Should You Choose a Roth IRA Over a Traditional IRA for Retirement Savings?

Key Points

• Roth IRAs allow your money to grow tax-free and aren't subject to required minimum distributions (RMDs).

• Traditional IRAs are preferable when tax rates are lower in retirement than they were during working years.

• The $23,760 Social Security bonus most retirees completely overlook ›

The best time to begin thinking about retirement is in the past. The second-best time to start is now.

There's good news, though. Americans have several great alternatives for building a solid retirement nest egg. The Individual Retirement Account (IRA) ranks among the most popular, but IRAs come in two flavors. Should you choose a Roth IRA over a traditional IRA for retirement savings?

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The case for Roth IRAs

The biggest advantage of Roth IRAs is that all your qualified withdrawals during retirement -- every single penny you contributed plus all of the money made from growth and dividends -- will be completely tax-free. Anyone who would love not to fork over money to Uncle Sam when they're retired will probably prefer a Roth IRA.

This could be especially appealing to younger savers. Incomes typically increase the older you get. That pushes your tax burden up, too. You may be in a higher tax bracket during retirement than you are now.

Another consideration is that U.S. national debt currently totals $37.5 trillion and counting. Interest expense already makes up 13% of federal spending. As the debt grows, the interest grows. Lawmakers could be forced to raise taxes significantly at some point to avoid massive spending cuts in critical government services. In this scenario, putting money in a Roth IRA might be preferable to using a traditional IRA.

If you want the flexibility to be able to tap into your retirement savings if needed, the Roth IRA is your best bet. You can withdraw any contributions at any time without paying taxes or penalties. Note, however, that any withdrawals of the earnings from those contributions before you reach age 59 1/2 will be subject to taxes and a 10% penalty.

Required minimum distributions (RMDs) are a complication with traditional IRAs. You'll have to begin withdrawing from a traditional IRA at age 73 or 75, depending on when you were born. RMDs don't apply to Roth IRAs, though. If you expect to live a long time and want your retirement savings to last a long time, too, a Roth IRA could be your best bet.

Roth IRAs also allow you to thumb your nose at Uncle Sam from the grave. Money in a Roth IRA that's passed down to your heirs typically isn't subject to inheritance or other taxes.

The case for traditional IRAs

Traditional IRAs offer several advantages, though. The most important one is that your contributions are tax-deductible. Saving for retirement using a traditional IRA can allow you to keep more of your money now than using a Roth IRA can. Even better, a traditional IRA can enable you to save more money for retirement, which can boost your earnings over time.

Sure, you will have to pay taxes on your contributions and any growth in the traditional IRA when you begin withdrawing later in life. However, many Americans are in a lower tax bracket when they retire than they are during their working years.

Also note that whether or not you can contribute to a Roth IRA and how much you can contribute depend on your income level. An individual tax filer with a modified adjusted gross income (MAGI) of $160,000 or more in 2025 or a married couple filing jointly with MAGI of $246,000 or more can't contribute at all to a Roth IRA. These limitations don't apply to traditional IRAs.

There is a catch for some, though. If you or your spouse is covered by a retirement plan at work, such as a 401(k), the amount of your contributions to a traditional IRA that are tax-deductible could be limited, depending on your MAGI.

Which is the better choice?

Is a Roth IRA a better choice than a traditional IRA or vice versa? The answer is...it depends.

Your income level is a key factor in determining which retirement plan is the better choice. So is your expected tax rate during retirement. It als matters how important flexibility related to withdrawing money early and RMDs is to you.

For many people, a Roth IRA will be preferable. But for many others, going with a traditional IRA will be the smarter decision.

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