Should I Choose A Roth IRA Or Traditional IRA?

I’ll never forget sitting across from Sarah, a 28-year-old teacher who came to me completely overwhelmed. She’d been staring at her IRA application for two weeks. “Roth or Traditional?” she asked. “Everyone has a different opinion. I just want to make the right choice.”

Here’s what I told her that day, and what I’ve learned after helping hundreds of people navigate this exact decision: choosing between a Roth IRA or Traditional IRA isn’t about finding some perfect answer. It’s about understanding one simple thing.

When do you want to pay your taxes?

That’s really what this comes down to. Both accounts help you build wealth for retirement. Both offer tax advantages. The only question is timing. Let me walk you through exactly how to figure out which one makes sense for your situation.

Why This Decision Matters More Than You Think

Early in my career as a bank teller, I watched a client realize he’d been contributing to the wrong IRA type for nearly a decade. He was in the 12% tax bracket during those years. He chose a Traditional IRA because his coworker told him it was “the smart choice.” That advice cost him tens of thousands in future tax-free growth.

The IRA you choose today affects how much of your retirement savings you actually get to keep. Understanding the difference between saving and investing is the first step. But this next decision determines how the IRS treats your retirement account for the next 30, 40, or 50 years.

No pressure, right?

Actually, here’s the good news: there’s no permanently “wrong” choice. Both IRAs are excellent retirement vehicles. You can even switch strategies later. But understanding this now will help you optimize from day one.

Understanding The Core Difference: When You Pay Taxes

Every IRA gives you a tax break. The question is whether you want that break now or later.

Traditional IRA: Tax Break Now, Pay Later

With a Traditional IRA, you contribute pre-tax dollars. That means your contributions reduce your taxable income this year. If you earn $60,000 and contribute $7,000, you’re only taxed on $53,000.

That feels good in April when you owe less. But there’s a catch.

When you withdraw money in retirement, every dollar gets taxed as ordinary income. Your contributions? Taxed. All that beautiful growth over the decades? Taxed too.

Think of it like a deal with the IRS: “I’ll let your money grow untouched for now, but I’m taking my cut when you pull it out.”

Roth IRA: Pay Taxes Now, Tax-Free Forever

A Roth IRA flips the script. You contribute money you’ve already paid taxes on. No tax break this year.

But here’s where it gets interesting.

Qualified withdrawals in retirement are completely tax-free. Your contributions come out tax-free. All the growth from decades of compounding comes out tax-free. The IRS never touches it again.

I remember when this finally clicked for my niece. I was explaining compound interest using her lemonade stand money, and she asked, “So if I use the Roth one, I never have to share my lemons with the tax people again?” Exactly right.

For more ways to reduce your taxable income, Traditional IRAs are one powerful tool in your toolkit.

2025 Contribution Limits And Income Rules You Need To Know

Before you choose, you need to know the rules. Here’s what matters for 2025:

Now here’s where income limits come into play. And this is where many people get confused.

Roth IRA Income Limits (2025):

• Single filers: Full contribution up to $150,000. Phase-out between $150,000-$165,000. Above $165,000? No direct Roth contributions allowed.
• Married filing jointly: Full contribution up to $236,000. Phase-out between $236,000-$246,000.

Traditional IRA: Anyone with earned income can contribute. However, if you’re covered by a workplace retirement plan, your deduction phases out:

• Single filers: Full deduction up to $79,000. Phase-out between $79,000-$89,000.
• Married filing jointly: Full deduction up to $126,000. Phase-out between $126,000-$146,000.

You can verify these numbers directly with the IRS contribution limits page.

When A Roth IRA Is The Clear Winner

After years of running the numbers for clients, I’ve found clear patterns. A Roth IRA typically makes more sense when:

• You’re in the 12% tax bracket or lower. This is historically a low rate. Lock in that low tax cost now.
• You’re early in your career. Your income will likely rise, pushing you into higher brackets later.
• You expect higher taxes in retirement. Whether from rising tax rates or larger retirement income.
• You hate Required Minimum Distributions. Roth IRAs have no RMDs during your lifetime. Your money grows tax-free as long as you want.
• You’re thinking about your heirs. Passing on a tax-free inheritance is powerful generational wealth building.

For those focused on retiring early on a modest income, Roth IRAs offer incredible flexibility since you can withdraw contributions (not earnings) penalty-free anytime.

When A Traditional IRA Makes More Financial Sense

That said, Traditional IRAs aren’t outdated. They’re the better choice when:

• You’re in your peak earning years. High tax bracket now? The immediate deduction is more valuable.
• You need to lower this year’s taxes. Traditional contributions reduce your AGI, which can affect other tax benefits.
• You expect significantly lower income in retirement. If you’ll drop from the 32% bracket to the 12% bracket, Traditional wins.
• You’re not covered by a workplace plan. You get the full deduction regardless of income.

Check the IRS deduction limits to see exactly what you qualify for.

What About High Earners? The Backdoor Roth Strategy

Making too much for a direct Roth contribution? There’s a legal workaround called the “backdoor Roth IRA.”

Here’s how it works:

1. Contribute to a Traditional IRA (non-deductible, since you’re over income limits)
2. Convert that Traditional IRA to a Roth IRA
3. Pay taxes only on any gains between contribution and conversion

Sounds simple, but there’s a catch called the “pro-rata rule.” If you have existing pre-tax IRA balances, your conversion gets taxed proportionally. This can turn a clean backdoor strategy into a tax headache.

The strategy works best when you have zero existing Traditional IRA balances. If that’s not your situation, talk to a tax professional before attempting this.

As of 2025, the backdoor Roth remains legal. But Congress has proposed closing this loophole several times. If you’re considering it, sooner may be better than later.

Common Mistakes That Cost People Thousands

In my years of financial advising, I’ve seen the same mistakes over and over. Here’s what to avoid:

Mistake #2: Ignoring future tax brackets

Today’s tax bracket matters, but so does tomorrow’s. A 25-year-old in the 12% bracket today might retire in the 22% bracket. Think long-term.

Mistake #3: Analysis paralysis

This one hurts the most. I’ve watched people delay contributions for years because they couldn’t decide between Roth and Traditional. Any IRA beats no IRA. Every. Single. Time.

Mistake #4: Not investing after contributing

I can’t tell you how many people I’ve met who contributed to an IRA but left the money sitting in cash. An IRA is just an account. You still need to invest the money inside it.

Mistake #5: Ignoring tax diversification

Who says you have to pick just one? Having both Roth and Traditional accounts gives you flexibility in retirement to manage your tax burden year by year.

My Recommendation: How To Actually Decide

Let me give you the simple framework I use with clients:

If you’re still figuring out how much to save for retirement each month, start there. Even small contributions add up dramatically over decades.

And if you’re debating whether to pay off debt or invest first, that’s a valid question too. Generally, high-interest debt should go first. But don’t let perfect be the enemy of good.

The most important thing? Just start. Open an account today. You can always adjust your strategy next year.

Sarah, that teacher I mentioned at the beginning? She chose a Roth IRA. She was in the 12% bracket with decades of growth ahead. Last year, she sent me a message showing her account had crossed $50,000. “Thank you for making it simple,” she wrote.

That’s all I want for you too. Not perfection. Just progress.

For the official rules on both account types, the IRS rules on Traditional and Roth IRAs page has everything you need.

Now stop researching and start contributing. Future you will be grateful.