Traditional vs Roth IRA: Which Is Better for Your Taxes?
Both account types let you invest for retirement tax-advantaged. The difference is when you pay tax — and that single timing decision can swing your lifetime tax bill by tens of thousands.
The core difference
- Traditional IRA — contribute pre-tax, grow tax-deferred, pay ordinary income tax on withdrawals
- Roth IRA — contribute after-tax, grow tax-free, withdrawals are 100% tax-free in retirement
2024 contribution limits
| Age | Annual limit |
|---|---|
| Under 50 | $7,000 |
| 50+ | $8,000 (with catch-up) |
Limit is combined across both account types. You can split however you like.
2024 income limits
Roth IRA direct contribution phase-out:
- Single: $146,000 – $161,000 MAGI
- MFJ: $230,000 – $240,000 MAGI
Traditional IRA deduction phase-out (if you or spouse have a workplace plan):
- Single covered by plan: $77,000 – $87,000
- MFJ both covered: $123,000 – $143,000
The simple decision rule
- Expect a higher tax bracket in retirement → Roth
- Expect a lower tax bracket in retirement → Traditional
- Truly uncertain → split, or favor Roth for tax diversification
Roth advantages people undervalue
- No required minimum distributions (RMDs) ever during your lifetime
- Contributions (not earnings) can be withdrawn anytime, penalty-free
- Heirs receive tax-free dollars
- Hedge against future tax-rate increases
The backdoor Roth
If you're over the Roth income limit, contribute to a traditional IRA (nondeductible) and convert to Roth. Watch out for the pro-rata rule if you have other pre-tax IRA balances.
Don't forget the Saver's Credit
Lower-income contributors get a 10–50% nonrefundable credit on the first $2,000 contributed ($4,000 MFJ). Available through 2026 with phase-out starting around $38K single / $76K MFJ.
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