Individual Retirement Accounts (IRAs) come in two main types: Traditional and Roth. Each offers different tax advantages depending on your situation.
Traditional IRA
Contributions may be tax-deductible in the year you make them. Money grows tax-deferred, and withdrawals in retirement are taxed as ordinary income. Required minimum distributions (RMDs) begin at age 73.
Roth IRA
Contributions are made with after-tax dollars, so they are not tax-deductible. However, qualified withdrawals in retirement are completely tax-free. No RMDs during the original owner's lifetime.
Which Should You Choose?
- Traditional IRA: Better if you expect to be in a lower tax bracket in retirement
- Roth IRA: Better if you expect to be in a higher tax bracket in retirement
Income Limits
Roth IRA contributions have income limits. For 2026, single filers with modified AGI above $161,000 cannot contribute directly to a Roth IRA.
