Roth vs. Traditional IRA: Which IRA Is Right for You in 2025?
by Daniel Snyder, Founder & Principal Advisor
Roth vs. Traditional IRA: Which IRA Is Right for You in 2025?
Picking an IRA used to be simple: get the deduction today (Traditional) or enjoy tax-free growth later (Roth). SECURE 2.0 and the 2025 IRS inflation adjustments add new wrinkles—higher income limits, larger catch-ups and later required minimum distributions (RMDs). This guide walks you through the key differences so you can choose—or combine—the account that maximizes your retirement dollars.
Snapshot: Key Differences at a Glance
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| Tax treatment of contributions | May be deductible now (subject to income & plan-coverage limits) | Not deductible; contributions made with after-tax dollars |
| Tax treatment of growth & withdrawals | Earnings taxed as ordinary income in retirement | Qualified withdrawals (age 59½ + five-year rule) are tax-free |
| 2025 contribution limit | $7,000; $8,000 age 50+ catch-up | Same aggregate limit applies |
| Eligibility phase-outs 2025 | Deduction phases out $79-$89k single, $126-$146k joint when you're covered by a workplace plan | Contribution phases out $150-$165k single, $236-$246k joint |
| RMDs | Start at age 73 (will rise to 75 in 2033) | None for the original owner |
| Early-withdrawal penalties | 10% on taxable amount before 59½, with exceptions | 10% on earnings if rules aren't met; contributions always accessible |
How Each IRA Works
Traditional IRA
- Front-loaded tax break. Contributions may reduce your taxable income for 2025 if you (and/or your spouse) fall within the deduction limits above.
- Tax-deferred growth. Gains compound without current taxation, but every dollar withdrawn later is ordinary income.
- RMD clock ticks. You must begin RMDs the year you turn 73; missing one triggers a 25% penalty (down from 50% under SECURE 2.0).
Roth IRA
- Back-loaded tax break. No deduction today, but qualified withdrawals—contributions plus growth—come out 100% tax-free.
- Income-based gatekeeper. High earners above the phase-out ranges must use a "backdoor" conversion strategy.
- RMD-free for life. Your money can grow untouched, a huge edge for estate planning.
2025 Contribution & Catch-Up Rules
The standard limit remains $7,000; age-50+ savers still get a $1,000 catch-up, indexed for inflation but unchanged for 2025.
SECURE 2.0 created a special catch-up for workplace plans at ages 60-63 ($11,250 in 2025), but IRAs keep the $1,000 cap.
Deduction & Eligibility Phase-Outs
Traditional IRA Deduction (when covered by a job plan)
- Single/Head of Household: Partial deduction begins at $79,000 MAGI; gone at $89,000.
- Married Filing Jointly: If you are covered, partial starts at $126,000; vanishes at $146,000.
Roth IRA Contribution
- Single/HOH: Full up to $150,000 MAGI; phased out at $165,000.
- Married Filing Jointly: Full up to $236,000; phased out at $246,000.
Tip: Phase-outs apply to contributions, not conversions—hence the popularity of backdoor Roths for high earners.
RMD & Withdrawal Rules
| Rule | Traditional | Roth |
|---|---|---|
| First RMD | Age 73 in 2025; age 75 starting 2033 | None for owner |
| Early-withdrawal penalty | 10% on pre-tax amount | 10% on earnings only |
| 5-year clock? | N/A | Must satisfy 5-year rule and age 59½ for tax-free earnings |
Which IRA Fits These Scenarios?
- Early-career saver in 12% tax bracket → Roth often wins; pay low taxes now, harvest tax-free growth for decades.
- Peak-earning professional in 32% bracket → Traditional may cut today's bill; consider partial Roth conversions after retirement.
- Self-employed with variable income → Combine both: deduct Traditional in high-income years, switch to Roth in lean years.
- Legacy-minded retiree → Roth's RMD-free nature preserves assets for heirs and avoids taxable Social Security and Medicare surcharges.
Can You Have Both?
Absolutely. The $7,000/$8,000 limit is an aggregate cap, but splitting contributions lets you hedge future tax policy changes and fine-tune cash-flow needs.
How FortiGuard Financial Helps You Decide
- Tax-mapping software projects lifetime taxes under multiple scenarios.
- FLOW® Fixed-Indexed Annuities create guaranteed income so you can lean harder into Roth conversions without fretting about market dips.
- Personalized rollover guidance—move old 401(k) or 403(b) assets into the IRA mix seamlessly and penalty-free.
- Book a complimentary IRA Strategy Session to see how a blended approach could lift your after-tax retirement income.
FAQs
Q: Can I contribute for 2024 and 2025 at the same time? Yes. You have until April 15, 2025 to fund an IRA for tax year 2024, even as you make 2025 contributions.
Q: Does a Roth ever require RMDs for beneficiaries? Yes—non-spouse heirs must empty an inherited Roth within 10 years, but withdrawals remain tax-free.
Q: What if my income straddles the phase-out? We can calculate the exact permissible contribution and automate a backdoor Roth for the remainder.
Next Steps
Estimate your 2025 taxable income, then schedule your call with FortiGuard to lock in the right IRA strategy before year-end.