Roth IRA vs. Traditional IRA
The main difference is when taxes are paid: generally before contribution for a Roth IRA and potentially later for deductible Traditional IRA contributions.
Side-by-side comparison
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Contribution tax treatment | Usually after-tax | May be deductible, subject to rules |
| Qualified withdrawals | Generally tax-free | Generally taxable |
| Income limits | Contribution eligibility limits may apply | Deduction limits may apply |
| Required distributions | Different owner rules may apply | Required distribution rules may apply |
Questions to consider
- Is the current tax rate likely lower or higher than the future rate?
- Is a current deduction valuable?
- Will income limits affect eligibility?
- How important is future tax diversification?