Traditional vs. Roth IRA
Traditional and Roth IRAs are both tax-advantaged retirement accounts, but there are several key differences.
Tax-deferred contributions vs. tax-free withdrawals
Traditional IRAs allow for tax-deferred contributions (contributions are typically tax-deductible, but withdrawals will be taxed in retirement), while Roth IRAs allow for tax-free withdrawals (contributions are post-tax, but withdrawals can be tax-free in retirement).
Both types of accounts are beneficial in different situations. It will ultimately come down to whether you believe your income tax will be higher at the time of contribution or at the time of withdrawal. If your tax bracket is higher at the time of contribution, a traditional IRA may benefit you more. If it’s higher at the time of withdrawal, a Roth IRA may make more sense.
Required minimum distributions
When you reach age 73, you must start taking RMDs from your traditional IRA each year or face a penalty. Roth IRAs do not have this rule – you can keep growing your Roth IRA without RMDs as long as you live.
Income eligibility
There are no income limits to be eligible to contribute to a traditional IRA. However, if a single filer makes over $79,000 and has access to a retirement plan at work, they won’t be able to deduct the full amount of traditional IRA contributions. If a single filer makes over $89,000, they won’t be able to deduct any contributions. For married couples filing jointly, the partial deduction begins with income over $123,000, with a phase-out of deductions when income surpasses $143,000.
If someone is not covered by a retirement plan at work, as a single filer, they can deduct up to the amount of their annual traditional IRA contributions, regardless of income. Deductions for married couples where one spouse is covered by a plan at work will be limited if income is over $236,000, with a full phase-out and the inability to deduct contributions if income is over $246,000.
Roth IRAs come with income limits on contribution eligibility. In 2025, if a single filer makes more than $150,000 per year, they’ll only be eligible to contribute a reduced amount, with the inability to make any contributions if income is over $165,000. For married couples, the phase-out begins at $236,000, with the inability to contribute when income surpasses $246,000.
Are Roth IRAs insured?
A Roth IRA can be FDIC-insured as long as the contributions in the portfolio are invested in FDIC-insured banking products, such as money market accounts, CDs, savings accounts and checking accounts. If you invest in securities, such as stocks or ETFs, these investments will not be insured.
What are the Roth IRA withdrawal rules?
Once you reach age 59 1/2 and have had your account for at least 5 years, you can withdraw funds without penalty.
Under certain conditions, such as a medical disability or a first-time home purchase, you can withdraw up to a certain amount before age 59 1/2 without paying a penalty.
If you are under 59 1/2 and don’t meet any of the other requirements for a qualified distribution, you may have to pay a penalty.
Opening a Roth IRA
To open a Roth IRA, you’ll need to fill out an application with your broker, bank or financial institution of choice.
After, you can start making weekly, monthly or annual contributions to your Roth IRA, which you can invest in whichever assets suit your financial needs.
Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
