Once you start planning for retirement, you’ll face a choice between a Roth IRA vs. traditional IRA. Both accounts help you save for retirement, but they work in different ways.  

For some people, the best option is the account that lowers taxes right now. Others want a tax-free income later when they stop working. Even if you’re unsure what your retirement will look like, learning the basics about these two accounts can help you make a confident choice.  

Let’s see how each account works and what sets them apart. 

What Is a Roth Individual Retirement Account (IRA)? 

A Roth IRA is a retirement account where you contribute money on which you’ve already paid taxes. The main advantage is that your money grows tax-free, and you can withdraw it tax-free later in retirement. In other words, you pay taxes now so you don’t have to pay them later. 

Here’s how a Roth IRA works step by step: 

• You contribute money from income you have earned. 
• Your savings grow over time. 
• When you retire, your withdrawals are tax-free as long as you follow the rules. 

Many financial experts recommend Roth IRAs for people who expect to be in a higher tax bracket during retirement.  

What Is a Traditional IRA? 

Traditional IRAs let you contribute money before you pay taxes on the funds. This tax deferral can help you lower taxable income for the year. Eventually, when you retire, you’ll pay taxes on the money you withdraw. In other words, you save on taxes now and pay them later. 

Here’s how a traditional IRA works step by step: 

• You contribute money from earned income that may qualify for a tax break. 
• Your savings grow tax-deferred over time. 
• Withdrawals in retirement are taxed as income. 

Traditional IRAs can be helpful if your current income is high and you want relief upfront. By lowering your tax bill, they also free up additional savings that you can invest—as long as you’re disciplined enough not to spend the funds on something else. 

Roth IRA vs. Traditional IRA: Pros and Cons 

Both accounts offer major benefits for anyone looking to build long-term savings, but one may be better for your unique needs. Let’s look at some of each account type’s most significant pros and cons. 

Roth IRA Pros 

• Tax-free withdrawals in retirement 
• Flexible access to contributions 
• No required withdrawals later in life 

Roth IRA Cons 

• No upfront tax break 
• Income limits may restrict eligibility 

Traditional IRA Pros 

• Possible tax deduction now 
• Unlocks additional savings potential 
• Helpful for people expecting lower income in retirement 

Traditional IRA Cons 

• Withdrawals are taxed in retirement 
• Need to make minimum required distributions starting later in life 

Which IRA Is Better for Your Income and Tax Bracket? 

The right choice between these two types of accounts often depends on your income and tax bracket, and how you expect both to change over time. That’s why it’s helpful to think about long-term goals before choosing an account. 

You may want to select a Roth IRA if you expect to have a higher income during retirement and would prefer tax-free withdrawals then. Many people find that the long-term Roth IRA tax benefits offer flexibility and a more predictable income in retirement. 

In contrast, a traditional IRA can make more sense if your income is relatively high now, and you expect it to decrease in retirement. In that case, it might make more sense to take the deduction while you’re in the higher tax bracket. 

Can You Have Both a Roth IRA and Traditional IRA? 

The Internal Revenue Service (IRS) lets you save in both accounts at the same time as long as you stay within the annual contribution limit. By spreading your retirement savings across both accounts, you might gain more control over how you handle taxes later in life.  

You can even adjust which account you fund based on your income and tax situation at the time. Many people use this approach when their earnings vary from year to year. 

Final Thoughts: Which IRA Is Right for You? 

The best IRA for retirement savings is the one that matches your unique goals and tax situation. Before you decide between a Roth IRA vs. traditional IRA, ask yourself questions like: 

• Do I want to pay taxes now or later? 
• Will my income likely go up over time? 
• Do I need flexible access to my contributions? 

If you’re not sure whether to use a Roth IRA, a traditional IRA, or a mix of both, consider working with a financial advisor. They can walk you through the pros and cons of each, answer any questions you have, and help you devise a personalized retirement plan. 

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