Traditional IRA vs. Roth IRA: the right choice depends on your bracket.
The classic question. The honest answer is bracket arithmetic: if your bracket today is lower than it will be in retirement, Roth wins; if higher, Traditional wins. Most savers benefit from holding both.
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| 2025 contribution limit | $7,000 (+$1,000 catch-up at 50) | $7,000 (+$1,000 catch-up at 50) |
| Tax treatment of contribution | May be deductible (subject to MAGI/coverage rules) | Never deductible (after-tax) |
| Tax treatment of withdrawal | Ordinary income | Tax-free (after age 59½ + 5-yr rule) |
| Income limit to contribute | None (deduction phases out) | $165k single / $246k MFJ MAGI (2025) |
| RMDs | Required at age 73/75 (SECURE 2.0) | None during owner's lifetime |
| Early withdrawal | Taxable + 10% penalty before 59½ | Contributions out anytime; earnings 10% penalty |
| Inheritance treatment | 10-yr rule, ordinary income to heirs | 10-yr rule, tax-free to heirs |
| Best fit (current high bracket) | Often better — defer at high rate | Less compelling unless rates rise |
| Best fit (low/early career bracket) | Less valuable | Often best — lock in low rate |
| Backdoor Roth eligible? | Yes (non-deductible contribution then convert) | N/A (already Roth) |
Common questions about this comparison
What's the 2025 contribution limit?
$7,000 for those under 50; $8,000 for those 50 and older. The same total applies across Traditional and Roth IRAs combined.
Can I contribute to both in the same year?
Yes — but the combined total cannot exceed your annual limit. Many savers split contributions or choose based on current-year tax bracket.
What if I earn too much for a Roth?
The 2025 Roth IRA phase-out for single filers is $150,000–$165,000 MAGI ($236,000–$246,000 for joint filers). Above that, consider a 'backdoor Roth' via after-tax Traditional IRA contribution and conversion.
Is the Traditional IRA deduction always available?
No. If you (or your spouse) are covered by a workplace retirement plan, the Traditional IRA deduction phases out at certain MAGI thresholds. Non-deductible Traditional contributions are still allowed and become the basis for backdoor Roth.
Which is better for heirs?
Roth — heirs still face the SECURE Act 10-year rule, but withdrawals are tax-free. Traditional IRA distributions to heirs are ordinary income in their bracket.