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

Is it better to have an IRA or a Roth IRA

IRAs are tax-advantaged retirement savings accounts that allow you to contribute and invest money based on your income level. Traditional IRA contributions grow federal income tax-deferred, while Roth IRA investments and qualified withdrawals are tax free.

People typically make decisions between traditional and Roth accounts based on whether they believe future tax liabilities will be higher or lower; however, the answer might not be so simple.


Traditional IRAs provide tax benefits that can help your savings grow faster than in non-tax-advantaged accounts. You can deduct contributions from your income and watch earnings grow tax-deferred – though taxes must be paid on withdrawals at retirement age or prior to reaching 59 1/2.

Roth IRAs allow you to make after-tax contributions and watch them grow tax-free; however, withdrawal of these earnings only qualifies as tax-free when meeting specific criteria.

To select an IRA that best meets your needs, it is wise to evaluate both your current income and tax rate as well as what they anticipate being during retirement. Our IRA calculators can assist in this effort and show you your potential growth.


Withdrawals from both types of IRAs may incur taxes and/or penalties depending on your circumstances; however, there may be exceptions which allow withdrawals that help keep your savings on track with retirement goals.

Roth IRA contributions, on the other hand, can be funded with after-tax money so your distributions from them won’t incur taxes in retirement.

Both IRAs are excellent retirement savings vehicles, with differing approaches to growing your money. Use our IRA calculator to see what difference choosing one type of account over the other will make to how much you save over time. Finally, find an advisor to assist in starting up your savings plan using SmartAsset’s free tool that matches you up with pre-screened advisors in your area – start now – it only takes minutes with no obligation attached!


People who already have traditional IRA accounts and wish to convert them to Roth IRA accounts can do so without penalty, though if any funds are withdrawn before age 59.5 you will owe regular income taxes plus an additional 10% penalty tax payment. Some convert their IRAs or 401(k) accounts to Roth IRAs to avoid future tax liabilities that they anticipate being higher post retirement than now.

Successful conversions require anticipating what your tax rate will be in the future and making conversions during years when that tax rate will be lower than anticipated. Investors may choose a strategy called “dollar-cost averaging,” in which just enough is converted each year to prevent moving into higher tax brackets; alternatively, large Roth conversions can be staggered over several years; either way, when doing either you must follow IRS pro rata rules when calculating which portion is subject to income tax later.


Fees can eat away at investment returns over time. Even seemingly minor costs such as those charged by platforms and brokers as well as funds you invest in could eat into your returns significantly.

Traditional IRAs provide tax savings up front, making them particularly appealing to workers who anticipate lower tax brackets in retirement. Unfortunately, no matter how hard we try to predict our taxes in 20 years’ time!

Roth IRAs offer no immediate tax advantages but do eliminate RMDs once you reach age 73 – which could prove particularly valuable to workers planning on passing along their IRAs after death to beneficiaries. Furthermore, these accounts offer extra flexibility for savers who already contribute through employer-sponsored accounts such as 401(k)s or pension plans; plus many providers offer educational resources and support services.

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