The biggest question in retirement planning is: "Do I pay taxes now, or do I pay them later?" This is the core difference between Roth and Traditional IRAs.

Traditional IRA: Tax Me Later

With a Traditional IRA, you contribute pre-tax dollars. This lowers your taxable income today. However, when you withdraw money in retirement, you pay income tax on everything (contributions + earnings).

Best for: People who expect to be in a lower tax bracket in retirement.

Roth IRA: Tax Me Now

With a Roth IRA, you contribute post-tax dollars. You pay taxes today, but in retirement, all withdrawals are 100% tax-free.

Best for: Young people or those who expect to be in a higher tax bracket later.

Key Differences at a Glance

• Contribution Limit (2025): $7,000 for both ($8,000 if 50+).
• RMDs: Traditional IRAs require withdrawals at age 73. Roth IRAs do not.
• Early Withdrawal: Roth allows you to withdraw contributions anytime penalty-free. Traditional does not.