account (IRA) is a powerful tax savings tool that can be used alone or in combination with an employer-sponsored retirement plan. An IRA is a tax-advantaged retirement plan, meaning you’re awarded certain tax benefits for participating.

There are various types of IRAs; two common ones are Roth IRAs and traditional IRAs. They work similarly in terms of their self-directed nature and contribution limits but differ when it comes to their tax advantage. Keep reading to learn more about the Roth and traditional IRA and which may be best for you.

Understanding the Roth IRA

A Roth IRA is a tax-advantaged retirement account that allows workers to save for retirement outside of a workplace retirement plan. It’s a self-directed plan, meaning you can open your own Roth IRA directly with a provider and then direct your own investments.

The Roth IRA doesn’t have an upfront tax advantage like many other retirement accounts: You can’t deduct your contributions, and your tax liability isn’t reduced for the current year. However, you’ll then enjoy tax-free growth potential and won’t pay federal income taxes on any earnings in your account when you withdraw them at retirement if.  Your contributions are made with after-tax dollars so you can withdraw them at any time without a penalty.

Because of their deferred tax advantage, Roth IRAs may be best suited to workers early in their career or earning relatively low incomes compared to what they expect to earn later in life for whom the upfront tax advantage isn’t as important.

Read more: Roth 401(k) vs. Roth IRA: Key differences

Understanding the traditional IRA

A traditional IRA is another type of retirement account that allows a worker to save for retirement on their own. It works the same as the Roth IRA in its self-directed nature.

The traditional IRA has an upfront tax advantage. You can deduct your contributions, reducing your taxable income and, therefore, your current tax liability. The money in your account then potentially grows tax-free as long as it remains in your account. You’ll pay income taxes on your withdrawals during retirement.

Because of the upfront tax advantage, the traditional IRA is most beneficial for workers who want to reduce their tax burden in the current year. It might be right for you if you have a high income today and expect to be in a lower tax bracket during retirement.

Key similarities and differences between Roth and traditional IRAs

Roth IRAs and traditional IRAs have a lot in common, especially as it relates to their contribution limits, their investment options, and their withdrawal requirements (at least for certain dollars). However, they also have some important differences  that should be considered.

Tax treatment

The most important difference between the Roth and traditional IRA is their tax treatment. Traditional IRAs have an upfront tax advantage. You get a tax deduction for your contributions in the current year but will be taxed on your withdrawals during retirement.

A Roth IRA works the exact opposite. There’s no upfront tax advantage. However, you’ll enjoy tax-free investment growth potential and withdrawals of earnings will be tax-free, as long as you comply with the withdrawal rules. In this case, you’re delaying your tax benefit for retirement.  Contributions are made with after-tax dollars so they can be withdrawn at any time without penalty.


The most basic eligibility requirement for both traditional and Roth IRAs is that you must have earned income. However, both types of accounts also have some income limitations.

The income cap for a Roth IRA limits who can contribute. If your income exceeds the limits set by the IRS, you won’t be able to contribute to a Roth IRA at all. In the case of a traditional IRA, the income limits dictate who can deduct their contributions. If your income exceeds the limit, you may not be able to deduct part or all of your contributions.

Roth IRA income limits

As mentioned, there are income limits that restrict who may contribute to a Roth IRA. The table below shows the income limits for 2024.1

Filing status

Modified AGI

Allowed contribution

Married filing jointly, qualifying widower

Less than $230,000

Full contribution

Married filing jointly, qualifying widower

$230,000 to $240,000

Partial contribution

Married filing jointly, qualifying widower

$240,000 or more

No contribution

Married filing separately

Less than $10,000

Partial contribution

Married filing separately

$10,000 or more

No contribution

Single or head of household

Less than $146,000

Full contribution

Single or head of household

$146,000 to $161,000

Partial contribution

Single or head of household

$161,000 or more

No contribution

Traditional IRA income limits

The income limits on traditional IRAs don’t necessarily dictate who can contribute, but rather who can deduct their contributions. First, if you don’t have an employer-sponsored retirement plan, there are no income limits on tax deductions. However, if you do have a retirement plan through your workplace, you’ll be subject to the following income limits for deductions for 2024:2

Filing status

Modified AGI

Allowed deduction

Married filing jointly, qualifying widower

$123,000 or less

Full deduction

Married filing jointly, qualifying widower

$123,000 to $143,000

Partial deduction

Married filing jointly, qualifying widower

$143,000 or more

No deduction

Married filing separately

Less than $10,000

Partial deduction

Married filing separately

$10,000 or more

No deduction

Single or head of household

$77,000 or less

Full deduction

Single or head of household

$77,000 to $87,000

Partial deduction

Single or head of household

$87,000 or more

No deduction

Annual contribution limits

Each year, the IRS sets limits on the amount you can contribute to a traditional or Roth IRA. Both types of accounts are subject to the same contribution limits.

