Roth IRA Vs Traditional IRA: Key Differences & Similarities

This guide breaks down the key similarities and differences to help you decide how each type of IRA could fit into your retirement strategy.

Contribution Limits: Same

The annual contribution limit is the same for both Roth and Traditional IRAs in 2025.

✅You can contribute up to $7,000, or $8,000 if you’re age 50 or older.

✅Your total contributions cannot exceed your earned income for the year.

✏️ Hypothetical Example: If you earn $4,000 in 2025, your IRA contribution is limited to $4,000.

Contribution Deadline: Same

You can make 2025 IRA contributions until April 15, 2026—the standard tax-filing deadline. If the deadline falls on a weekend or holiday, the IRS may extend it.

Tax-Advantages: Different 

The biggest difference between Roth and Traditional IRAs is when and how you pay taxes.

With a Traditional IRA, contributions may be deductible. This can lower your taxable income in the year you contribute, but withdrawals in retirement are taxed as ordinary income.

With a Roth IRA, contributions are made with after-tax dollars. You pay taxes now, but qualified withdrawals in retirement are tax-free.

Put simply:

Traditional IRA = tax savings now

Roth IRA = tax savings later

✏️ Hypothetical Example: Let’s say you earn $50,000 in 2025 and contribute $7,000 to an IRA:

Age Requirements: Same

There’s no minimum age to open or contribute to a Roth or Traditional IRA, as long as the individual has earned income. For example, a 10 year old child with a paper route is eligible to contribute to a custodial Traditional or Roth IRA.

Eligibility Rules: Different

To contribute to either a Traditional or Roth IRA, you must have earned income. But each account has different eligibility requirements based on your income level and access to a workplace plan.

Traditional IRA Eligibility

There are no income limits to contribute to a Traditional IRA.

However, if you (or your spouse) are covered by a workplace retirement plan, your ability to deduct contributions on your tax return may be reduced or eliminated, depending on your modified adjusted gross income (MAGI).

For 2025, if you’re covered by a workplace plan:

✅ Single or head-of-household

✅ Married filing jointly, both spouses covered

✅ Married filing jointly, one spouse covered

These deduction rules only apply if you or your spouse participate in a retirement plan at work. If not, your contribution is generally fully deductible regardless of income.

📝 Note: You can calculate your MAGI using Worksheet 1-1 in IRS Publication 590-A.

Roth IRA Eligibility

Roth IRAs have income limits that determine whether you can contribute. If your income is too high, your contribution may be reduced or not allowed at all.

Roth IRA income limits for 2025:

✅ Single, head-of-household, or married filing separately (living apart)

✅ Married filing jointly

If you’re over the income limit, you can’t contribute directly to a Roth IRA. However, there are workarounds.

Roth Workaround: Backdoor Roth IRA

If your income is too high to contribute directly to a Roth IRA, you may consider a standard backdoor Roth strategy. This involves:

This method bypasses the Roth income limits but may have tax implications depending on your existing IRA balances.

📝 Note: This is different from a Mega Backdoor Roth, which involves after-tax contributions to a workplace plan like a Solo 401k and does not apply to regular IRAs.

Withdrawal Rules: Different

The withdrawal rules for Roth and Traditional IRAs differ in several key ways.

Traditional IRA Withdrawal Rules

✅ When you can withdraw without penalties:

You can take qualified withdrawals starting at age 59½.

✅ Taxes on withdrawals:

Since Traditional IRA contributions are typically made with pre-tax dollars, withdrawals are taxed as ordinary income in retirement.

✅ Penalties for early withdrawals:

Taking money out before age 59½ usually triggers a 10 percent early withdrawal penalty plus income taxes on the amount withdrawn.

Roth IRA Withdrawal Rules

✅ When you can withdraw without penalties:

You may withdraw your contributions at any time without taxes or penalties. However, to withdraw earnings without penalties, both of the following must be true:

✏️ Hypothetical Example: If you open a Roth IRA at age 57, you’ll need to wait until age 62 to withdraw earnings without penalty.

