What Is the Difference Between a Roth IRA and a Traditional IRA?
Choosing between these two accounts is one of the most important financial decisions you can make. The difference can mean tens of thousands of dollars in retirement.
General information, not professional advice — see terms of use.
Traditional IRA:
- Contributions may be tax-deductible now
- Money grows tax-deferred
- You pay income tax on withdrawals in retirement
- Required Minimum Distributions start at age 73
- Best if you expect a lower tax bracket in retirement
Roth IRA:
- Contributions made with after-tax dollars (no deduction now)
- Money grows completely tax-free
- Withdrawals in retirement are 100% tax-free
- No required minimum distributions during your lifetime
- Best if you expect a higher tax bracket in retirement
2025–2026 contribution limits: $7,000/year (under 50), $8,000/year (50+). Roth income limits phase out for single filers above $146,000 and married filers above $230,000.
General recommendation: If you're under 40 or in a lower tax bracket, favor the Roth IRA. Tax-free compounding over decades is extremely powerful.
Follow-up questions
Can I contribute to both a Roth IRA and Traditional IRA in the same year?
Yes, but your combined contributions cannot exceed the annual limit ($7,000 in 2025, or $8,000 if 50+). You can split them however you like.
What is a backdoor Roth IRA?
If your income exceeds Roth IRA limits, make a non-deductible contribution to a Traditional IRA, then immediately convert it to a Roth. This is legal and widely used by high earners.
When can I withdraw from my IRA without penalty?
Without the 10% early withdrawal penalty once you reach age 59½. For a Roth, you can withdraw your contributions (not earnings) at any time since you already paid tax on them.
More finance answers
This page is general information, not professional advice, and it may not reflect the latest rules where you live. For your own situation, talk to a qualified adviser. Spotted an error? Email per@upperia.se and we will fix it.