In 2024, you can contribute up to $7,000 — up from $6,500 in 2023 — or 100% of your earned income, whichever is less. In other words, if you only have $4,000 in income, you can only contribute up to $4,000.3

The IRS also allows for a catch-up contribution for workers 50 and older. The catch-up contribution in 2024 is $1,000, which brings the total contribution limit for those individuals to $8,000.

Read more: Roth IRA contribution limits 2023

It’s important to note that the contribution limit for Roth and traditional IRAs applies to both together. If you choose to put $7,000 into a Roth IRA, you couldn’t also put $7,000 into a traditional IRA (though you could split the contribution between the two).

Investment options

Your investment options may be limited by the brokerage firm or provider you choose.  Popular investment options include individual stocks and bonds, mutual funds, and exchange-traded funds.

Withdrawal rules

Both traditional and Roth IRAs are retirement accounts, and the funds are intended to remain in the account until at least age 59 ½. However, the two accounts have different withdrawal rules.

Traditional IRA

You can access the money in your traditional IRA at any time. No matter when you withdraw funds — whether it’s when you’re 35 or 65 — you’ll pay income taxes on your withdrawals. However, because a traditional IRA is intended to be used for retirement, distributions before age 59 ½ will also be subject to a 10% early withdrawal tax (unless an exception applies).4

Roth IRA

In the case of a Roth IRA, the withdrawal rules vary depending on whether we’re talking about your contributions or your earnings.

Because you’ve already paid income taxes on your contributions, you can withdraw them from the account at any time tax-free and penalty-free. For example, you could contribute $5,000 to your Roth IRA in 2023 and then withdraw it the following for any reason with no penalties.

The withdrawal rules for your Roth IRA earnings are similar to those of a traditional IRA. Any distributions made before age 59 ½ will be subject to both income taxes and the 10% early withdrawal penalty.

Roth IRA earnings are also subject to an additional requirement. To withdraw your earnings tax-free and penalty-free, you must wait at least five years  after the year you first contributed to the account.

Exceptions to early withdrawal penalties

Both traditional and Roth IRAs have a handful of exceptions to the 10% tax on early withdrawals. You won’t pay the 10% additional tax in the following situations:5

  • You’re the beneficiary of the account and the account owner passes away
  • You become totally and permanently disabled
  • You pay for qualified higher education expenses
  • You take a series of substantially equal payments
  • You are a qualified first-time homebuyer (up to $10,000 withdrawal)
  • There’s an IRA levy on your account
  • You pay for unreimbursed medical expenses at the deductible amount
  • You pay for health insurance premiums while unemployed
  • You’re a qualified military reservist called to active duty

Required minimum distributions (RMDs)

The IRS imposes required minimum distributions (RMDs) on pre-tax retirement accounts like the 401(k) and traditional IRA. Once you reach age 73 — or 72 for those who reached that age on or before December 31, 2022 — you’ll have to start taking distributions from your retirement account. You’ll also have to pay any income taxes associated with those distributions.6

Roth accounts aren’t subject to RMDs. Roth IRAs have never been subject to RMDs, and Roth 401(k) plans and 403(b) plans aren’t subject to RMDs starting in 2024.

Choosing the right IRA for you

Both Roth and traditional IRAs have some key benefits. For many people, either type of account could just as easily help them achieve their retirement goals. However, because of the different tax advantages, each type of account may be better suited to a certain type of investor.

When you’re choosing between a traditional and a Roth IRA, the most important question you can ask yourself is: When will a tax break be most valuable to me?

If you’re early in your career and have a relatively low tax rate anyway, then an additional tax break today might not be all that important. This is especially true if you’re in a low tax bracket today but expect to be in a much higher tax bracket in the future. In that case, a Roth IRA can be a powerful way to pay your taxes today at a low rate and enjoy tax-free withdrawals later on.

