IRA Plans
Traditional IRA & Roth IRA
The bedrock of personal retirement savings, and one of the most important tax planning decisions you'll make.
What Is an IRA?
An Individual Retirement Account (IRA) is a personal savings account that provides tax advantages for retirement savings. Unlike employer-sponsored plans, IRAs are opened and managed independently by the individual, giving you complete control over your investments and provider.
There are two primary flavors: the Traditional IRA, which gives you a tax deduction today in exchange for taxable withdrawals later, and the Roth IRA, where you contribute after-tax dollars and enjoy tax-free growth and withdrawals in retirement.
Side-by-Side Comparison
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| 2025 Contribution Limit | $7,000 ($8,000 if 50+) | $7,000 ($8,000 if 50+) |
| Tax on Contributions | Pre-tax (deductible) | After-tax (not deductible) |
| Tax on Withdrawals | Taxable as ordinary income | Tax-free (qualified) |
| Required Minimum Distributions | Yes, begins at age 73 | No RMDs during owner's lifetime |
| Income Limits | Deductibility phases out with employer plan | Contribution phases out at $150k–$165k (single), $236k–$246k (MFJ) |
| Early Withdrawal Penalty | 10% before age 59½ | 10% on earnings before 59½ (contributions always accessible) |
| Best For | Those expecting lower tax rate in retirement | Those expecting higher tax rate in retirement |
The Backdoor Roth IRA
High earners who exceed the Roth IRA income limits can still access Roth benefits through the Backdoor Roth IRA strategy:
- 1Make a non-deductible contribution to a Traditional IRA (no income limits apply to contributions)
- 2Convert the Traditional IRA to a Roth IRA shortly after (paying tax only on any earnings)
- 3The converted funds now grow and withdraw tax-free
Pro-Rata Rule Warning
If you have any pre-tax IRA balances elsewhere, the IRS applies the "pro-rata rule," which may create an unexpected tax bill. Planning around this rule requires professional guidance.
Spousal IRA
A non-working spouse can contribute to their own IRA based on the working spouse's earned income — effectively doubling the household's annual IRA contribution. This is an often-missed planning opportunity for single-income households.
Who Should Choose Which?
Traditional IRA Is Better When…
You're in a high tax bracket now and expect to be lower in retirement- You need the immediate tax deduction to reduce taxable income today
- You're close to retirement and want to lower your current tax bill
- State income taxes are high now and you plan to retire in a no-income-tax state
Roth IRA Is Better When…
- You're young and in a low tax bracket with decades of growth ahead
- You expect tax rates (or your income) to rise in the future
- You want flexibility — Roth contributions can be withdrawn penalty-free
- You want to leave a tax-free inheritance to your heirs
- You want to avoid Required Minimum Distributions in retirement
Not Sure Which IRA Is Right for You?
The choice between Traditional and Roth, and advanced strategies like the Backdoor Roth — depends heavily on your specific tax situation. Let's talk through your options.
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