What's the difference between Roth and Traditional IRA?

Traditional IRA: contributions are tax-deductible (pre-tax), withdrawals taxed as ordinary income. Roth IRA: contributions are after-tax, withdrawals are tax-free. The choice depends on current vs expected retirement tax rates.

Should I choose Roth or Traditional?

If retirement tax rate > current → Roth; if retirement tax rate < current → Traditional; if uncertain → both (tax diversification). Young low-income earners often benefit from Roth, high-income earners from Traditional.

Roth vs Traditional IRA Calculator

Parameters

Annual Contribution ($)

Amount contributed to IRA each year

Current Marginal Tax Rate (%)

Your current highest federal tax bracket

Expected Retirement Tax Rate (%)

Estimated marginal tax rate in retirement

Years Until Retirement

Annual Return (%)

Expected annual investment return

Contribution Growth Rate (%)

Annual increase in contributions (raises/inflation)

About Roth vs Traditional

Roth and Traditional IRAs are the two most common individual retirement accounts in the US. Key difference: Roth = "pay tax now, tax-free later"; Traditional = "deduct now, pay tax later."

Selection Guide

•Retirement rate > current rate → Choose Roth
•Retirement rate < current rate → Choose Traditional
•Uncertain → Both (tax diversification)

Does Roth IRA have income limits?

Yes. In 2024, single filers with MAGI over $161,000 or married over $240,000 cannot contribute directly to Roth IRA, but can use the Backdoor Roth strategy.

Parameters

About Roth vs Traditional

Selection Guide

Does Roth IRA have income limits?

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