Roth vs Traditional IRA: Full Comparison
Both accounts offer tax advantages. The difference is when you pay the tax. Here is everything that matters for your decision.
Tax Treatment
You contribute after-tax dollars. Your money grows tax-free. Qualified withdrawals in retirement are 100% tax-free, including all the growth.
You contribute pre-tax dollars (if eligible for the deduction). Your money grows tax-deferred. Every dollar you withdraw in retirement is taxed as ordinary income.
Contribution Limits (2024)
$7,000/year. $8,000/year if you are 50 or older.
Same: $7,000/year. $8,000/year if you are 50 or older. Combined limit applies across all IRAs.
Income Eligibility
Single filers earning above $161K and married filers above $240K cannot contribute directly. The Backdoor Roth strategy gets around this.
Anyone with earned income can contribute. The deductibility phases out for those with workplace plans: $77K–$87K single, $123K–$143K married (2024).
Required Minimum Distributions (RMDs)
No RMDs during your lifetime. You decide when and how much to withdraw. Your heirs can continue to let the money grow for up to 10 more years.
RMDs start at age 73 (under current SECURE 2.0 rules). The IRS calculates a minimum you must withdraw each year based on your account balance and life expectancy tables. Failing to take RMDs triggers a 25% penalty on the amount you should have taken.
Early Withdrawal Flexibility
Your contributions (not earnings) can be withdrawn at any age, for any reason, with no taxes and no penalty. Earnings are subject to the 10% penalty before age 59.5.
All withdrawals before age 59.5 are subject to the 10% early withdrawal penalty plus ordinary income tax. Exceptions apply for first-time home purchase (up to $10K), higher education, disability, and substantially equal periodic payments (SEPP).
Impact on Heirs
Heirs inherit a Roth IRA tax-free. Under the 10-year rule (SECURE Act 2.0), non-spouse beneficiaries must withdraw the full amount within 10 years, but pay no income tax on distributions.
Heirs inherit the tax burden along with the account. Non-spouse beneficiaries must withdraw within 10 years, and every dollar is taxed as their ordinary income. A large Traditional IRA inherited by a high-earning child could be taxed at 37%.