Traditional vs. Roth: What Kind of IRA Should You Use?

Traditional IRAs and Roth IRAs both offer a tax-advantaged way to grow your money for retirement. The biggest difference between the two comes down to when you pay taxes on that money.

With a Roth IRA, you pay tax now. You contribute to a Roth IRA using aftertax money, and you can’t deduct the contribution from your taxable income. But when you do withdraw the money in retirement, it’s tax-free. However, not everyone is eligible to contribute because of income limits.

With a traditional IRA, you pay tax later. When you contribute to a traditional IRA, if your income is below certain limits, you may be eligible to deduct the contribution from your adjusted gross income, which means you won’t pay tax on it now. When you withdraw money in retirement, you will pay income taxes on the amount withdrawn.

How to Use the Tool to Get Information Tailored to Your Situation

You can customize the information below to find which kind of IRA may be suited to your financial situation and how much you can contribute annually. Plus, see how much the tax savings of an IRA could be worth compared with a taxable account.

Just follow these steps:

1. Click on the blue text to customize your information. The rest of the text will automatically adjust.
2. Review the full list of assumptions that power the text by clicking on Data and References.