Roth IRA vs Traditional IRA: Which One Wins?

The core difference in one paragraph

Traditional IRAs give you a tax deduction now — your contribution lowers your taxable income this year, and you pay tax on withdrawals in retirement. Roth IRAs give you no deduction today, but every dollar (including all the growth) comes out tax-free after age 59½.

Side-by-side comparison

• Contribution limit (2025): both $7,000 ($8,000 if age 50+)
• Tax treatment: Traditional = deduct now, tax later. Roth = no deduction, no tax in retirement.
• Income limits: Traditional has no income cap to contribute, but high earners may lose the deduction. Roth phases out around $146K single / $230K married.
• Required minimum distributions: Traditional forces withdrawals starting at age 73. Roth has no RMDs ever.
• Early withdrawal: Roth contributions (not earnings) can be withdrawn anytime, tax-free, penalty-free. Traditional withdrawals before 59½ get a 10% penalty.

Worked example: $6,500/year for 30 years

Assume 7% growth and you're currently in the 24% tax bracket.

Traditional IRA

Contribute $6,500 pre-tax (so you save $1,560 in taxes today). After 30 years at 7%, the balance is about $657,000. If you withdraw in the 22% bracket in retirement, you net about $512,000 after tax.

Roth IRA

Contribute $6,500 after-tax (you pay $1,560 in taxes upfront). Same growth, same $657,000 balance — but you withdraw it all tax-free. Net: $657,000.

The Roth wins by $145,000 in this scenario because tax rates were the same in both periods AND you effectively contributed more (since you paid the tax separately). If you'd invested the $1,560 tax savings from the Traditional, the numbers get much closer.

When to pick which

Choose Roth if…

• You're early in your career and in the 10–22% bracket
• You expect higher taxes in retirement
• You want flexibility (tax-free withdrawals of contributions anytime)
• You want to avoid RMDs and pass tax-free money to heirs

Choose Traditional if…

• You're a high earner today in the 32–37% bracket
• You expect to retire in a lower bracket (most retirees do)
• You need the immediate tax deduction to lower current AGI
• Your employer doesn't offer a Roth 401(k)

Do both if you can

Tax diversification is powerful. Many investors max out a 401(k) (traditional) for the deduction, then contribute to a Roth IRA for tax-free retirement income. This gives you levers to pull in retirement to manage your tax bracket year by year.

Use the calculator