Roth IRA vs. Traditional IRA: A Guide to Determine the Right Fit for You

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Choosing between a Roth IRA and a Traditional IRA is a big decision—but it doesn’t have to be overwhelming. Both accounts offer valuable benefits, but the right one for you depends on your income, your tax situation, and how you envision your life in retirement.

In this guide, we’ll break it all down so you can make a confident choice. You’ll learn:

• The key differences between a Roth IRA and a Traditional IRA
• How each IRA type affects your taxes now and later
• Whether you're eligible to contribute to a Roth IRA based on income
• A clear breakdown of the pros and cons of each option
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‍Is a Traditional or Roth IRA Better?

Both Roth and Traditional IRAs come with solid tax perks—but the best fit depends on your current income, your future goals, and where you expect your tax rate to go from here. Here’s a simple framework to help guide your thinking:

• Go with a Traditional IRA if you want a tax break now and think you’ll be in a lower tax bracket in retirement.
• Choose a Roth IRA if you’d rather pay taxes upfront and enjoy tax-free income in retirement, especially if you expect your income to grow over time.

No matter which one you choose, you’re already ahead just by asking these questions. The goal is to match your IRA strategy to your life—not the other way around.

How Does a Traditional IRA Affect Taxes?

Traditional IRAs give you an upfront tax advantage—which can be a huge plus if you’re looking to lower your current tax bill. Here’s how it works:

• Your contributions may be tax-deductible, which can reduce your taxable income this year.
• Your money grows tax-deferred, meaning you won’t owe taxes on investment gains until you withdraw the money.
• When you retire and start taking distributions, you’ll pay taxes on those withdrawals as ordinary income.

This setup can be a smart move if you expect to be in a lower tax bracket later in life.

How Does a Roth IRA Affect Taxes?

Roth IRAs flip the script: you pay taxes now, and enjoy tax-free income later.

• You contribute after-tax dollars, so there’s no immediate tax deduction.
• Your money grows tax-free inside the account.
• As long as you meet the rules (age 59½ + 5 years), your withdrawals are 100% tax-free—even the earnings.

This option can be especially powerful if your income (and tax rate) is likely to go up in the future.

Income and Contribution Limits for a Traditional IRA

Good news: anyone with earned income can open a Traditional IRA. But whether or not you can deduct your contributions depends on your income and whether you’re covered by a retirement plan at work.

• No income limits for contributing
• Deductibility may be limited at higher incomes if you (or your spouse) have a workplace plan
• Your filing status and MAGI (Modified Adjusted Gross Income) determine your deduction
• If you don’t have a retirement plan at work, your contributions are usually fully deductible

Income and Contribution Limits for a Roth IRA

Roth IRAs have income limits that can reduce or even eliminate your ability to contribute directly.

• Contributions start phasing out at higher income levels
• For 2025:
  
  • Single filers: phase-out begins at $146,000
  • Married filing jointly: phase-out begins at $230,000
• If you earn too much, you might still qualify through a backdoor Roth strategy

Traditional IRA Withdrawal Rules

Withdrawals from a Traditional IRA come with more strings attached.

• Taking money out before age 59½ usually means paying income tax and a 10% penalty
• There are some exceptions (like for qualified education expenses or first-time home purchases)
• Required Minimum Distributions (RMDs) kick in at age 73, whether you need the money or not

Planning ahead can help you avoid penalties and make the most of your retirement dollars.

Roth IRA Withdrawal Rules

Roth IRAs offer more flexibility—especially when it comes to your original contributions.

• You can always withdraw your contributions tax and penalty-free
• Earnings can also be withdrawn tax-free if you’re 59½ or older and the account is at least five years old
• Early withdrawal of earnings might trigger taxes and penalties unless you qualify for an exception

This flexibility can be helpful for both long-term planning and unexpected life events.

Comparing Pros and Cons of Traditional IRA vs. Roth IRA

To help you weigh your options, here’s a breakdown of the key pros and cons of each IRA type.

What Are the Advantages of a Traditional IRA?

Traditional IRAs can be a great option if you're looking for an upfront tax benefit and don't mind paying taxes down the road. Here’s what makes them appealing:

• Potential for a tax deduction right now
• Available to anyone with earned income
• Can be beneficial if you’ll be in a lower tax bracket in retirement

This option can be especially helpful if you're trying to lower your current tax bill while still investing for the future.

What Are the Disadvantages of a Traditional IRA?

Of course, there are trade-offs. Before choosing a Traditional IRA, keep these drawbacks in mind:

• You’ll pay taxes on withdrawals in retirement
• RMDs are mandatory starting at age 73
• Early withdrawals may come with taxes and penalties

While a Traditional IRA can help you save on taxes today, it can also add complexity later—so it's worth weighing the long-term impact.

What Are the Advantages of a Roth IRA?

Roth IRAs are like the gift that keeps on giving—especially in retirement. Here's why many women+ love them:

• Tax-free income in retirement (yes, really!)
• No RMDs during your lifetime
• Contributions are accessible anytime without taxes or penalties

If you want flexibility and the power of compound growth without future tax surprises, Roth IRAs are a strong contender.

What Are the Disadvantages of a Roth IRA?

Roth IRAs aren’t perfect for everyone. Some downsides to be aware of:

• No tax deduction when you contribute
• Income limits apply
• You’re paying taxes upfront, which can feel like a hit to your cash flow

Still, for many people, the long-term benefits of a Roth IRA outweigh the short-term sting—especially if you're playing the long game with your money.

Roth IRA or Traditional IRA: The Right Choice for Your Financial Goals

At the end of the day, there’s no one-size-fits-all answer. Your best choice depends on your income, your tax situation, and how you want to manage your money in retirement.

Here are a few steps to figure it out:

• Compare your current tax rate to what you expect in retirement
• Check if you’re eligible for a Roth IRA
• Decide whether an upfront tax break or future tax-free income matters more to you

Still feeling unsure about which IRA fits you best?

That’s completely normal. We’re talking about how you want to live, retire, and use your money to create the future you care about. Whether you're trying to figure out how taxes will hit you now versus later, or you're wondering if a Roth is even an option based on your income, you don’t have to untangle it all alone.

👉 In our FREE masterclass, we break down the exact steps women+ are taking to go from “I think I’m doing this wrong” to confidently building wealth—IRAs included. 

👉 And if you want personalized next steps based on your income, goals, and current financial situation? Our quick financial planning quiz is a great place to start. This is your first step in understanding how your money can work for you—today, tomorrow, and long into the future. Take the financial planning quiz →

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FAQ: Traditional Roth vs. Roth IRA 

How much will a Roth IRA reduce my taxes?

It won’t—at least not right away. Since Roth contributions are made with after-tax dollars, there’s no current tax deduction. But in the long run, tax-free withdrawals in retirement can be a big win.

Can I roll my 401(k) into an IRA?

Yes. You can roll a 401(k) into a Traditional IRA without owing taxes. If you move it into a Roth IRA, you’ll owe taxes on any pre-tax contributions and earnings, but your future withdrawals will be tax-free.

Can you borrow from an IRA?

Nope. Unlike some 401(k) plans, IRAs don’t allow loans. Taking money out early can lead to taxes and penalties unless you qualify for an exception, like for education costs or a first home.

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