Same contribution limits, opposite tax treatment: Traditional deducts now and taxes later; Roth taxes now and never again. The choice is a bet on your future tax rate.
Side by side
| Traditional IRA | Roth IRA | |
|---|---|---|
| Tax break timing | Now (deductible contribution) | Later (tax-free withdrawals) |
| Withdrawals in retirement | Taxed as ordinary income | Tax-free (qualified) |
| Required minimum distributions | Yes, from age 73 | No, never (original owner) |
| Early access | Penalties on most withdrawals | Contributions withdrawable anytime |
| 2025 limit | $7,000 ($8,000 age 50+) | Same, with income phase-outs |
Strengths of each
Traditional IRA — strengths
- Lowers this year’s tax bill
- Better if retirement bracket will be lower
Roth IRA — strengths
- Tax-free compounding forever
- No RMDs; cleaner estate planning
- Better if your bracket will rise
Worked example
A 30-year-old contributing $7,000/year at 7% reaches ~$740,000 by 65. In a Roth it is all spendable; in a Traditional, a 22% retirement bracket leaves ~$577,000.
FAQ
Which wins mathematically?
If tax rates were identical now and in retirement, they tie. Roth wins when your future rate is higher; Traditional wins when it is lower.
Can I have both?
Yes — the limit is shared across both accounts, and splitting hedges the tax-rate bet.