Roth or Traditional IRA: Which Is Better in 2025?

Looking to save more for retirement? Opening a traditional IRA or Roth IRA can be one of the best money moves you ever make.

I recently opened a Roth IRA myself -- a choice that will likely save me thousands of dollars in the long run.

Here's what you need to know about traditional IRAs and Roth IRAs -- and why everyone should have at least one of the two.

Why both types of IRAs are great

An IRA, or individual retirement account, is a type of personal savings account designed to help you save for retirement.

It works a lot like a 401(k), except anyone who earns income can open an IRA. And the best part is that your capital gains and dividends aren't taxable.

You can open an IRA through a brokerage. Then you'll have the option to invest in a wide range of financial products, including stocks, bonds, exchange-traded funds (ETFs), and mutual funds. In short, they're a great way to grow your retirement savings in the long term.

There are a few limitations to be aware of with IRAs:

• Withdrawing money from your traditional IRA before age 59 1/2 can trigger a 10% penalty. (You can withdraw your contributions from a Roth IRA tax-free and penalty-free, regardless of age -- withdrawing earnings, however, is subject to a penalty.)
• You can't contribute to a Roth IRA if you earn more than a certain amount in a year.
• There's a limit to how much you can contribute to IRAs: in 2025, it's $7,000 for those under age 50 and $8,000 for those 50 or older.

Still, for most people, the benefits of IRAs make them worth it. Simply put, anyone who earns an income should consider opening one.

The main difference between traditional and Roth IRAs is when you pay taxes on your contributions and withdrawals.

Start saving for your future today -- see our full list of the best IRA accounts available now.

Why choose a traditional IRA?

A traditional IRA can be a smart choice if you expect your tax rate in retirement to be lower than it is today -- in other words, if you think your retirement income will be less than what you make now.

Contributions to a traditional IRA can be deducted from your taxable income in the year you make them, which means you save money on taxes up front. It's also available to anyone who earns an income regardless of how much they make.

Traditional IRAs are best if you want immediate tax relief and plan to withdraw funds when your income -- and tax rate -- are lower. They're also a smart choice if you want more money in your pocket today, either for expenses or other investments.

Why choose a Roth IRA?

With a Roth IRA, your contributions are not tax-deductible -- but after that, withdrawals can be made tax-free.

That means you can lock in your current, potentially lower tax rate, then avoid income taxes on withdrawals later. If you're far off from retirement, expect your income to rise later in life, or don't want to worry about what tax rates will be when you retire, it's probably the right type of IRA for you.

Income limits apply, so not everyone is eligible to contribute. In 2025, single filers must have a modified adjusted gross income (MAGI) of less than $165,000 to contribute to a Roth IRA, and married couples must have MAGIs of less than $246,000.

Still, for anyone who qualifies -- and wants their retirement savings to grow substantially, over decades -- a Roth IRA is a great choice.

Why I went with a Roth IRA

I contribute to a Roth IRA because I'm young (26 years old), I expect my income and tax rate to rise, and I have decades (I hope) to let my investments grow tax-free.

That's just my situation, though -- the truth is that any IRA is better than no IRA at all. The biggest key is starting early and giving your money time to grow, no matter which account you choose.

Ready to explore your options? See our list of the best IRAs available today to get started.