The Core Difference: Tax Now vs. Tax Later
A Traditional IRA lets you deduct contributions now (if eligible), grow investments tax-deferred, and pay ordinary income tax on withdrawals in retirement. A Roth IRA uses after-tax dollars — no deduction now — but your investment grows completely tax-free and qualified withdrawals in retirement are 100% tax-free.
Roth vs. Traditional IRA comparison — 2025
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| Contributions | Pre-tax (if deductible) or after-tax | After-tax only |
| Tax deduction | Yes if eligible | Never |
| Investment growth | Tax-deferred | Tax-free |
| Withdrawals in retirement | Fully taxable as ordinary income | 100% tax-free (if qualified) |
| Required Minimum Distributions | Yes starting at age 73 | None during owner’s lifetime |
| Income limits for contribution | None for contribution (deductibility varies) | Phase-out $150K–$165K single 2025 |
| 2025 contribution limit | $7,000 under 50 / $8,000 age 50+ | $7,000 under 50 / $8,000 age 50+ |
2025 IRA Contribution Limits and Income Rules
In 2025 both Roth and Traditional IRAs have the same contribution limit: $7,000 per year (under age 50) or $8,000 per year (age 50+). Roth IRA contributions phase out between $150,000 and $165,000 MAGI for single filers and $236,000 to $246,000 for married filing jointly. Traditional IRA deductibility phases out at lower income thresholds if you have a workplace retirement plan.
If your income exceeds Roth IRA limits ($165K+ single, $246K+ married) you can still access Roth benefits through the backdoor Roth IRA: contribute to a non-deductible Traditional IRA, then immediately convert to Roth. Consult a tax advisor about the pro-rata rule before executing.
2025 Roth and Traditional IRA eligibility by income (single filer)
| Income (Single MAGI) | Roth Eligibility | Traditional Deductibility (with workplace plan) |
|---|---|---|
| Under $77,000 | Full Roth | Full deduction |
| $77,000–$87,000 | Full Roth | Partial deduction |
| $87,000–$150,000 | Full Roth | No deduction (but non-deductible allowed) |
| $150,000–$165,000 | Partial Roth | No deduction |
| Over $165,000 | No direct Roth (use backdoor) | No deduction |
The One Question That Determines Your Choice
Will you be in a higher or lower tax bracket in retirement than you are today? If higher tax rate in retirement: choose Roth (pay taxes at the lower current rate). If lower tax rate in retirement: choose Traditional (pay taxes at the lower future rate). If unsure: split contributions between both to hedge.
- Young earner in low bracket: Roth almost always wins — taxes are cheapest now
- Peak earner in high bracket: Traditional often wins — defer taxes to lower-rate retirement
- Uncertain future income: split contributions between both to hedge
- Retiree with high income: Roth conversions may be worth considering
- High earner over Roth limits: backdoor Roth or Traditional with non-deductible contribution
See Which IRA Saves You More
Enter your current income, expected retirement tax rate, and years to retirement to find your optimal choice.