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As a finance coach, one of the most common questions I get is: “Should I open a traditional IRA or a Roth IRA?” The short answer? It depends on your financial situation now—and your expectations for the future.

Let’s break it down in plain English so you can confidently choose the best retirement savings vehicle for your goals.

What Is an IRA?

An IRA (Individual Retirement Account) is a tax-advantaged way to save for retirement. There are two main types: Traditional IRA and Roth IRA. Both offer tax benefits, but in different ways.

Traditional IRA: Pay Taxes Later

Key Benefits:

• Contributions are often tax-deductible today.
• Your money grows tax-deferred.
• You pay income tax when you withdraw in retirement.

Watch Out For:

• Required Minimum Distributions (RMDs) start at age 73.
• You may owe taxes on the full amount when you take money out.

Best For:

• People who expect to be in a lower tax bracket in retirement.
• Those who want a tax break now.

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Roth IRA: Pay Taxes Now, Save Later

Key Benefits:

• You contribute after-tax money—no upfront deduction.
• Your money grows tax-free.
• Qualified withdrawals are 100% tax-free in retirement.
• No RMDs during your lifetime.

Watch Out For:

• You need to meet income limits to contribute.
• No tax deduction now.

Best For:

• Younger earners or those expecting to be in a higher tax bracket later.
• People who value tax-free income in retirement.

Side-by-Side Comparison

Feature	Traditional IRA	Roth IRA
Tax on Contributions	Deductible (if eligible)	Not deductible
Tax on Growth	Deferred	None (tax-free)
Tax on Withdrawals	Taxed as income	Tax-free (if qualified)
Income Limits to Contribute	No	Yes
RMDs Required?	Yes (starting at 73)	No

So… Which One Should You Choose?

Here’s a simple framework I use with my clients:

• Choose a Traditional IRA if:
  • You need the tax deduction now.
  • You expect your tax rate to drop in retirement.
  • You’re currently above the Roth income limits.
• Choose a Roth IRA if:
  • You’re early in your career (lower income now).
  • You want tax-free income later.
  • You want to avoid RMDs.

Pro Tip: You Might Not Have to Choose Just One

Many people don’t realize this—you can actually contribute to both a Traditional IRA and a Roth IRA, as long as your combined contributions stay within the annual limit ($7,000 for 2024, or $8,000 if you’re 50+).

This strategy is called tax diversification, and it can give you more flexibility in retirement.

There’s no one-size-fits-all answer when it comes to retirement planning—but the good news is, you’ve got options. Whether you prioritize saving on taxes now or want to lock in tax-free growth for the future, both IRAs can be powerful tools.