Traditional IRA vs Roth IRA

What these accounts have in common

Both Traditional and Roth IRAs are individual retirement accounts. They are designed to help people save and invest for retirement outside of an employer plan. The main difference between them is not how money is invested, but when taxes are paid.

How a Traditional IRA works

Contributions to a Traditional IRA are often made before taxes. This can reduce taxable income today. The money grows without being taxed each year, but withdrawals in retirement are generally taxed as income.

How a Roth IRA works

Contributions to a Roth IRA are made with money that has already been taxed. Because taxes are paid up front, qualified withdrawals later are not taxed.

Why tax timing matters

The key question is whether taxes are paid now or later. A Traditional IRA shifts taxes into the future. A Roth IRA settles taxes earlier and removes them from future withdrawals.

How this affects flexibility in retirement

Having money in different tax categories can create flexibility. It allows withdrawals to be spread across accounts with different tax treatment, which can help manage taxable income over time.

Common scenarios

Some people prefer a Traditional IRA when current taxes feel high. Others value the certainty of tax-free withdrawals from a Roth IRA. Many use both over time to balance tax timing and flexibility.