Roth IRA vs Traditional IRA: Which One Should You Choose?

Apr 20

Intro

When it comes to retirement accounts, two of the most popular are the Roth IRA and Traditional IRA. Both help you save for the future, but they work differently with taxes.

Here’s a simple breakdown to help you decide which one is right for you.

💵 What Is a Traditional IRA?

Contributions: Pre-tax → lower your taxable income now.
Growth: Tax-deferred.
Withdrawals: Taxed in retirement.

👉 I usually recommend a Traditional IRA if someone expects to be in a lower tax bracket in retirement. It’s a “pay taxes later” strategy.

🌱 What Is a Roth IRA?

Contributions: After-tax → no immediate tax break.
Growth: Tax-free.
Withdrawals: Tax-free in retirement.

👉 I personally love Roth IRAs for younger investors. You pay taxes now (while your income is lower) and enjoy tax-free withdrawals decades later.

📊 Side-by-Side Comparison

Feature Roth IRA Traditional IRA Tax break Later (withdrawals tax-free) Now (deduction on contributions) Best for Young earners, long growth horizon High earners, expect lower retirement taxes Withdrawal taxes $0 in retirement Taxed as income

✅ Contribution Limits (2025)

$7,000 per year (under 50).
$8,000 if 50+.
Income restrictions apply for Roth IRAs.

Final Thoughts

Both Roth and Traditional IRAs are great tools. If you’re young and expect to earn more later, Roth is usually the smarter choice. If you’re already in a high tax bracket, Traditional can save you money now.

👉 When in doubt, start with a Roth. It’s one of the most powerful tools for long-term wealth.

Vinh Tran