A Traditional IRA and a Roth IRA are both individual retirement accounts that help you save for the future, but they differ in how and when you pay taxes.
With a Traditional IRA, your contributions may be tax-deductible depending on your income and whether you’re covered by a workplace plan. Your money grows tax-deferred, meaning you won’t pay taxes on investment earnings until you withdraw the funds in retirement — at which point withdrawals are taxed as regular income. Traditional IRAs also come with required minimum distributions (RMDs), which begin at age 73.
A Roth IRA, on the other hand, is funded with after-tax dollars, so there’s no tax break up front. However, the money grows tax-free, and qualified withdrawals in retirement are completely tax-free as well. Roth IRAs don’t have RMDs, and you can withdraw your contributions (but not earnings) at any time without penalties or taxes. Keep in mind that Roth IRAs have income limits for eligibility, (single filers must have a Modified Adjusted Gross Income (MAGI) below $150,000, while married couples filing jointly need an MAGI below $236,000) which may restrict who can contribute.
Both types have annual contribution limits of $7000 in 2025, with an additional $1000 for those 50 and older. Both offer advantages — it just depends on your goals and tax situation.