Retirement Plans – Roth vs. Traditional: Which is better?

One decision you may face when saving for retirement is whether to contribute to a traditional retirement savings account or a Roth account. A key thing to consider is when you prefer to pay taxes on the money you contribute. With traditional accounts, you don’t pay taxes on contributions when you make them but will when you take them out. With Roth accounts, you pay taxes on contributions when you make them but won’t when you withdraw them, as long as you meet certain requirements.

Understanding how these account types compare can help you choose between a traditional and Roth IRA. And if your retirement plan offers traditional and Roth options, it can help you decide whether to contribute to one or the other — or both.

Use these quick comparison charts to find out how they stack up. Keep in mind that these are general overviews and there may be exceptions. Discuss your plan requirements and situation with your plan sponsor, whether it's your employer or another organization. You can also reach out to a Retirement Specialist.

401(k), 403(b), 457(b) plans
Roth in-plan account	Traditional in-plan account
Eligibility
You must be employed by the plan sponsor or have employment compensation There are no income limits that prevent participation	You must be employed by the plan sponsor or have employment compensation There are no income limits that prevent participation
Taxes
Contributions are made after-tax, so they don’t reduce income taxes for the year in which you make them	Contributions are made pre-tax, which reduces income taxes for the year in which you make them
Maximum annual contributions
In 2025, the limit is $23,500; for those over age 50, it’s $31,000 and for those who will reach age 60-63 by the end of the year it's $34,750 If you’re eligible to contribute to both a 401(k) and 403(b), this limit is a combined amount you can contribute across plans If you have a 457(b) plan, you may be eligible to contribute the maximums to both that and a 401(k) or 403(b)	In 2025, the limit is $23,500; for those over age 50, it’s $31,000 and for those who will reach age 60-63 by the end of the year it's $34,750 If you’re eligible to contribute to both a 401(k) and 403(b), this limit is a combined amount you can contribute across plans If you have a 457(b) plan, you may be eligible to contribute the maximums to that and a 401(k) or 403(b)
Contribution deadline
For tax year 2025, by the end of the plan year, which for most plans is the end of the calendar year If you leave your job, in most cases you can’t contribute past the last day of employment with your plan provider	For tax year 2025, by the end of the plan year, which for most plans is the end of the calendar year If you leave your job, in most cases you can’t contribute past the last day of employment with your plan provider
Withdrawals
Contributions are withdrawn tax-free Earnings can be also withdrawn tax-free if the withdrawal meets plan distribution requirements, the account has been open for at least 5 years and at least one of the following conditions is met: age 59½ or older, disability or death	Contributions and earnings are taxed as ordinary income when withdrawn Withdrawals from 401(k) and 403(b) plans before age 59½ may be subject to a 10% early withdrawal penalty Withdrawals from a 457(b) plan may be taken without penalty if you are no longer employed by the plan sponsor, regardless of age, or for a qualifying hardship
Required minimum distributions (RMDs)
None during the original accountholder's lifetime	Starting at age 73 if you were born in 1951 through 1959; starting at age 75 if you were born in 1960 or later

IRAs
Roth IRA	Traditional IRA
Eligibility
You must have earned income below certain IRS limits based on your tax-filing status If your income exceeds these limits, you may not be able to contribute or to contribute up to the maximum A nonworking spouse in a married couple filing jointly on their taxes may be eligible to contribute to their own account	You must have earned income A nonworking spouse in a married couple filing jointly on their taxes may be eligible to contribute to their own account
Taxes
Contributions are made after-tax and are not tax-deductible	Contributions may be tax-deductible You may not be eligible for a tax deduction or your tax deduction may be reduced if your income exceeds certain IRS limits and you or your spouse are covered by an employer's retirement plan
Maximum annual contributions
In 2025, the limit is $7,000; for those over age 50, it's $8,000 This limit is a combined amount you can contribute across all IRAs	In 2025, the limit is $7,000; for those over age 50, it’s $8,000 This limit is a combined amount you can contribute across all IRAs
Contribution deadline
For tax year 2025, by the annual income tax filing deadline in 2026	For tax year 2026, by the annual income tax filing deadline in 2026
Withdrawals
Contributions come out first and are always withdrawn tax-free Earnings come out last and can also be withdrawn tax-free if the account has been open for at least 5 years and at least one of the following conditions is met: age 59½ or older, disability, qualified first-time home purchase or death Earnings withdrawn prior to age 59½ may be subject to a 10% early withdrawal penalty unless an exception applies	Contributions and earnings are taxed as ordinary income when withdrawn Withdrawals made prior to age 59½ may be subject to a 10% early withdrawal penalty unless an exception applies
Required minimum distributions (RMDs)
None during the original accountholder's lifetime	Starting at age 73 if you were born in 1951 through 1959; starting at age 75 if you were born in 1960 or later

To learn more about investing concepts and investing through your plan, visit our resource center.

Contributing

Investing

Related Info

As you save for retirement, are you?

Related info

Administrative

Your account

Other info

Roth vs. traditional: How do they compare?