What is the difference between a Roth IRA and a traditional IRA?

The main difference between a Roth IRA and a traditional IRA is how and when you get a tax break. Contributions to traditional IRAs are tax-deductible, but withdrawals in retirement are taxable as income. In comparison, contributions to Roth IRAs are not tax-deductible, but the withdrawals in retirement are tax-free.

Can you contribute to a traditional IRA and a Roth IRA?

Worth noting: You can contribute to a traditional and a Roth IRA during the same year, as long as the total amount does not exceed the maximum allowable contribution limit: $7,000 in 2024 ($8,000 if age 50 or older). » Our picks for the best Roth IRAs and best traditional IRAs

Should you choose a Roth IRA or a traditional IRA?

One decision variable to keep in mind in deciding between a traditional IRA versus Roth IRA is income tax levels in the future. Most of the income generated by those in retirement is taxable.