If you’ve already started putting money away for retirement, you’re ahead of the game. But here’s the real question: are you saving in the right kind of account? The choice between a Traditional IRA, a Roth IRA, or even a mix of both can make a big difference in how much you get to keep now—and how much you’ll have later.

Both options come with unique tax benefits, and the trick is figuring out how they fit into the plan you already have. Think of it less as starting from scratch and more as fine-tuning your strategy so your hard-earned savings work even harder for you.

Contribution Limits

The IRS sets limits on how much you can contribute each year. For 2025, you can contribute up to $7,000 total across all IRAs, Traditional and Roth combined. If you’re 50 or older, you get a $1,000 catch-up contribution, raising your limit to $8,000.

That means you don’t necessarily have to pick just one—you could split contributions between a Roth and a Traditional IRA, as long as you stay within the annual limit.

Tax-Deferred Growth

Both Traditional and Roth IRAs give you the advantage of tax-deferred growth. That means your investments grow without you paying annual taxes on dividends, interest, or capital gains. Over time, this tax-free compounding can make a huge difference in how much you accumulate.

Benefits of a Traditional IRA

• Tax break now: Contributions are often tax-deductible, reducing your taxable income in the year you contribute.
• Ideal for higher earners today: If you’re in a high tax bracket now and expect to be in a lower one in retirement, a Traditional IRA can be especially useful.
• Deferred taxes: You don’t pay taxes until you withdraw the money in retirement, ideally at a lower tax rate.

Withdrawal rules: If you take money out before age 59½, you’ll likely face income tax plus a 10% penalty (unless you qualify for an exception).

Benefits of a Roth IRA

• Tax break later: You contribute after-tax dollars today, but your withdrawals in retirement (both contributions and growth) are 100% tax-free.
• No required distributions: Unlike a Traditional IRA, Roth IRAs don’t require you to take withdrawals at age 73. That makes them great for flexibility and estate planning.
• Access to contributions: You can withdraw your original contributions (but not investment growth) at any time without penalty. Handy in a pinch, though it’s best left untouched for retirement.

Traditional vs. Roth IRA: Restrictions to Keep in Mind

Earlier we mentioned you must have an earned income to make contributions to an IRA. This rule has only one exception: if you’re making contributions for a spouse or minor children.

That said, if you earn too much income, the IRS may disqualify you from making direct Roth IRA contributions or from deducting Traditional IRA contributions. These income thresholds change over time, and you can find the most current numbers on the IRS website.

If your income is too high to qualify for a Roth IRA directly, there’s a strategy called the Backdoor Roth IRA. This allows high earners to contribute to a Traditional IRA first and then convert it into a Roth, opening the door to tax-free growth even if you’re above the income limits.

Backdoor Roth IRA Contributions

If your income is too high to qualify for a Roth IRA directly, there’s a strategy called the Backdoor Roth IRA. Here’s how it works:

1. Contribute to a Traditional IRA (non-deductible if you’re over the income limits).
2. Convert those funds to a Roth IRA.
3. Growth then continues tax-free, just like a regular Roth.

This strategy has become a popular way for higher earners to still benefit from Roth advantages. It does come with tax implications depending on your other IRA balances, so it’s important to plan carefully.

Do You Have to Choose Just One?

Not at all! Many investors benefit from having both a Traditional and a Roth IRA. This approach, sometimes called tax diversification, gives you flexibility in retirement—you can choose whether to draw from taxable, tax-deferred, or tax-free accounts based on your needs and the tax environment at the time.

The Bottom Line

There’s no “one-size-fits-all” answer when it comes to Traditional vs. Roth IRAs. The best choice depends on your current income, tax situation, and long-term retirement goals. For some, it’s a matter of picking one; for many, it’s smart to use both.

If you’re unsure which strategy fits your financial picture—or if you want to explore advanced strategies like a Backdoor Roth—Navalign Wealth Partners can help. Our team will guide you through your options, so you can build a retirement plan that works for your life today and your future tomorrow.