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Roth vs Traditional IRA

Roth IRA vs. Traditional IRA

Which IRA is the right choice for you?

Saving for retirement doesn’t have to be complicated. Learn the difference between a traditional IRA and a Roth IRA and decide what’s right for you.

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  • Traditional vs Roth IRA: an overview.

    While both traditional and Roth IRAs can be great ways to save for retirement, there are a few key differences. With a traditional IRA, you contribute pre-tax dollars and get an upfront tax deduction on qualified contributions. However, you’ll pay taxes on withdrawals during retirement. When contributing to a Roth IRA, you pay taxes up front but qualified withdrawals in retirement are tax-free. Traditional IRAs have required minimum distributions starting at age 72, while Roth IRAs don’t.

Key differences between traditional and Roth IRAs:

See how Traditional and Roth IRAs compare side-by-side in the table below.
Find the perfect fit for your financial goals.

Traditional IRA

Roth IRA

Pay taxes on withdrawals

Yes No

Contributions

Made with pre-tax dollars
Details on Traditional IRA Contribution Limits
Made with after-tax dollars
Details on Roth IRA Contribution Limits

Potential earnings

Grow tax-deferred until withdrawal Grow tax-free

Tax deductible

Yes, if you meet income requirements No

2024 income limits

None If you’re single: $146,000
If you’re married: $230,000

2024 contribution limits

If you’re under 50: $7,000
If you’re 50 or older: $8,000

Required minimum distributions

Generally required at age 73 None

Early withdrawal penalties

If before age 59 ½, may require you to pay taxes on earnings, plus 10% penalty No penalties on contribution amounts, but earnings are subject to taxes and a 10% penalty for early withdrawal.

Roth or traditional: Which IRA is right for you?

Take our personalized quiz and find the IRA that perfectly aligns with your retirement goals.

When to choose a traditional IRA:

If you expect to be in a lower tax bracket when you retire compared to your current one, and you qualify for the tax deductions, a traditional IRA might be right for you.

Open a Traditional IRA

When to choose a Roth IRA:

If you expect to be in a higher tax bracket when you retire compared to your current one, and you meet the income eligibility criteria, a Roth IRA might be a good choice for you.

Open a Roth IRA

FAQ

Which is better, a Roth or Traditional IRA?

A Roth IRA may be better if you expect to be in a higher income tax bracket in retirement. That’s because with a Roth, you make contributions with after-tax dollars, the money in the account grows tax-free, and you generally withdraw the funds tax-free in retirement. A traditional IRA may be better for you if you expect to be in a lower tax bracket in retirement because you’ll pay taxes on withdrawals then. You can take deductions on your traditional IRA contributions upfront when you make them.

Am I eligible to open both a Roth IRA and a traditional IRA?

Yes, you’re able to open both a Roth IRA and a traditional IRA as long as you meet the income and contribution limits for both.

Can I roll over funds from one IRA type to another?

Yes, you can move funds from a traditional IRA to a Roth IRA by completing a rollover IRA. While less common, you can also rollover Roth funds to a traditional IRA. Since these may be a taxable events, we recommend that you speak to a tax advisor.

What happens to my IRA when I reach retirement age?

You can typically begin taking withdrawals from a traditional or Roth IRA when you reach age 59 ½. For a traditional IRA, you must begin taking required minimum distributions (RMDs) at age 72 and pay ordinary income tax on withdrawals. For a Roth IRA, there are no RMDs during your lifetime and qualified distributions are tax-free.

What are the benefits of opening a SoFi Invest IRA compared to other institutions?

With a SoFi traditional or Roth IRA, you:

•   Don’t have to pay any account fees or have minimum contributions.

•   Have access to a diverse range of investment options.

•   Can tell us your goals and we’ll build a custom portfolio for you.

Get professional advice at no extra cost.

How can I get help choosing the right IRA with SoFi Invest?

Take the quiz above or talk to one of our Certified Financial Planner™ professionals to get an understanding of what retirement account options may be the best for you.

Ready to start your IRA journey?

Start saving for retirement today with a traditional or Roth IRA. Not sure if a Roth or traditional IRA is better for you? Our no-cost financial planners can help you decide.

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