✅ Taxes on withdrawals:

Qualified withdrawals—including both contributions and earnings—are tax-free.

✅ Penalties for early withdrawals:

RMD Rules: Different

Required minimum distributions (RMDs) apply differently depending on the type of IRA.

✅ Traditional IRA: 

You must begin taking RMDs starting at age 73, even if you don’t need the money. Withdrawals are taxed as ordinary income.

✅ Roth IRA:

There are no RMDs during your lifetime, so your money can continue growing tax-free for as long as the account remains open.

📝 Note: You can keep contributing to both accounts past age 73 as long as you still have earned income.

To estimate your RMD amounts, use the IRS’s official RMD table.

Can You Contribute to Both a Traditional IRA and Roth IRA?

Yes, you can contribute to both accounts in the same year as long as your combined contributions do not exceed the annual limit.

✏️ Hypothetical Example: If you’re under 50, you could contribute $3,500 to a Traditional IRA and $3,500 to a Roth IRA in the same year.

Roth IRA Pros and Cons

Pros

✅ Withdrawals in retirement are completely tax-free.

✅ You can withdraw your contributions at any time without any penalties or taxes.

✅ You have no RMDs, which allows you to continue compounding your money tax-free as long as you’re alive.

Cons

❌ You don’t get a tax deduction on contributions. There are no immediate tax benefits when you contribute to a Roth IRA.

Traditional IRA Pros and Cons

Pros

✅ Contributions may be tax-deductible, lowering your taxable income for the year

✅ Taxes are delayed until retirement, when you may be in a lower tax bracket

Cons

❌ Withdrawals are taxed as regular income in retirement

❌ You can’t access your contributions early without taxes and penalties

❌ You must start taking RMDs at age 73, even if you don’t need the funds

Wrapping It Up

Both Traditional and Roth IRAs offer valuable opportunities to save for retirement. The better choice depends on your current tax situation, income level, and how you expect your finances to change over time.

If you prefer to lower your taxable income now, a Traditional IRA may be worth considering. If long-term tax-free growth is more important, a Roth IRA could make more sense. You may also be eligible to contribute to both—just keep your total annual contributions within the IRS limits.

Be sure to review the latest IRS rules each year and consider speaking with a tax professional if your income or situation is complex.

📌 For more retirement insights and contribution strategies, explore our other articles:

---

Disclaimer:

The Carry Learning Center is operated by The Vibes Company Inc. (“Vibes”) and contains generalized educational content about personal finance topics. While Vibes provides educational content and technology services, all investment advisory services discussed on this website are provided exclusively through its wholly-owned subsidiary, Carry Advisors LLC (“Carry Advisors”), an SEC registered investment adviser. The information contained on the Carry Learning Center should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment, accounting, tax or legal strategy. Vibes is not providing tax, legal, accounting, or investment advice. You should consult with qualified tax, legal, accounting, and investment professionals regarding your specific situation.

The accounts, strategies and/or investments discussed in this material may not be suitable for all investors. All investments involve the risk of loss, and past performance does not guarantee future results. Investment growth or profit is never a guarantee. All statements and opinions included on the Carry Learning Center are intended to be current as of the date of publication but are subject to change without notice.

To access investment advisory services through Carry Advisors, you must be a client of Vibes on an eligible membership plan. For more information about Carry Advisors’ investment advisory services, please see our Form [ADV Part 2A] (https://files.adviserinfo.sec.gov/IAPD/Content/Common/crd_iapd_Brochure.aspx?BRCHR_VRSN_ID=916200) brochure and [Form CRS] (https://reports.adviserinfo.sec.gov/crs/crs_323620.pdf) or through the SEC’s website at [www.adviserinfo.sec.gov] (http://www.adviserinfo.sec.gov/).