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Access is included with a NerdWallet account. REGISTER NOW for a NerdWallet account Sign in Sign up Join Investing Investing Roth IRA vs. Traditional IRA Advertiser disclosure YOU’RE OUR FIRST PRIORITY. EVERY TIME. NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free. So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners. ROTH IRA VS. TRADITIONAL IRA Traditional and Roth IRAs differ mainly in how and when your money is taxed. By Andrea Coombes Andrea Coombes Tax Specialist | Personal finance reporter for 16+ years, including work for the Wall Street Journal and MarketWatch. Andrea is a former NerdWallet authority on retirement and investing. Her stories have appeared in The Wall Street Journal, the SanFrancisco Chronicle, MarketWatch and elsewhere. She has been interviewed onTV and radio, including NPR’s “All Things Considered,” and quoted by national publications such as Fortune, Time and CNBC. Learn More and June Sham June Sham Lead Writer | Personal finance, retirement June Sham is a lead writer on NerdWallet’s investing and taxes team covering retirement and personal finance. She is a licensed insurance producer, and previously was an insurance writer for Bankrate specializing in home, auto and life insurance. She earned her Bachelor of Arts in creative writing at the University of California, Riverside. Learn More Updated Mar 15, 2024 Edited by Chris Hutchison Chris Hutchison Lead Assigning Editor Chris Hutchison helped build NerdWallet's content operation and has worked across banking, investing and taxes. He now leads a team exploring new markets. Before joining NerdWallet, he was an editor and programmer at ESPN and a copy editor at the San Jose Mercury News. Learn More Reviewed by Jody D’Agostini Jody D’Agostini Certified financial planner | financial planning, investing, family investing, retirement, wealth management Jody D’Agostini, financial advisor with Equitable Advisors, focuses her practice in the areas of comprehensive financial planning and wealth management for individuals and closely held businesses using a goal-based, holistic approach to their finances. She specializes in the areas of retirement and estate planning, having obtained a certificate in retirement planning from the Wharton School at the University of Pennsylvania. D’Agostini has been working with family law attorneys and mediators for over 15 years providing insight into the financial issues surrounding divorce to assist individuals in achieving a fair and equitable settlement, but most importantly to assist in making decisions that give them a clear view of their future and a path toward achieving their life goals. She helps them feel empowered to move forward towards a brighter future. Learn More -------------------------------------------------------------------------------- At NerdWallet, our content goes through a rigorous editorial review process. We have such confidence in our accurate and useful content that we let outside experts inspect our work. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money. -------------------------------------------------------------------------------- The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. Follow the writers You’re following Andrea Coombes and June Sham Visit your My NerdWallet Settings page to see all the writers you're following. MORE LIKE THISInvestingRetirement PlanningRoth and Traditional IRAs An IRA is one of the most common retirement savings accounts, and when opening one, you'll need to choose between two main types: Roth or traditional. THE DIFFERENCE BETWEEN ROTH AND TRADITIONAL IRAS The main difference between a Roth IRA and a traditional IRA is how and when you get a tax break. Contributions to traditional IRAs are tax-deductible, but withdrawals in retirement are taxable as income. In comparison, contributions to Roth IRAs are not tax-deductible, but the withdrawals in retirement are tax-free. And while you can have both types of IRAs, deciding to contribute to a traditional IRA vs. a Roth IRA might come down to other differences between the accounts. Advertisement Charles Schwab Interactive Brokers IBKR Lite J.P. Morgan Self-Directed Investing NerdWallet rating NerdWallet's ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities. 4.9 /5 NerdWallet rating NerdWallet's ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities. 5.0 /5 NerdWallet rating NerdWallet's ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities. 4.1 /5 Fees $0 per online equity trade Fees $0 per trade Fees $0 per trade Account minimum $0 Account minimum $0 Account minimum $0 Promotion None no promotion available at this time Promotion None no promotion available at this time Promotion Get up to $700 when you open and fund a J.P. Morgan Self-Directed Investing account with qualifying new money. Learn More Learn More Learn More ROTH VS. TRADITIONAL IRA Here are the other main differences between traditional and Roth IRAs: Roth IRA Traditional IRA Annual contribution limit $6,500 in 2023 ($7,500 if age 50 and older). For 2024, the limit is $7,000 ($8,000 if age 50 or older). The contribution limit for IRAs is a combined limit. Income Ability to contribute is phased out at higher incomes. Ability to deduct contributions can be phased out depending on income and access to