How to pick the right one

You have two options for individual retirement accounts (IRAs): traditional or Roth. Which one can help you secure the retirement you want? Find out now with this breakdown of how traditional and Roth IRAs differ. We’ll also cover the factors to consider when choosing between these retirement account types.

Learn more: What is an IRA and how does it work?

Traditional and Roth IRAs have powerful tax advantages that help you save more for retirement. Both offer tax-deferred earnings. This means you do not pay taxes annually on capital gains, dividends, and interest earned within the account.

Tax-deferred growth speeds up wealth production by sparing you an annual tax expense on the money earned. You can leave your funds invested and growing rather than taking withdrawals to pay Uncle Sam.

Traditional and Roth accounts also have other tax benefits:

1. Traditional IRAs offer tax-free contributions under certain conditions. Tax-free contributions reduce your taxable income and, in turn, your taxes. Saving is cheaper because lower taxes offset a portion of your contribution. You will pay taxes later when you withdraw funds from your account in retirement.

2. Roth IRA contributions are after-tax, meaning they are not deductible. They do not affect your current income or taxes in the current year. Qualified Roth withdrawals in retirement are tax-free.

The relevant differences between traditional and Roth IRAs go beyond the timing of certain tax benefits. They also have different restrictions on contributions and withdrawals. To evaluate which account type suits your situation better, consider your tax outlook, current income, 401(k) access, and liquidity needs.

The traditional IRA provides up-front tax benefits in the form of tax-free contributions. This is an advantage when you are in a higher tax bracket today versus your expected tax bracket in retirement. You can use a traditional IRA to forgo higher taxes today and pay lower taxes later.

With a Roth IRA, you pay taxes now on your contributions and enjoy tax-free withdrawals in retirement. Mathematically, this saves you money if you are in a higher tax bracket in your senior years. Tax-free income in retirement is also easier to budget and may contribute to lower Medicare premiums.

The IRS has eligibility requirements for Roth IRA contributions. The 2025 annual contribution limit is $7,000, or $8,000 if you are over 50. In 2026, you can contribute up to $7,500, or $8,600 after your 50th birthday.

These are not per-account limits. They apply to all IRAs in your name. You can split your contributions between a traditional and Roth account — but only to the extent you are eligible for Roth contributions.

Annual income limits govern eligibility for Roth IRA contributions. The IRS defines income here as modified adjusted gross income.

Rules for single taxpayers include:

1. Single taxpayers earning less than $153,000 annually can make a full Roth IRA contribution.

2. Single taxpayers earning $153,000 to $168,000 can make a partial Roth IRA contribution. Allowed amounts are calculated based on income and are less than the $7,500 limit or $8,600 for those over 50.

3. Single taxpayers earning $168,000 or more are not eligible to make Roth IRA contributions.

Roth IRA contribution rules for married taxpayers filing jointly include:

1. Couples earning less than $153,000 can make a full Roth IRA contribution for the year.

2. Couples earning $242,000 to $252,000 can make a partial Roth IRA contribution.

3. Couples earning more than $252,000 cannot make Roth IRA contributions.

Learn more: These are the traditional IRA and Roth IRA limits in 2026

Your income does not limit how much you can contribute to a traditional IRA. However, it may affect the deductibility of your IRA contributions if you also have access to a workplace 401(k). The IRS sets separate income limits for single taxpayers and those who are married and filing jointly. The rules for couples vary depending on whether the spouse making the contribution has a 401(k).

1. Singles earning $81,000 or less annually can fully deduct their traditional IRA contributions.

2. Singles earning $81,000 to $91,000 annually can partially deduct traditional IRA contributions.

3. Singles earning $91,000 or more annually cannot deduct traditional IRA contributions.

Learn more: What is a 401(k)? A guide to the rules and how it works.

The limits for married taxpayers filing jointly who also have a 401(k) are:

1. Couples earning $129,000 or less annually can fully deduct traditional IRA contributions.

2. Couples earning $129,000 to $149,000 annually can partially deduct traditional IRA contributions.

3. Couples earning $149,000 or more annually cannot deduct traditional IRA contributions.

Non-deductible traditional IRA contributions are less appealing than non-deductible Roth IRA contributions because traditional IRA withdrawals in retirement are taxable, while qualified Roth withdrawals are tax-free. But, if your income prohibits you from Roth contributions, non-deductible traditional contributions may still be worthwhile because of the tax-deferred growth.

Learn more: 401(k) vs. IRA: The differences and how to choose which is right for you

Generally, you should not withdraw funds from any IRA before age 59 ½. Doing so can prompt penalties and fees from the IRS. However, Roth IRAs have more relaxed withdrawal rules than traditional IRAs. For this reason, Roth IRAs are a better source of emergency liquidity than traditional IRAs.

What’s different about Roth accounts is that you can withdraw your contributions at any time without restriction or penalty. The IRS only restricts the withdrawal of earnings from the account. The distinction between the contributions and the earnings exists because their tax statuses differ. As noted, you make Roth contributions with after-tax funds, but the earnings are tax-deferred.

Traditional IRAs don’t have that distinction. Early withdrawal of contributions or earnings in a traditional account triggers taxes and penalties.

Some savers rely on their tax outlook to choose between traditional and Roth IRA contributions. If they expect a lower tax bracket in retirement, they’ll put more funds in a traditional IRA and vice versa. Those with an uncertain tax outlook may opt to diversify and contribute to both account types, assuming they are eligible. Still, others may prefer the convenience of tax-free retirement income from a Roth IRA — even if it means paying more taxes now.

How you choose to tackle this decision is up to you. More important is your commitment to regular, ongoing retirement contributions. Focus on establishing a sizable nest egg in whatever account makes sense now. Managing some tax consequences later is a good problem to have if it confirms you’ve saved enough for a comfortable retirement.

Learn more: Gold IRA: Benefits, risks, and how it differs from a traditional IRA

Tim Manni edited this article.