$7,000
2025 IRA contribution limit (under 50)
$8,000
2025 limit with catch-up contribution (50+)
$161,000
2025 Roth IRA phase-out starts (single)
59½
Earliest penalty-free withdrawal age
How the tax treatment differs
Traditional IRA contributions may be tax-deductible in the year you contribute (reducing today's taxable income), and the account grows tax-deferred. You pay ordinary income tax when you withdraw in retirement. Roth IRA contributions are made with after-tax dollars (no deduction), but qualified withdrawals in retirement are completely tax-free — including all the decades of growth. Required minimum distributions (RMDs) apply to Traditional IRAs starting at age 73; Roth IRAs have no RMDs during the owner's lifetime.
Key differences at a glance
- Tax deduction: Traditional may be deductible now; Roth is never deductible
- Withdrawals: Traditional taxed as ordinary income; Roth qualified withdrawals are tax-free
- Income limits: Roth contributions phase out at high incomes; Traditional deductibility phases out if you have a workplace plan
- RMDs: Required for Traditional at 73; not required for Roth
- Early withdrawal: Both penalize withdrawal under 59½, but Roth contributions (not earnings) can be withdrawn penalty-free anytime
How to use the IRA comparison calculator
- Enter your current age and expected retirement age
- Enter your current marginal tax rate
- Enter your expected tax rate in retirement
- Set your annual contribution and assumed return rate
- Review the projected after-tax retirement balance for each account type
- See the break-even tax rate — below it, Traditional wins; above it, Roth wins
💡 When in doubt, Roth
If you're early in your career with a low current tax rate, or if you're uncertain about future rates, Roth typically wins by default. Tax rates can only be adjusted by Congress; Roth gives you certainty about the tax treatment of your retirement withdrawals.
Common mistakes to avoid
- Earning too much for direct Roth contributions without exploring the backdoor Roth strategy
- Assuming Traditional always wins because of the current deduction — ignoring decades of tax-deferred growth that will be taxed at future rates
- Contributing to neither because the choice seems overwhelming — any IRA is better than no IRA
- Not taking RMDs from a Traditional IRA — the 25% penalty on missed RMDs is severe
- Forgetting that Roth accounts protect from future tax rate increases that are outside your control
Related calculators
The 401(k)/RRSP Planner works alongside an IRA to model total retirement savings. The Capital Gains Tax Calculator shows why sheltering investments in a Roth (where growth is tax-free) is especially powerful for high-growth assets. And the US Income Tax Calculator helps you identify your current marginal rate — the key input to the Roth vs. Traditional decision.