How to choose between a Roth IRA and traditional IRA

Planning for retirement isn’t just about saving—it’s about choosing the right tools to protect those savings from tax erosion and market uncertainty. For most Americans, IRAs are a cornerstone of that long-term plan. But deciding between a traditional IRA and a Roth IRA isn’t a minor detail. It affects when you pay taxes, how much flexibility you have in retirement, and whether your income will stretch across a longer life expectancy.

This article breaks down the core differences between these two retirement accounts, how they align with different income levels and retirement goals, and why personal finance expert Dave Ramsey favors the Roth IRA for long-term peace of mind.

The primary difference between a traditional IRA and a Roth IRA is the timing of taxation:

Traditional IRA: Contributions are tax-deductible today. But withdrawals during retirement are taxed as ordinary income.

Roth IRA: Contributions are made with after-tax dollars. But withdrawals in retirement are completely tax-free.

Think of it this way: do you want the tax benefit now, or later? That’s the key decision.

The Roth IRA is often best for individuals who are early in their career or currently in a lower tax bracket, since they can pay a lower rate on contributions now and avoid higher taxes later when income may rise.

By contrast, a traditional IRA may suit those in high-earning years who need to reduce taxable income today and expect to be in a lower tax bracket in retirement.

Contribution limits (2025):

• $7,000 annually for individuals under 50
• $8,000 for those 50 and over (including the $1,000 catch-up)
  (Roth eligibility phases out for single filers at $161,000–$176,000 income)

Dave Ramsey emphasizes the value of tax-free growth with Roth IRAs. Over decades, avoiding taxes on compounding returns can significantly increase net retirement income. That becomes even more important as retirees face rising health care costs, longer lifespans, and inflation.

In his words: “Now, that’s a sweet deal!”

Still, if you expect to withdraw less in retirement—or need the upfront deduction—traditional IRAs may offer more immediate relief.

“Will my tax rate be higher or lower in retirement?”

“Do I want to reduce my taxable income today or maximize flexibility later?”

“Am I saving consistently in both employer-sponsored plans and IRAs?”

“Is my retirement timeline long enough for tax-free growth to compound meaningfully?”

There’s no perfect answer—only what aligns with your income today, your outlook tomorrow, and your comfort with tradeoffs. But choosing your IRA type shouldn’t be a guess. It should be a deliberate part of your long-term planning strategy.

Start with your timeline. Then match the vehicle—not the other way around.