Traditional vs. Roth IRA: Which Is Right for You?

Share this article

What we’ll cover:

  • Both Traditional and Roth IRAs can help you save for retirement.
  • With a Traditional IRA, you contribute with pre-tax dollars and your money grows tax-deferred until retirement.
  • With a Roth IRA, you contribute with after-tax dollars, but withdrawals in retirement are tax-free once certain conditions are met.

Both Traditional and Roth IRAs could help you save money for the future while offering some potential tax advantages.

With IRAs, like all retirement accounts, the goal is the same: You put money into the account (contributions), that money is allowed to grow over time (your potential earnings), and then you take that money out in retirement (withdrawals).

When it comes to taxes, here’s the key difference between a Roth vs. Traditional IRA:

  • With a Roth IRA, you contribute money that you’ve already paid taxes on, and your withdrawals in retirement are tax-free once certain conditions are met.
  • With a Traditional IRA, your contributions are made pre-tax and grow tax-deferred (meaning you pay taxes later) until you withdraw your money in retirement. If you qualify, your contributions may be tax-deductible.

Here are other differences between a Traditional IRA and Roth IRA.

Roth IRA vs. Traditional IRA: What's the Difference Between Them?

Roth IRA

Traditional IRA


Your contributions are made with after-tax dollars, but your withdrawals in retirement are tax-free once certain conditions are met.

You may be able to deduct your contributions from your taxable income, depending on your circumstances, and your money is tax-deferred until you withdraw it in retirement.

Maximum annual contribution limits

Up to $6,500 for the 2023 tax year ($7,500 for those 50 and older).

Up to $7,000 for the 2024 tax year ($8,000 for those 50 and older).

Up to $6,500 for the 2023 tax year ($7,500 for those 50 and older).

Up to $7,000 for the 2024 tax year ($8,000 for those 50 and older).

Who can contribute?

You can contribute if you have taxable employment income and can meet certain criteria regarding your income and tax filing status.

Visit for more details on eligibility rules.

You can contribute if you have taxable employment income.


Contributions can be withdrawn tax-free and penalty-free at any time.

Withdrawals of earnings prior to the age of 59 ½ (or before the account is 5 years old) are generally subject to income tax unless it’s a qualified distribution and to a 10% early withdrawal penalty unless you qualify for an exception.

Withdrawals prior to the age of 59 ½ are generally subject to income tax and a 10% early withdrawal penalty unless you qualify for an exception.

After the age of 59 ½, withdrawals are subject to income tax, but there’s no early withdrawal penalty.

Required Minimum Distributions (RMDs)

No RMDs if you’re the original owner of the account.

Visit the IRS for more details.

RMDs are withdrawals that you must make from Traditional IRAs starting at age 73 (or age 72 if you turned 72 on or before December 31, 2022). RMDs are required by the IRS, and failure to take RMDs may result in penalties.

Check with the IRS to get the full details on the timing of your RMD obligations.

Tax deduction

Contributions are not tax-deductible.

Contributions may be tax-deductible if you meet certain eligibility rules.

If you or your spouse is covered by a workplace retirement plan (e.g., 401(k)), you may not be able to deduct contributions made to this type of IRA.

Visit for more information.

Reasons to consider a Roth IRA

Tax-free withdrawals in retirement

If you think you’ll be in a higher tax bracket when you retire, a Roth IRA might work in your favor because you’re paying taxes up front at a lower rate.

You might also just enjoy the thought of not paying taxes on your retirement income. Assuming you follow the rules associated with a Roth IRA, the money you withdraw is tax-free.

Tax diversification if you have other retirement accounts

If you contribute pre-tax earnings to other retirement plans, such as a 401(k), withdrawals from those accounts will generally be considered taxable income. If eligible, having a Roth IRA in the mix might be a good way to diversify your retirement income since you’ll be able to withdraw from that account without paying tax as long as certain conditions are met.

Flexible early withdrawal rules

Although you should proceed with caution if you’re considering an early withdrawal, accessing money in a Roth IRA ahead of retirement can be a little easier than it would be compared to a Traditional IRA. Contributions to your Roth IRA can be withdrawn at any time, for whatever reason, tax-and penalty-free.

That being said, you may have to pay taxes on the withdrawals of your earnings (the money you’ve made on your contributions). The IRS outlines what you need to know about early withdrawal penalties (including any exceptions) here, but two main factors to keep in mind are whether you are over or under age 59½, and if you’ve held the account for at least five years.

Reasons to consider a Traditional IRA

Potentially lower your taxes today

Depending on your circumstances, your contributions to a Traditional IRA may be tax-deductible, which effectively lowers your taxable income.

A lot of this depends on your annual income, tax filing status (single, married filing jointly, married filing separately), and whether or not you’re covered by a retirement plan at work. If you have questions about whether you can claim a deduction, consult a tax professional.

No income restrictions for contributing

You’re only allowed to contribute to a Roth IRA if you meet certain income rules. Visit for more information. But with a Traditional IRA, you can contribute up to the full amount permitted regardless of your income. However, keep in mind that if you make above a certain income, you may not qualify for a tax deduction on your contributions.

If you think you’ll be in a lower tax bracket in retirement

If you think your income will be lower in retirement than it is now, your effective tax rate may be lower as well. For instance, this could be true if you are in the peak of your career and expect a lower income in retirement. If that’s the case, the potential benefit of a tax deduction today may be worth more than tax-free withdrawals from a Roth IRA.

Traditional IRA vs. Roth IRA: Deciding what’s best for you

At the end of the day, choosing between a Roth IRA vs. Traditional IRA depends on your circumstances and goals (just remember to check your eligibility first). Once you have a solid grasp on the differences between the two, you can decide what’s best for you. If you have questions, it's a good idea to consult a financial advisor.

This article is for informational purposes only and shall not constitute an offer, solicitation, or recommendation to buy or sell securities, or of an account type, securities transaction, or investment strategy. This article was prepared by and approved by Marcus by Goldman Sachs®, but is not a description of any of the products or services offered by and does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendation in this article and it is not a substitute for individualized professional advice. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.  Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC are or any of their affiliates, none of which are a fiduciary with respect to any person or plan by reason of providing the material or content herein. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.

Investing involves risk, including the potential loss of money invested. Past performance does not guarantee future results. Neither asset diversification or investment in a continuous or periodic investment plan guarantees a profit or protects against a loss.