Question 1

What is the key difference between Roth and Traditional IRA?

Accepted Answer

A Traditional IRA lets you contribute pre-tax dollars — you get a deduction now but pay income tax on withdrawals in retirement. A Roth IRA uses after-tax dollars — no deduction now, but qualified withdrawals in retirement are completely tax-free, including all the growth.

Question 2

When is a Roth IRA better than Traditional?

Accepted Answer

Roth is generally better if you expect your tax rate in retirement to be higher than your current rate. This often applies to younger workers early in their careers, or anyone who expects significant income growth. Traditional is better if you expect a lower tax rate in retirement — common for higher earners near peak income.

Question 3

What are the 2025 IRA contribution limits?

Accepted Answer

For 2025, you can contribute up to $7,000 per year to a Roth or Traditional IRA ($8,000 if you're age 50 or older). Roth contributions phase out at incomes above $150,000 (single) / $236,000 (MFJ). Traditional IRA deductibility phases out if you or your spouse have a workplace retirement plan.

Question 4

Can I contribute to both a Roth and Traditional IRA?

Accepted Answer

Yes, but the combined limit across all IRAs is $7,000 ($8,000 if 50+). You can split contributions however you like — for example, $3,500 Roth + $3,500 Traditional — as long as total contributions don't exceed the annual limit.

Question 5

What is the breakeven retirement tax rate?

Accepted Answer

The breakeven rate is the retirement tax rate at which both accounts produce the same after-tax result. If you contribute the same nominal amount to each, the breakeven equals your current marginal tax rate — because the only variable is whether tax is paid now (Roth) or later (Traditional). If your retirement rate is above the breakeven, Roth wins; below it, Traditional wins.

Question 6

Are there required minimum distributions (RMDs)?

Accepted Answer

Traditional IRAs require RMDs starting at age 73 (under SECURE 2.0). Roth IRAs have NO RMDs during the owner's lifetime — a major benefit for estate planning and flexible retirement income. This can be a deciding factor for high earners who may not need the income and want to leave funds to heirs.

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