an employer retirement plan. Tax benefits No immediate tax benefit for contributing; distributions in retirement are tax-free. If deductible, contributions reduce taxable income in the year they are made. Distributions in retirement are taxed as ordinary income. Early withdrawal options Roth IRAs allow contributions to be withdrawn at any time, but earnings distributed before age 59 1/2 may be subject to a 10% penalty and income taxes, unless you meet an exception. There is also a five-year holding rule for Roth IRA investment earnings. Unless you meet an exception, distributions from a traditional IRA before age 59 1/2 are subject to taxes and a 10% penalty. This applies to both contributions and investment earnings. Distributions in retirement No required minimum distributions. There are required minimum distributions once you reach a certain age. That age was previously 72; in 2023, it increased to 73 and in 2033, it will increase again to 75. ROTH VS. TRADITIONAL IRA: HOW TO CHOOSE Most advice on the Roth IRA vs. traditional IRA topic begins with a question: Do you think your tax rate will be higher or lower in the future? If you can answer that question definitively, you can theoretically choose the type of IRA that will give you the biggest tax savings: If you expect to be in a higher tax bracket in retirement, consider a Roth IRA and its delayed tax benefit. If you expect lower rates in retirement, consider a traditional IRA and its upfront tax advantage. But it's hard to anticipate what your tax rate will be in retirement, particularly if you're decades away from leaving the workforce. Fortunately, there are other ways to determine whether a Roth or traditional IRA is best for you. FIRST THINGS FIRST: CHECK YOUR IRA ELIGIBILITY The IRS rules on IRA eligibility may make the Roth vs. traditional decision for you. Your income will determine: * If you're eligible to contribute to a Roth. * How much of your contribution to a traditional IRA you can deduct from this year’s taxes. Traditional IRA deductibility is restricted only if you or your spouse has access to a workplace savings plan like a 401(k). Expand to see the latest IRA deduction limits TRADITIONAL IRA INCOME LIMITS FOR 2023 AND 2024 These income limits apply only if you (or your spouse) has a retirement plan at work. The limits are based on modified adjusted gross income, which is your adjusted gross income with some deductions added back in. Filing status 2023 traditional IRA income limit 2024 traditional IRA income limit Deduction limit Single or head of household (and covered by retirement plan at work) $73,000 or less. $77,000 or less. Full deduction. More than $73,000, but less than $83,000. More than $77,000, but less than $87,000. Partial deduction. $83,000 or more. $87,000 or more. No deduction. Married filing jointly (and covered by retirement plan at work) $116,000 or less. $123,000 or less. Full deduction. More than $116,000, but less than $136,000. More than $123,000, but less than $143,000. Partial deduction. $136,000 or more. $143,000 or more. No deduction. Married filing jointly (spouse covered by retirement plan at work) $218,000 or less. $230,000 or less. Full deduction. More than $218,000, but less than $228,000. More than $230,000, but less than $240,000. Partial deduction. $228,000 or more. $240,000 or more. No deduction. Married filing separately (you or spouse covered by retirement plan at work) Less than $10,000. Less than $10,000. Partial deduction. $10,000 or more. $10,000 or more. No deduction. Expand to see the latest Roth IRA income limits ROTH IRA INCOME LIMITS FOR 2023 AND 2024 These income limits are based on modified adjusted gross income, which is your adjusted gross income with some deductions added back in. Filing status 2023-2024 Income range Maximum annual contribution Single, head of household or married filing separately (if you didn't live with spouse during year) * Less than $138,000 in 2023. * Less than $146,000 in 2024. * $6,500 ($7,500 if 50 or older) in 2023. * $7,000 ($8,000 if 50 or older) in 2024. * $138,000 up to $153,000 in 2023. * $146,00 up to $161,000 in 2024. Contribution is reduced. * $153,000 or more in 2023. * $161,000 or more in 2024. No contribution allowed. Married filing jointly or qualifying widow(er) * Less than $218,000 in 2023. * Less than $230,000 in 2024. * $6,500 per person ($7,500 if 50 or older) in 2023. * $7,000 per person ($8,000 if 50 or older) in 2024. * $218,000 to $228,000 in 2023. * $230,000 to $240,000 in 2024. Contribution is reduced * $228,000 or more in 2023. * $240,000 or more in 2024. No contribution allowed Married filing separately (if you lived with spouse at any time during year) Less than $10,000 Contribution is reduced $10,000 or more No contribution allowed » Want a Roth but don’t qualify? Read how a backdoor Roth IRA might allow you to get one anyway. Worth noting: You can contribute to a traditional and a Roth IRA during the same year, as long as the total amount does not exceed the maximum allowable contribution limit: $7,000 in 2024 ($8,000 if age 50 or older). » Our picks for the best Roth IRAs and best traditional IRAs A smart view of your financial health Track your retirement savings balances in one place by linking your accounts. Sign Up WHY THE ROTH IRA WORKS FOR MANY SAVERS Here’s why it may be better to go with the Roth vs. a traditional IRA, for those who qualify. 