When it comes to saving for retirement, the Roth and traditional IRA are like two sides of the same coin. Both offer powerful ways to grow your savings, but they come with distinct tax advantages — and challenges. As 2025 brings new tax changes, understanding these accounts is more important than ever.

Let’s break down the differences, explore how tax updates might affect your decision and help you figure out which path is right for your retirement journey.

Roth IRAs: Pay now, save later

With a Roth IRA, you contribute post-tax dollars. This means you don’t get a tax deduction up front, but your earnings grow tax free, and qualified withdrawals in retirement are also tax free. Think of it as planting a seed today so you can enjoy the fruits tax-free tomorrow.

2025 update: Higher income limits

Starting in 2025, the income limits for contributing to a Roth IRA are expected to rise slightly, making these accounts accessible to more people. For single filers, the limit is projected to increase to $153,000, while married couples filing jointly may see an increase to $228,000. If you’ve been on the edge of eligibility, this is your opportunity to join the Roth club.

Traditional IRAs: Save now, pay later

A traditional IRA is the opposite of a Roth. Contributions are typically tax deductible, giving you an immediate tax break. However, withdrawals in retirement are taxed as ordinary income. It’s like deferring taxes today in exchange for paying them later when (hopefully) your income and tax rate are lower.

2025 update: RMD age increase

One key advantage of a traditional IRA used to be delaying required minimum distributions (RMDs). The SECURE 2.0 Act extended the RMD age to 73 starting in 2023, and it will rise to 75 by 2033. For retirees, this means more time for tax-deferred growth, giving traditional IRAs an added boost.

Key differences to consider

The choice between a Roth and a traditional IRA often comes down to timing — when you want to pay taxes. To decide, consider these factors:

1. Your current tax bracket: If you’re in a high tax bracket today, a traditional IRA might make sense to reduce your taxable income now. But if your tax rate is low, paying taxes up front with a Roth IRA could save you money in the long run.
2. Future tax expectations: If you expect to be in a higher tax bracket in retirement, the Roth IRA’s tax-free withdrawals are an attractive option. Conversely, if your income will drop significantly after you stop working, the traditional IRA may be more advantageous.
3. Withdrawal flexibility: Roth IRAs don’t have RMDs, so your money can grow tax free for as long as you live. Traditional IRAs require RMDs once you hit the specified age, which can limit your flexibility.

How tax changes in 2025 could influence your decision

The tax landscape is always shifting, and 2025 is no exception. With certain provisions of the 2017 Tax Cuts and Jobs Act set to expire, federal tax rates may rise. If this happens, the Roth IRA’s appeal could grow for many investors.

For example, let’s say your taxable income today puts you in the 22% bracket, but future changes push that to 25%. Contributing to a Roth IRA now would lock in today’s lower rate, saving you from paying potentially higher taxes on withdrawals later.

Real-life scenarios

Scenario 1: The high-earner

Jake, 45, earns $180,000 a year and expects to stay in a high tax bracket during retirement. He opts for a Roth IRA because paying taxes now ensures he won’t face a heavy tax burden later. With 20 years until retirement, he maximizes his contributions, knowing his tax-free withdrawals will provide significant savings in the long run.

Scenario 2: The budget-conscious saver

Lisa, 32, earns $50,000 annually and expects her income to rise over time. She starts with a traditional IRA to take advantage of the immediate tax break while managing her current budget. As her income grows, she plans to convert some of her traditional IRA funds to a Roth IRA during lower-tax years.

Roth conversions: A 2025 strategy to consider

If you already have a traditional IRA, 2025 might be the perfect time to consider a Roth conversion. This involves transferring funds from a traditional IRA to a Roth IRA, paying taxes on the converted amount now to enjoy tax-free growth and withdrawals later.

Why convert in 2025? If tax rates rise in subsequent years, converting now could lock in today’s lower rates. It’s a smart strategy for those expecting higher future income or for retirees who want to leave a tax-free inheritance to their heirs.

Blended approach: Why not noth?

For many, the best strategy is a combination of Roth and traditional IRAs. This approach offers flexibility, allowing you to manage your taxable income in retirement. You can draw from your traditional IRA during lower-income years and tap into your Roth IRA to avoid pushing yourself into a higher tax bracket.

A personal perspective

Over the years, I’ve seen the power of tax planning in action. One client, nearing retirement, had split their savings evenly between Roth and traditional accounts. When they faced an unexpected expense during a year with high taxable income, they drew from their Roth IRA, avoiding a tax spike. It was a simple yet effective strategy that preserved their long-term plan.

Takeaways for 2025 and beyond

1. Evaluate your current tax bracket: Understand how your tax situation aligns with each IRA type.
2. Plan for future taxes: Consider how changing tax laws and income levels may impact your retirement.
3. Consider Roth conversions: If taxes are expected to rise, converting now could save money later.
4. Diversify your accounts: Use both Roth and traditional IRAs to maximize flexibility and tax efficiency.

Conclusion

Choosing between a Roth and traditional IRA isn’t just a financial decision — it’s a strategic one. With 2025 bringing higher income limits for Roth IRAs and changes to RMD rules, understanding these accounts is more critical than ever. Take time to review your current and future tax situation, explore opportunities for Roth conversions and consider blending both types of IRAs for greater flexibility.

Retirement planning is about more than saving; it’s about making your savings work for you. The right choice today can mean a more secure, tax-efficient future. Start planning now — your future self will thank you.

Lyle Boss, The REAL BOSS Financial, endorsed by Glenn Beck as the premier retirement advisor for Utah and the Mountain West states. Boss Financial, 955 Chambers St., Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.