Traditional IRA vs Roth IRA: Breaking down the differences
Both can help you save on taxes when setting aside money for retirement, one now and the other later.
February 5, 2026
Traditional and Roth are two of the most popular types of IRAs. The biggest difference to consider between the two is whether you might want to take advantage of tax benefits now when you contribute, or later when you retire.
Traditional and Roth IRA basics
With traditional IRAs, contributions may be tax-deductible now (meaning you don’t pay income tax on the money you contribute) but your withdrawals are taxed in retirement. On the other hand, with Roth IRAs contributions are taxed now but in retirement you can withdraw your earnings tax free.
Contributions to a traditional IRA may not be tax deductible if you have a workplace retirement account, and there are income limits to be eligible to contribute to a Roth IRA. Also, Roth IRAs are less of a commitment because you can withdraw the amount you’ve put into them at any time with no penalty.
The full breakdown
The chart below details the differences between traditional and Roth IRAs:
| Traditional IRATraditional IRA | Roth IRARoth IRA | |
|---|---|---|
| GeneralGeneral | ||
| Main difference | Contributions may be tax deductible, reducing the income you're taxed on this year--taxes are differed until withdrawal | No tax benefits when you contribute, but withdraw money later tax-free (including no taxes on gains) |
| How it helps you save money | Allows you to direct pre-tax income toward investments than can grow tax-deferred | Allows you to direct post-tax income toward investments than can grow tax-free |
| When do you save money on taxes? | Now | Later |
| Compared to a brokerage account where you don't save now or later... | With a brokerage account you invest with after-tax dollars then also pay taxes on your gains | |
| Who it may be right for | People who don’t have workplace retirement accounts or expect be in a lower tax bracket when they withdraw | People who may want to withdraw early or expect to be in a higher tax bracket when they withdraw later |
| Examples | Gig workers or people who are self employed (with no workplace retirement account), people in their peak earning years | Young people investing for long-term goals (for many potential goals, like a home, you can still withdraw with no penalties before retirement) |
| Putting money in (contributions) | ||
| 2025 max contribution amount | $7,000 total for any IRAs (but if you're 50+ it's $8,000) | |
| 2025 contribution deadline | April 15, 2026 (Tax Day) | |
| 2026 max contribution amount & deadline | $7,500 total ($8,600 if you're 50+), Tax Day 2027 | |
| Pay income taxes when you contribute? | No - contributions may be tax deductible now, pay income taxes later when you withdraw | Yes - pay income taxes now on contributions, may withdraw later tax-free with no taxes on earnings |
| Eligibility to contribute for 2025 | Anyone can contribute, but to fully deduct it from your taxes you must either A) not have access to a workplace retirement savings program, or B) earn less than $79K if you're single, or less than $126K if you're married and filing jointly | To fully contribute your income must be less than $150K if you're single, or $236K if you're married and filing jointly |
| Eligibility to contribute for 2026 | For option B) earn less than $81K if you're single, or less than $129K if you're married and filing jointly | To fully contribute your income must be less than $153K if you're single, or $242K if you're married and filing jointly |
| Taking money out (distributions) | ||
| Before age 59½ | 10% penalty and income taxes on all money you withdraw | No taxes or penalties for withdrawing money you contributed, 10% penalty for withdrawing earnings |
| Exceptions to before age 59½ | May avoid penalties if withdrawals are used for first-time home purchase, birth or adoption, education, medical expenses | |
| After age 59½ | Pay income taxes on withdrawals | Withdraw contributions and earnings (if you've had the account 5+ years) with no taxes or penalties |
| Required minimum distributions (RMDs) | Must begin withdrawing after turning 73 | None, can pass on to your heirs |
Key considerations
When choosing between a traditional or Roth IRA, it’s worth thinking about whether you expect to be in a higher or lower tax bracket when you retire. That can help you determine if you’d rather save money on taxes now or in the future.
And once you open an IRA, don’t forget to invest it.