On the other hand, if you have a high income that puts you in a high tax bracket, you may appreciate the tax break today more, especially if you expect your tax rate to be lower during retirement, making the traditional IRA a more appealing option.

Another thing some people take into account when choosing between a traditional and a Roth IRA is what the overall tax rates will be in the future. Many people expect that tax rates will be higher in a few decades, so they choose the Roth IRA to enjoy today’s lower tax rates. Of course, there’s no guarantee tax rates will actually increase.

Other benefits of a Roth IRA that many investors appreciate are:

  • Early withdrawal flexibility: You can access your Roth IRA contributions at any time. You can use the funds for any purpose, including as a tax-free emergency fund in the case of a job loss or unplanned financial emergency.
  • No RMDs: Roth IRAs aren’t subject to RMDs. Not only does that mean you could defer those contributions as long as you want, but you could also  keep the money  invested so you can leave it to the next generation.
  • Tax-free withdrawals: You’ll be subject to income taxes on your Social Security, your pre-tax 401(k) withdrawals, and any other income you earn during retirement. A Roth IRA is an excellent opportunity to add tax-free income to the mix.

Read more: Should you choose Roth or traditional 401(k) contributions?

If you really aren’t sure which tax advantage is better for you, the one offered by the Roth IRA versus the traditional IRA, there are ways to run the numbers. Consider using an online calculator like the Empower Pre-tax vs. Roth Analyzer to help you decide which may be  most tax-efficient for you.

Also, remember that the IRA that’s best for your situation today may not be the one that’s best for you a decade from now. You may decide to use a Roth IRA early in your career while your income is low but then switch to a traditional IRA later on when you’re earning more.

Contributing to both Roth and traditional IRAs

If you’re stressed about choosing between the traditional and Roth IRA, especially if it's because you feel both would benefit you, we’ve got good news: you don’t have to choose. Many people choose to combine the tax benefits of both the traditional and Roth IRA.

Suppose you decide to split your contributions between both types of IRA. You contribute $3,500 to your traditional IRA, which allows you to reduce your taxable income by the same amount using a tax deduction. You also decide to contribute $3,500 to your Roth IRA. You’ll first pay taxes on those dollars, but then you can enjoy tax-free growth. And as an added bonus, you can access that $3,500 any time you want.

If you decide to use both IRAs in your retirement strategy, just make sure to pay attention to your contribution limits to ensure you aren’t over-contributing.

Roth IRA backdoor option

If you want to utilize a Roth IRA and your income is above the limits, you can still achieve the benefits using what’s called a backdoor Roth IRA.

To use a backdoor Roth IRA, you make non-deductible contributions to a traditional IRA. You then transfer or rollover those contributions from your traditional IRA to a Roth IRA. The contributions are reclassified. There’s no tax consequence of rolling over the money as long as you haven’t had any earnings on those dollars.

A backdoor Roth IRA can be especially beneficial for someone who doesn’t qualify to contribute to a Roth IRA directly and who isn’t eligible to deduct their traditional IRA contributions. Because you can’t deduct the contributions anyway, there’s no downside to converting those dollars to Roth.

Read more: What a backdoor Roth IRA is and how to use it

The bottom line

Both Roth and traditional IRAs are excellent ways to save for retirement, either alongside a workplace retirement plan or on their own. These accounts have some key similarities. Both are self-directed and have the same contribution limits. However, they have important tax differences and are best suited to different types of investors.

If you aren’t sure which type of IRA is best for your situation, consider speaking with a financial professional who can analyze your situation and give you personalized advice on the most valuable tax advantage at this point in your life.

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1 IRS. “Roth IRAs.” Accessed November 10, 2023.

2 IRS. “Traditional IRA.”

3 IRS. “401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000.”

4 IRS. “Publication 590-B (2022), Distributions from Individual Retirement Arrangements (IRAs).

5 IRS. “Retirement Topics — Exceptions to Tax on Early Distributions.”

6 IRS. “Retirement Topics — Required Minimum Distributions (RMDs).”


The Currency editors

Staff contributors

The CurrencyTM, a publication from Empower, covers the latest financial news and views shaping how we live, work, and play. We keep you current on ways to plan, save, and invest for life.

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