Roth IRA vs. Traditional IRA
There are 2 types of IRAs, and choosing between a Roth IRA and a traditional IRA often depends on your current financial situation and your anticipated tax bracket in retirement. Roth IRAs offer tax-free growth and tax-free withdrawals in retirement, making them an attractive option for those who expect to be in a higher tax bracket in the future. Traditional IRAs provide tax-deferred growth with pre-tax contributions, which can be beneficial for those seeking a tax break in the current tax year.
IRA Eligibility
Eligibility requirements for traditional and Roth IRAs differ primarily based on income levels and tax filing status. Traditional IRAs generally allow anyone with earned income to contribute, but tax deductibility is phased out at higher income levels if the contributor or their spouse has access to a workplace retirement plan. In contrast, Roth IRAs have income caps beyond which individuals cannot contribute at all. Determining eligibility is crucial before choosing which IRA to open because it ensures that contributors select the type that maximizes their tax advantages and aligns with their financial situation and retirement goals.
Are there age limits for IRA contributions?
You can contribute to a Roth IRA at any age.As a result of the changes made by the SECURE Act, since 2020, you can make contributions to a traditional IRA regardless of your age.
What are the income limits for IRA contributions?
In 2025, single filers must make less than $150,000 to contribute to a Roth IRA and married couples filing jointly must make less than $236,000.Anyone with earned income can contribute to a traditional IRA.
How does my income affect how much I can contribute?
The amount you can contribute to a Roth IRA:
- Can't exceed the amount of income you earned that year.
- Can't exceed the IRS-imposed limits (see below).
- Could be reduced—or even eliminated—based on your modified adjusted gross income (MAGI).
Get details on Roth IRA income limits
The amount you can contribute to a traditional IRA:
- Can't exceed the amount of income you earned that year.
- Can't exceed the IRS-imposed limits (see below).
There are no additional restrictions based on your income, however, income can impact whether or not you're able to deduct your contributions.
IRA Contribution Rules
Both Roth IRAs and traditional IRAs have contribution limits set by the IRS and allow contributions from minors and nonworking spouses under specific income rules. However, Roth IRA contributions are affected by the contributor's income level, potentially reducing or eliminating contribution eligibility based on their MAGI, whereas traditional IRAs don't have income-based restrictions. Additionally, traditional IRA contributions may be tax-deductible, offering immediate tax benefits, whereas Roth IRA contributions are not deductible but provide tax-free growth and withdrawals in retirement.
What are the contribution limits?
For the 2025 tax year:
- If you're under age 50, you can contribute up to $7,000.
- If you're age 50 or older, you can contribute up to $8,000.
Limits could be lower based on your income.
Get details on IRA contribution limits & deadlines
For the 2025 tax year:
- If you're under age 50, you can contribute up to $7,000.
- If you're age 50 or older, you can contribute up to $8,000.
Get details on IRA contribution limits & deadlines
Can I claim my contribution as a deduction on my tax return?
No. Contributions are not deductible.
Yes. You can generally claim your contributions as a tax deduction, reducing your taxable income for the year you make the contribution.
Deductibility may be limited if you or your spouse are covered by a retirement plan at work and your income exceeds certain levels.
What's the deadline for making contributions in a given year?
The Roth IRA contribution deadline is typically April 15 of the following year.The deadline is typically April 15 of the following year.
Can working spouses contribute to an IRA?
Minors and nonworking spouses may be able to contribute, but check the special income rules first.Minors and nonworking spouses may be able to contribute, but check the special income rules first.
When comparing Roth versus traditional IRA tax advantages, Roth IRAs offer tax-free growth and withdrawals, making them appealing if you anticipate being in a higher tax bracket during retirement. In contrast, traditional IRAs provide up-front tax relief through tax-deductible contributions, with taxes deferred until funds are withdrawn in retirement. This makes traditional IRAs beneficial for those seeking immediate tax deductions. Each type offers distinct tax benefits tailored to different financial situations and retirement planning strategies.
Are IRA contributions tax deductible?
You can't deduct your Roth IRA contribution.
You may be able to deduct some or all of your Traditional IRA contributions. The deductible amount could be reduced or eliminated if you or your spouse is already covered by a retirement plan at work.
IRA Withdrawal Rules
You'll never pay taxes on withdrawals of your Roth IRA contributions. And you won't pay taxes on withdrawals of your earnings as long as you take them after you've reached age 59½ and you've met the 5-year-holding-period requirement.
Get details on IRA withdrawals
You'll pay ordinary income tax on withdrawals of all traditional IRA earnings and on any contributions you originally deducted on your taxes.
Get details on IRA withdrawals
Is there a penalty for withdrawals taken before age 59½?
There are no penalties on withdrawals of Roth IRA contributions. But there's a 10% federal penalty tax on withdrawals of earnings.
With a traditional IRA, there's a 10% federal penalty tax on withdrawals of both contributions and earnings.
Will I have to take required minimum distributions (RMDs)?
Roth IRAs have no RMDs during your lifetime.
Due to changes to federal law that took effect on January 1, 2023, the age at which you must begin taking RMDs differs depending on when you were born. If you reached age 72 on or before December 31, 2022, you were already required to take your RMD and must continue satisfying that requirement. However, if you had not yet reached age 72 by December 31, 2022, you must take your first RMD from your traditional IRA by April 1 of the year after you reached age 73.
For each subsequent year, you'll need to take your annual RMD by December 31.
Is a Roth or Traditional IRA better for you?
Deciding whether a Roth or traditional IRA is better for you depends on several factors:
- Current and expected future income levels: If you expect to be in a higher tax bracket in the future, a Roth IRA might be more beneficial as it offers tax-free withdrawals.
- Age and retirement timeline: Younger investors might prefer a Roth IRA to benefit from tax-free growth over a longer period.
- Tax-filing status and income: This determines eligibility for deductions (traditional IRA) or contributions (Roth IRA).
- Retirement goals and financial needs: Consider when you plan to access the funds and whether you'll need the money before retirement.
