RothvsTrad Image

Should You Be Investing in a Roth or Traditional IRA?

When it comes to planning for retirement, one of the most common questions people face is whether to contribute to a Traditional IRA or a Roth IRA. While both accounts offer tax advantages and are designed to help you save for retirement, they differ in how and when you get those tax breaks. