When you’re planning for retirement, understanding your Individual Retirement Account (IRA) options is essential. Both Roth and Traditional IRAs offer unique benefits, but they also have distinct rules and tax treatments.
This guide will help you compare Roth and Traditional IRAs side by side, using clear tables and updated facts for 2025. So let’s dive in.
Both roth IRA and traditional IRA accounts are designed to help you save for retirement, but they function differently in important ways, especially when it comes to taxes, income limits for contributions, and when you can access your money. In the section below, we’ll explore key differences in detail.
Not everyone can contribute to a Roth IRA, and the deductibility of Traditional IRA contributions can be limited by income and workplace retirement plan participation. Here’s a breakdown of the latest eligibility and contribution rules for 2025:
| Feature | Roth IRA | Traditional IRA |
| Open an account | Open an account | |
| Age limit | None. You can contribute at any age. | None. You can contribute at any age (since SECURE Act). |
| Income limit | Yes. In 2025, full contribution is allowed if your MAGI < $150,000 (single) or < $236,000 (married filing jointly). Phase-out between $150,000–$165,000 (single) and $236,000–$246,000 (married). No contributions are allowed above $165,000 (single) or $246,000 (married). | No income limit for making a contribution. Deductibility may be limited if you or your spouse is covered by a workplace plan and your income is too high. |
| Contribution limit | $7,000 ($8,000 if age 50 or older) in 2025. | $7,000 ($8,000 if age 50 or older) in 2025. |
| Deadline | April 15 of the following year. | April 15 of the following year. |
| Spousal IRA | Yes. A nonworking spouse can contribute if filing jointly. | Yes. A nonworking spouse can contribute if filing jointly. |
Both accounts impose penalties and taxes for early withdrawals, but Roth IRAs are generally more flexible:
| Feature | Roth IRA | Traditional IRA |
| Open an account | Open an account | |
| Withdrawal penalty | No penalty or tax on contributions, but earnings may be penalized if withdrawn before age 59½ and not qualified | 10% penalty on withdrawals before age 59½ (with some exceptions) |
| Required minimum distributions (RMDs) | None during your lifetime. | Required starting at age 73 (for those born after 1950) |
| Qualified withdrawals | Age 59½ and account open for 5 years | N/A |
| Early withdrawal exceptions | First-time home purchase, education, disability, death. | First-time home purchase, education, disability, death. |
One of the key differentiators between Roth and Traditional IRAs is when the tax advantage applies:
| Feature | Roth IRA | Traditional IRA |
| Open an account | Open an account | |
| Contributions | After-tax (not deductible) | Pre-tax (may be deductible) |
| Contributions | After-tax (not deductible) | Pre-tax (may be deductible) |
| Tax on growth | Grow tax-free | Taxes are deferred |
| Tax on withdrawals | Tax-free for qualified withdrawals | Taxed as ordinary income |
| Deductibility | Not deductible | May be deductible, depending on income and workplace plan coverage |
| Feature | Roth IRA | Traditional IRA |
| Open an account | Open an account | |
| Portability & rollovers | You can convert funds from a Traditional IRA or employer plan to a Roth IRA. Taxes are paid on the converted amount in the year of conversion. | You can generally roll over funds from employer-sponsored plans (like a 401(k)) to a Traditional IRA without immediate tax consequences. |
| Catch-up contributions (Age 50+ in 2025) | Extra $1,000 allowed; total possible contribution: $8,000 | Extra $1,000 allowed; total possible contribution: $8,000 |
| Required minimum distributions (RMDs) | No RMDs during your lifetime—investments can keep growing tax-free. | Must start taking RMDs at age 73 (for those born after 1950); affects tax planning in retirement. |
| Can You Contribute if You Have a 401(k)? | Yes | Yes |
| Example | Scenario | Roth IRA Outcome | Traditional IRA Outcome |
| High earner | You’re single, earn $170,000 in 2025, and want to contribute to an IRA. | Not eligible for a direct Roth IRA contribution because MAGI exceeds the $165,000 limit. | Eligible to contribute, but tax deductibility may be limited if covered by a workplace plan. |
| Moderate earner | You’re married, filing jointly, and your combined MAGI is $230,000 in 2025. | Eligible for a full Roth IRA contribution since income is below the $236,000 phase-out threshold. | Eligible to contribute, but deductibility phases out starting at $123,000 (married filing jointly) in 2025. |
| Nonworking spouse | One spouse has no income, but the couple files jointly. | Non working spouse is eligible to contribute if the working spouse has enough earned income to cover both contributions. | Non working spouse is eligible to contribute if the working spouse has enough earned income to cover both contributions. |
Both Roth and Traditional IRAs offer valuable tax advantages and may play important roles in your retirement planning. The best choice depends on your current income, tax situation, retirement goals, and preferences for tax treatment now versus later. By understanding the differences and rules for each, you may make informed decisions as you work toward your retirement objectives.
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Yes, you can contribute to both in the same year, but your total contributions across all IRAs cannot exceed the annual limit ($7,000 or $8,000 if 50+ in 2025).
Excess contributions may be subject to a 6% penalty tax for each year the excess remains in your account. You can withdraw the excess (and any earnings) before your tax filing deadline to avoid the penalty.
