Retirement Plans – Roth vs. Traditional: Which is better?

One decision you may face when saving for retirement is whether to contribute to a traditional retirement savings account or a Roth account. A key thing to consider is when you prefer to pay taxes on the money you contribute. With traditional accounts, you don’t pay taxes on contributions when you make them but will when you take them out. With Roth accounts, you pay taxes on contributions when you make them but won’t when you withdraw them, as long as you meet certain requirements.

Understanding how these account types compare can help you choose between a traditional and Roth IRA. And if your retirement plan offers traditional and Roth options, it can help you decide whether to contribute to one or the other — or both.

Use these quick comparison charts to find out how they stack up. Keep in mind that these are general overviews and there may be exceptions. Discuss your plan requirements and situation with your plan sponsor, whether it's your employer or another organization. You can also reach out to a Retirement Specialist.

Eligibility
401(k), 403(b), 457(b) plans
Roth in-plan account	Traditional in-plan account
You must be employed by the plan sponsor or have employment compensation There are no income limits that prevent participation	You must be employed by the plan sponsor or have employment compensation There are no income limits that prevent participation
Taxes
Contributions are made after-tax, so they don't reduce income taxes for the year in which you make them	Contributions are made pre-tax, which reduces income taxes for the year in which you make them
Maximum annual contributions
In 2024, the limit is $23,000; for those over age 50, it’s $30,500 If you’re eligible to contribute to both a 401(k) and 403(b), this limit is a combined amount you can contribute across plans If you have a 457(b) plan, you may be eligible to contribute the maximums to both that and a 401(k) or 403(b)	In 2024, the limit is $23,000; for those over age 50, it’s $30,500 If you’re eligible to contribute to both a 401(k) and 403(b), this limit is a combined amount you can contribute across plans If you have a 457(b) plan, you may be eligible to contribute the maximums to that and a 401(k) or 403(b)
Contribution deadline
For tax year 2024, by the end of the day on December 31, 2024 If you leave your job, in most cases you can’t contribute past the last day of employment with your plan provider	For tax year 2024, by the end of the day on December 31, 2024 If you leave your job, in most cases you can’t contribute past the last day of employment with your plan provider
Withdrawals
Contributions are withdrawn tax-free Earnings can be also withdrawn tax-free if the withdrawal meets plan distribution requirements, the account has been open for at least 5 years and at least one of the following conditions is met: age 59½ or older, disability, qualified first-time home purchase or death	Contributions and earnings are taxed as ordinary income when withdrawn Withdrawals before age 59½ may be subject to a 10% early withdrawal penalty Withdrawals from a 457(b) plan may be taken without penalty if you are no longer employed by the plan sponsor, regardless of age, or for a qualifying hardship
Required minimum distributions (RMDs)
For tax year 2023, starting at age 72 if you reached that age by Dec. 31, 2022; starting at age 73 if you reach age 72 after 2022 Starting in tax year 2024, none during original accountholder's lifetime	Starting at age 73 if you turn 72 after 2022; starting at age 75 if you turn 74 after 2032

Eligibility
IRAs
Roth IRA	Traditional IRA
You must have earned income below certain IRS limits based on your tax-filing status If your income exceeds these limits, you may not be able to contribute or to contribute up to the maximum A nonworking spouse in a married couple filing jointly on their taxes may be eligible to contribute to their own account	You must have earned income A nonworking spouse in a married couple filing jointly on their taxes may be eligible to contribute to their own account
Taxes
Contributions are made after-tax and are not tax-deductible	Contributions may be tax-deductible You may not be eligible for a tax deduction if your income exceeds certain IRS limits and you or your spouse are covered by an employer's retirement plan
Maximum annual contributions
In 2024, the limit is $7,000; for those over age 50, it's $7,500 This limit is a combined amount you can contribute across all IRAs	In 2024, the limit is $7,000; for those over age 50, it’s $7,500 This limit is a combined amount you can contribute across all IRAs
Contribution deadline
For tax year 2024, by the annual income tax filing deadline in 2025	For tax year 2024, by the annual income tax filing deadline in 2025
Withdrawals
Contributions come out first and are always withdrawn tax-free Earnings come out last and can also be withdrawn tax-free if the account has been open for at least 5 years and at least one of the following conditions is met: age 59½ or older, disability, qualified first-time home purchase or death Earnings withdrawn prior to age 59½ may be subject to a 10% early withdrawal penalty unless an exception applies	Contributions and earnings are taxed as ordinary income when withdrawn Withdrawals made prior to age 59½ may be subject to a 10% early withdrawal penalty unless an exception applies
Required minimum distributions (RMDs)
None during the original accountholder's lifetime	Starting at age 73 if you turn 72 after 2022; starting at age 75 if you turn 74 after 2032

Roth vs. traditional: How do they compare?