Traditional IRA v. Roth IRA: Which one is right for me?

By Financial Advisor Carrie McDonnell

Using an Individual Retirement Account (IRA) is a great way to save for retirement and also potentially save on taxes. Even if you have an employer sponsored plan through work, you can also have an IRA if you meet the eligibility requirements. Traditional IRAs and Roth IRAs are two types of accounts you can use to supplement your retirement savings. Below you will find a breakdown of the differences between the two types of accounts and their associated benefits so you can determine whether a Traditional IRA or Roth IRA is best suited for you and your goals

Overview: Traditional v. Roth IRA

• Traditional IRA: You make pre-tax contributions. If you expect to be in the same or lower tax bracket when you retire, a Traditional IRA may be the better choice. Contributions are immediately tax deductible¹, grow tax deferred and then withdrawals are taxed as income in retirement.
• Roth IRA: You make after tax contributions. If you expect to be in a higher tax bracket when you retire, a Roth IRA may be the better choice. Contributions are taxed now, grow tax free and then withdrawals are tax-free in retirement.

2024 Contributions: Traditional v. Roth

• Max Contributions for both Traditional and Roth IRA: $7,000 ($8,000 if you are over age 50)
• Traditional Contribution Eligibility: Anyone with earned income²
• Roth Contribution Eligibility: Those with earned income who fall below a certain income level based on their tax filing status³

Withdrawals: Traditional v. Roth

• Traditional IRA: Withdrawals can be taken without penalty after age 59.5; Required Minimum Distributions (RMDs) start at age 73⁴
• Roth IRA: Withdrawals can be taken without penalty after age 59.5 (provided the account is at least 5 years old); no mandatory distributions at retirement

Takeaways: Traditional v. Roth

• Traditional IRA - Take advantage of tax benefits today
• Roth IRA - Enjoy tax free withdrawals at retirement

Please reach out to learn more. We can help you determine whether a Traditional IRA or Roth IRA is right for you.

1. See Traditional IRA Deduction Limits here: https://www.irs.gov/retirement-plans/ira-deduction-limits
2. Use this calculator to determine how much you can contribute to your Roth or Traditional IRA: https://www.schwab.com/ira/ira-calculators/roth-vs-traditional
3. See income level requirements here: https://www.schwab.com/ira/roth-ira/contribution-limits#:~:text=If%20you%20file%20taxes%20as,%24228%2C000%20for%20tax%20year%202023
4. In 2033, RMD age will change to 75.