Is it Better to Have an IRA Or a Roth IRA?

IRAs allow anyone earning income to save for retirement using tax-advantaged investments such as stocks, bonds and exchange-traded funds. You can find them with banks, brokers and robo-advisors.

Decidng between a traditional IRA and Roth IRA is dependent upon your expected tax bracket in retirement, whether or not lowering taxable income can lower it now, and if any inherited assets may become tax-exempt upon your passing away.


One of the key differences between traditional and Roth IRAs lies in taxes; traditional IRAs allow contributors to deduct contributions from taxes while withdrawals will be taxed as income upon retirement. The tax savings can provide extra motivation to save.

As it’s impossible to predict your tax bracket in retirement, a traditional IRA might make more sense if you expect that to be in a higher tax bracket.

Roth IRAs offer additional advantages that may outweigh their reduced upfront tax deduction, particularly for people planning to pass their IRA onto their heirs. Unlike traditional IRAs, Roths do not require annual required minimum distributions (RMDs), so this could make leaving an IRA to family easier as there will no longer be penalties associated with late withdrawals – giving peace of mind that withdrawals won’t incur tax liability at any point down the road. For some people this assurance alone makes Roths a worthy choice over their upfront tax break counterpart – some people see peace of mind as it pays dividends all year long!


One advantage of traditional IRAs is the tax break they offer in terms of upfront tax savings, but remember that you will still pay taxes upon withdrawing funds in retirement. Therefore, without proper discipline when investing these upfront tax savings each year, your retirement may leave less after-tax savings than had you utilized Roth IRAs instead.

Not to worry! Most major brokerage firms provide both types of IRAs with equal minimums, fees and terms – so whatever suits your tax situation best can be considered an option worth exploring.

No matter whether or not you open a Roth or traditional IRA, when selecting an investment vehicle for retirement it’s wise to seek advice from target-date retirement funds, robo-advisors, or financial advisors who provide low cost investing which aligns with your goals. Doing this can make sure you maximize the returns from your account by keeping costs and taxes to a minimum while maintaining optimal tax implications.


IRAs allow you to diversify the types of tax-deferred and taxable accounts that you hold. For instance, you can make nondeductible contributions to a traditional IRA and then convert them to a Roth if desired; any earnings generated prior to conversion must be withdrawn and reported as income when withdrawing them for tax purposes.

Roth IRAs allow savers who anticipate being in higher tax brackets in retirement than now to pay taxes upfront through after-tax contributions, then withdraw tax-free when withdrawing in retirement (assuming the account has been open at least five years). They may be particularly appealing for investors aiming for tax-free withdrawals at age 65 and beyond.

No matter whether or not you choose a Roth or traditional IRA, it’s wise to save through both types of retirement accounts. Finding one that meets your goals, time horizon and investment strategy is key; NerdWallet offers retirement calculators that can help determine how much is necessary and help find financial advisors who can guide long-term savings plans.


Fees may not be an engaging topic, but they can have a major effect on your retirement planning efforts. Therefore, it is vitally important that you understand them fully and strive to minimize them as much as possible before selecting an IRA provider that charges low fees.

Traditional IRA contributions may allow you to deduct them from your income tax in the year they’re made; however, withdrawals in retirement will be subject to taxes at your current income tax rate – something to keep in mind if future taxes may rise significantly.

Roth accounts do not provide an upfront tax break, but are tax-free in retirement. This can be beneficial if your retirement years will find you in a higher tax bracket, and using earnings without increasing taxable income is another way of avoiding early withdrawal penalties (*exceptions apply when withdrawing funds for qualified expenses such as medical costs, unemployed hardship payments or first home purchases).

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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