Roth IRA vs Traditional IRA: Which One Should You Pick?

I spent way too long confused about this. Roth IRA, Traditional IRA, 401k… they all just sounded like alphabet soup to me. And every article explaining them seemed to assume I already knew things I definitely did not know.

So here\’s the actual difference, explained like you\’ve never thought about retirement accounts before. Because I hadn\’t either.

The one question that matters

Do you want to pay taxes now or later? That\’s really what this comes down to.

Traditional IRA: You put in money before taxes. It grows tax-free. But when you take it out in retirement, you pay taxes on it then.

Roth IRA: You put in money after you\’ve already paid taxes on it. It grows tax-free. And when you take it out in retirement, you pay zero additional taxes.

Same amount goes in. Same growth happens. Different timing on when you pay taxes.

Why I chose Roth

When I opened my first IRA at 29, I went with Roth. Here\’s my reasoning:

I was making about $52k at the time. That put me in a relatively low tax bracket. The logic is: pay taxes now while you\’re in a lower bracket, and avoid them later when (hopefully) you\’re making more and would be in a higher bracket.

Also, and I know this is pessimistic, but I kinda assume taxes will be higher in the future? Like, historically, tax rates have been much higher than they are now. Who knows what they\’ll be in 30+ years. With a Roth, I\’ve locked in today\’s rates.

The Vanguard IRA comparison has a good breakdown of when each makes more sense.

When Traditional might be better

If you\’re in a high tax bracket now and expect to be in a lower one during retirement, Traditional makes more sense. You get the tax deduction now when it saves you more money.

Also if your income is high enough that you can\’t contribute to a Roth directly (there are income limits), Traditional is your option. Though there\’s this thing called a \”backdoor Roth\” for high earners… but that\’s getting complicated.

Some people also like the immediate tax deduction. Contribute $6,000 to a Traditional IRA and your taxable income drops by $6,000 this year. That\’s a real benefit you see now vs decades from now.

The actual numbers (2025)

For 2025, the IRS contribution limit is $7,000 per year if you\’re under 50. If you\’re 50 or older, you can do $8,000.

That\’s for Traditional and Roth combined. Not each. You can split between them but the total can\’t exceed the limit.

For Roth, there are income limits. In 2025, you can contribute the full amount if you make under $150,000 (single) or $236,000 (married filing jointly). Above certain thresholds you get phased out.

What about my 401k?

Your 401k is separate from your IRA. You can max out both if you have the money. The 401k limit is much higher – $23,500 for 2025.

General advice I\’ve heard from everyone: at minimum, contribute enough to your 401k to get the full employer match. That\’s free money. Then fund your IRA. Then go back to the 401k if you have more to invest.

Why IRA before maxing the 401k? Usually more investment options and lower fees. But honestly, either is fine. The important thing is putting money somewhere.

Can\’t I just do both?

Yeah actually. Some people split their contributions. Or they have a Traditional 401k at work and a Roth IRA personally. This gives you \”tax diversification\” – some money taxed now, some taxed later.

I keep it simple. Roth IRA plus Traditional 401k (my employer doesn\’t offer Roth 401k). Works for me.

What if I\’m not sure?

If you\’re young and not in a high tax bracket, Roth is probably the safer bet. You have decades for it to grow tax-free, and you\’re paying taxes at today\’s (relatively low) rates.

If you\’re closer to retirement or in a high bracket, Traditional might make more sense. But honestly – either one is way better than not investing at all.

Don\’t let analysis paralysis stop you from starting. Pick one, contribute what you can, and you can always adjust later as your situation changes. If you\’re brand new to investing, read my guide to starting investing with almost no money first.

And if you\’re in your 20s specifically, check out investing in your 20s – the math on starting early is honestly wild.

Future you will be so glad you started.