“Should I open a Roth IRA or a traditional IRA?”
I hear this question from clients all the time. And for good reason. The difference between a Roth IRA and a traditional IRA affects your retirement savings and your taxes, both now and decades from now.
There’s no universal right answer. The best choice depends on your current income, career stage, life stage, and what you expect retirement to look like. Someone in their 20s just starting their career faces a different calculation than someone in their 50s during their peak earning years. And what made sense for you five years ago might not be the best move today.
This isn’t about picking a winner. It’s about understanding how each account works and choosing what fits your situation. At Allegiant Wealth Strategies, we help clients think through that decision based on their income, goals, and long-term plans.
Let’s start with how each type of IRA works. If you’d like a deeper look at contribution limits and income thresholds, you can review our full guide to IRA rules for 2025 and 2026.
The core difference between a Roth IRA and a traditional IRA
How traditional IRAs work
When you contribute to a traditional IRA, you’re typically using pre-tax dollars. Your traditional IRA contribution may be tax-deductible, which means you can subtract it from your taxable income for the year and pay less in taxes now.
Your money grows tax-deferred inside the account. You won’t pay taxes on the gains as your investments grow over the years. But when you start taking money out in retirement, those withdrawals are taxed as ordinary income.
Traditional IRAs also come with Required Minimum Distributions, or RMDs. Once you reach age 73, the IRS requires you to start withdrawing a minimum amount each year, whether you need the money or not. Those withdrawals are taxable.
How Roth IRAs work
Roth IRAs flip the tax equation. You contribute after-tax dollars, which means you don’t get a tax deduction when you put money in. You’re paying taxes on that income now, at your current tax rate.
The trade-off comes later. After age 59½, you can withdraw your funds without taxes or penalties, as long as the account has been open for at least five years. So, when you retire and start taking money out, those withdrawals are completely tax-free. That includes all the growth your investments earned over the years. There are no taxes on the principal or gains.
Roth IRAs don’t have RMDs during your lifetime. You can leave the money in the account if you want, without being forced to take distributions.
Roth IRA vs traditional IRA: Taxes now vs taxes later
The Roth IRA vs traditional IRA decision comes down to one question: When do you want to pay taxes on this money?
With a traditional IRA, you get the tax break now and pay taxes later when you withdraw the money in retirement. With a Roth IRA, you pay taxes now and get tax-free withdrawals later.
When a Roth IRA makes more sense than a traditional IRA
A Roth IRA isn’t the right choice for everyone, but there are certain situations where it can be a smart move.
Early in your career or during lower-income years
If you’re in a lower tax bracket now, paying taxes on your Roth IRA contribution today might cost you less than it would later. Maybe you’re just beginning your career, or you’re in a temporary period of lower income. Either way, your tax rate now is probably lower than it will be when you’re earning more.
With a Roth IRA, you lock in today’s tax rate by paying taxes now, which can be especially beneficial if you’re early in your career or in a lower-income year. If your income rises over time, or if future tax rates increase, you’ve already handled the tax bill while it was potentially lower, and your retirement withdrawals remain tax-free.
When you want more control in retirement
Roth IRAs give you flexibility that traditional IRAs don’t. Because you’ve already paid taxes on the money, withdrawals won’t increase your taxable income in retirement. That can matter when you’re managing other income sources like Social Security, pensions, or withdrawals from traditional 401(k)s.
For example, if you don’t need the money, you can leave it alone and let it keep growing tax-free. Or you can pass it on to your heirs.
When a traditional IRA may make more sense
A traditional IRA often makes the most sense when you’re earning more today than you expect to earn in retirement.
If you’re in your peak earning years and sitting in a higher tax bracket, the immediate deduction from a traditional IRA contribution can be especially valuable. Lowering your taxable income now – when your marginal rate may be 24% or 32% – can generate meaningful tax savings in the current year.
The strategy assumes that your taxable income will be lower once you retire. For many people, that’s the case. Without employment income, and with a more modest spending plan, retirement often places you in a lower tax bracket than during your highest-earning years. In that scenario, you receive the deduction when it’s most valuable and pay taxes later at a potentially lower rate.
When you need tax relief now
Sometimes the choice comes down to cash flow. If you’re juggling a mortgage, college savings for your kids, and building your retirement savings all at the same time, the immediate tax deduction from a traditional IRA can help ease the pressure.
Getting money back on your tax return this year might matter more to you right now than tax-free withdrawals 20 or 30 years down the road. That’s a legitimate reason to choose a traditional IRA, especially if you’re balancing competing financial priorities.
