Let’s break down the differences and help you make the smartest choice based on your income, tax bracket, and retirement goals.

The Basics: Tax Now or Tax Later?

With a Roth IRA, you contribute after-tax dollars today. That means you don’t get a deduction now—but your money grows tax-free, and you can withdraw it in retirement without paying any additional taxes. Roth IRAs also don’t require you to take Required Minimum Distributions (RMDs), giving you more flexibility and control later in life.

With a Traditional IRA, your contributions are typically made pre-tax. You get a deduction today, lowering your current taxable income, but your withdrawals in retirement will be taxed as ordinary income. Plus, once you hit age 73, RMDs are required—whether you need the money or not.

Which One Grows More Over Time?

Here’s the twist: If you’re in the same tax bracket when you contribute and withdraw, Roth and Traditional IRAs can yield the exact same result. Aaron shared a powerful example: If you contribute $1,000 per month for 40 years with an 8% return, you’ll end up with about $3.2 million in a Traditional IRA before taxes. After paying a 12% tax, that balance drops to $2.9 million—identical to what you would have had in a Roth IRA after tax-free growth.

The Deciding Factor: Your Future Tax Rate

The real difference lies in your future tax rate. If you expect your income and taxes to rise over time, a Roth IRA can be the smarter play—you’ll pay lower taxes now and avoid higher ones later. If you think your retirement tax rate will be lower, a Traditional IRA might make more sense, saving you more today.

Aaron emphasized that the U.S. progressive tax system complicates things, but generally, Roth is ideal for younger earners or those early in their careers, while Traditional works well for higher earners who expect lower income in retirement.

Don’t Overlook Flexibility and Estate Planning

Roth IRAs offer several additional perks:

• No RMDs, which means you’re not forced to draw money when you don’t need it.
• Tax-free inheritance, making it a powerful estate planning tool.
• Lower taxable income in retirement, which can help you qualify for tax credits or reduce your Medicare premiums.

Why Diversification Can Be the Best Strategy

Aaron recommends having both Roth and Traditional accounts. Diversifying your retirement tax exposure gives you options—pull from your Roth in high-income years, or use your Traditional IRA when you need the deduction. Having flexibility is just as important as having savings.

Final Thoughts

So, Roth or Traditional? The answer is: it depends.

If you’re young, in a lower tax bracket, and think taxes will rise in the future, go with Roth. If you’re in a higher bracket today and expect to be in a lower one later, a Traditional IRA could be better. But ideally, build both.

The goal is simple: maximize your retirement wealth, keep more of what you earn, and create a future that’s financially free and flexible.

Let me know in the comments—what kind of retirement account are you using? And do you think taxes will be higher or lower when you retire?

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

The post Roth vs. Traditional IRA: Which One Builds More Wealth for Your Retirement? appeared first on ROI TV.