Roth vs Traditional IRA

Same contribution, same return, same time horizon — but Roth pays tax now and Traditional pays tax later. The answer depends entirely on your tax bracket now vs in retirement.

Inputs

$
2025 IRA limit: $7,000 ($8,000 if 50+).
%
%
Your marginal bracket.
%
Your expected bracket then.

Roth IRA

Effective contribution (after tax now)

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Balance at retirement (tax-free!)

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Traditional IRA

Effective contribution (deductible now)

—

After-tax balance at retirement

—

Roth (tax-free balance) Traditional (after-tax balance at retirement)

The core idea

Both accounts grow tax-free. The only difference is when you pay income tax on the money:

  • Roth IRA — contributions are made with after-tax dollars. Withdrawals in retirement are 100% tax-free.
  • Traditional IRA — contributions are deductible now (lowering this year's tax). Withdrawals in retirement are taxed as ordinary income.

If the tax rates are the same now and in retirement, the two accounts produce mathematically identical outcomes. The choice only matters when the rates differ.

Rule of thumb

  • Expect your retirement tax bracket to be higher than today → Roth wins (pay the lower rate now).
  • Expect your retirement tax bracket to be lower than today → Traditional wins (defer to the lower rate later).
  • Don't know → many planners suggest splitting (some in each) for tax-diversification.

Other considerations

  • Income limits — Roth IRA contributions phase out at $146k–$161k (single, 2025) and $230k–$240k (MFJ). High earners use the "backdoor Roth" workaround.
  • RMDs — Traditional IRAs force withdrawals starting at age 73. Roth IRAs don't (during the original owner's lifetime).
  • Estate planning — Roth IRAs pass to heirs tax-free; Traditional IRA inheritances are taxable.