Roth IRA vs Traditional IRA: What's the Difference?
Both are U.S. retirement accounts with the same yearly contribution limit. A Roth is funded with after-tax money and grows tax-free; a Traditional IRA may give a tax deduction now, and withdrawals are taxed later.
| Roth IRA | Traditional IRA | |
|---|---|---|
| When you pay tax | Now (contributions are after-tax) | Later (withdrawals taxed as income) |
| Tax deduction today | No | Often, depending on income and workplace plan |
| Qualified withdrawals | Tax-free | Taxed as ordinary income |
| Required minimum distributions | None for the original owner | Yes, starting in your 70s |
| Income limits to contribute | Yes | No (but deduction may be limited) |
Bottom line
Roth tends to win if you expect a higher tax rate in retirement than today; Traditional tends to win if you expect a lower one. Check current IRS limits before contributing.
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