1. Early withdrawal rules are much more flexible with a Roth. Although early withdrawals from retirement accounts are generally discouraged, if you do have to break the seal on the cookie jar, the Roth allows you to withdraw contributions — the money you put into the account, not earnings — at any time without having to pay income taxes. Note that if you do withdraw earnings early, that money may be taxed and an additional penalty may be applied. Dip into a traditional IRA before age 59 1/2 and the IRS isn’t as lenient: You’ll likely be socked with a hefty 10% early withdrawal penalty and owe taxes at your current income tax rate on the money you take out, even if you only remove your contributions. There are a few exceptions to this rule — see our page on traditional IRA withdrawal rules for details — but you’ll need to proceed much more carefully than you would with a Roth. 2. The Roth has fewer restrictions for retirees. Traditional IRAs require you to start taking required minimum distributions (RMDs) at certain ages. That age was previously 72; it increased to 73 in 2023 and will increase again to 75 in 2033. Unless you’re inheriting the Roth IRA, Roths have no required minimum distribution rules: You’re free to let your savings stay put in the account to continue to grow tax-free as long as you live. 3. Unless you’re an extremely disciplined saver, you’ll end up with more after-tax money in a Roth IRA. Yes, both types of IRAs offer a tax break. But there’s an oft-overlooked benefit to the way the Roth treats taxes: Because your tax break doesn’t arrive until retirement (via tax-free withdrawals), you won’t be tempted to spend it before then. With a traditional IRA, the tax benefit is delivered annually when you file your taxes, which makes it easy to fritter the money you saved on taxes away on any number of things. To come out even in terms of after-tax savings, you have to be disciplined enough to invest the traditional IRA tax savings you get every year back into your retirement savings. If that seems unlikely to happen, then you’d be better off saving in a Roth, where you’ll arrive at retirement with more after-tax savings. 4. Funding a Roth in conjunction with your 401(k) provides tax diversification. The classic 401(k) plan offered by most employers provides the same tax benefits as a traditional IRA. Although some workplaces offer a Roth 401(k) option for employees, if yours doesn’t, diverting some of those retirement savings dollars into a Roth IRA will give you more options for managing your tax burden in retirement. 5. Roth IRAs can be used for estate planning. Whatever money you don't use, you can pass to your beneficiaries tax-free in an inherited Roth IRA. MAKING THE CALL The sole advantage of a traditional IRA for most people is the upfront tax break. And that can be a huge advantage for high earners and a great incentive for people who might otherwise skip saving for retirement. In the short term, it effectively makes it “cheaper” to save for retirement, since the tax savings each year reduces the cost of your contributions. But you will eventually have to face that tax burden in retirement, which means unless you really need that upfront tax break, it’s hard to go wrong with a Roth IRA. About the authors Andrea Coombes Follow You’re following Andrea Coombes Visit your My NerdWallet Settings page to see all the writers you're following. new Follow for more nerdy know-how Keep up with your favorite financial topics on NerdWallet. Andrea Coombes is a former NerdWallet authority on retirement and investing. Her work has appeared in The Wall Street Journal and MarketWatch. Read more June Sham Follow You’re following June Sham Visit your My NerdWallet Settings page to see all the writers you're following. June Sham is a lead writer on NerdWallet's investing and taxes team covering retirement and personal finance. Read more On a similar note... OPEN AN IRA View NerdWallet's picks for the best IRAs. See the list -------------------------------------------------------------------------------- Retirement Calculator: Free Estimate of How Much You Need Traditional IRA Income and Contribution Limits How to Open an IRA in 4 Steps AD NerdWallet rating NerdWallet's ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities. Learn More on Robinhood's website Dive even deeper in Investing BEST IRA ACCOUNTS by Alana Benson, Arielle O'Shea In our analysis, the best IRA accounts offer a large selection of low-cost mutual funds and ETFs, helpful retirement planning tools, educational guidance and strong customer support. Read more BROKERAGE ACCOUNT: WHAT IT IS AND HOW TO OPEN ONE by Arielle O'Shea, Pamela de la Fuente Opening a brokerage account is the first step to buying stocks, bonds, mutual funds and other investments. Read more BEST ROBO-ADVISORS by Alana Benson The best robo-advisors charge low portfolio management fees and offer a range of services, including tax strategies, access to human advisors and a variety of portfolio options. Read more -------------------------------------------------------------------------------- Explore Investing Get more smart money moves – straight to your inbox Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money. 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