Roth IRA vs. traditional IRA: The influence of age and career stage
Where you are in your career affects which IRA makes more sense. The Roth IRA vs Traditional IRA question looks different when you’re 25 versus 45 versus 60.
Early career
If you’re in your 20s or early 30s, you likely have two major advantages: time and income growth potential.
Early in your career, your salary and often your tax bracket may be lower than they will be later. A Roth IRA can make sense during these years because you’re paying taxes on contributions at a potentially lower rate while giving your investments decades to grow tax-free.
Just as important, starting with a Roth builds long-term flexibility. With many earning years ahead, locking in tax-free growth early can create meaningful options when you’re managing income in retirement.
Mid-career
Your 40s and 50s often bring higher income, but also greater financial complexity.
This stage may include peak earning years alongside competing priorities like college funding, mortgage payments, business responsibilities, or supporting aging parents. Because your tax bracket may be higher now than it was earlier in your career, a traditional IRA deduction can provide meaningful relief in the current year.
At the same time, many mid-career professionals benefit from building tax diversification. Contributing to both Roth and traditional accounts – when eligible – can create flexibility later, especially as retirement planning becomes more concrete. The goal during this stage isn’t just growth. It’s balance.
Pre-retirement
As retirement approaches, the focus shifts from accumulation to coordination.
You’re no longer just deciding where to contribute; you’re thinking about how all your income sources will work together. Social Security, traditional 401(k) withdrawals, pensions, if you have one, and your IRAs will eventually interact on your tax return.
At this stage, having both Roth and traditional accounts can offer meaningful planning flexibility. The ability to choose which account to draw from each year allows you to manage taxable income more deliberately as you transition into retirement.
Why many investors use both Roth and traditional IRAs
For many people, the decision isn’t about choosing one account over the other. It’s about building flexibility over time.
Holding both Roth and traditional IRAs creates tax diversification. Some of your retirement savings will be taxable later, and some will not. That mix allows you to adjust withdrawals based on your income needs and tax situation in any given year.
It also acknowledges that your circumstances won’t stay the same. Income levels shift, tax laws evolve, and financial priorities change. Contributing to different types of accounts over time gives you more room to adapt without locking yourself into a single strategy.
How a financial professional can help
The Roth IRA vs Traditional IRA decision isn’t something you have to figure out alone.
When you work with a financial advisor, like my colleagues at Allegiant Wealth Strategies and me, we look at more than just your current income. We consider your full financial picture: where you are now, where you’re headed, and what else is going on in your life.
What advisors look at
A good advisor starts by understanding your current tax situation. What bracket are you in? Do you have a retirement plan at work? Are you eligible to deduct traditional IRA contributions based on your income?
They also think about your career trajectory. Are you early in your career with room to grow? Are you at peak earnings? Are you nearing retirement and focused on managing income sources?
Your other retirement accounts matter too. If you already have a traditional 401(k) through work with a significant balance, adding a Roth IRA might give you valuable tax diversification. Or if you're self-employed and contributing to a SEP IRA, adding a Roth IRA might balance out those pre-tax contributions.
And then there are life transitions. Getting married, having kids, starting a business, helping aging parents. These all change your financial priorities and your tax picture.
Frequently asked questions about Roth IRA vs traditional IRA
Can I contribute to both a Roth IRA and a traditional IRA?
Yes. You can contribute to both in the same year, as long as your combined contributions don’t exceed annual IRS limits.
Is a Roth IRA always better than a traditional IRA?
Not necessarily. The right choice depends on your current tax bracket and expected retirement income.
What if I’m not eligible for a Roth IRA?
If your income exceeds Roth limits, you may consider strategies such as a backdoor Roth conversion, but professional guidance is recommended.
Allegiant Wealth Strategies can help
At Allegiant Wealth Strategies, we don’t advocate for one type of IRA over another. Our job is to help you understand your options and think through what fits your situation best.
We’ll walk through your current income, your goals, and what you expect your life to look like in the coming years. We’ll explain the trade-offs clearly so you can make a confident decision. And we’ll revisit that decision as your circumstances change.
You can schedule a complimentary, no-obligation consultation with us by calling 269-218-2100 or contacting us through our website.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend that you consult a tax preparer, professional tax advisor, or lawyer.
Some IRAs have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
Link to "Are IRA Rules a Mystery? Here’s What You Need to Know"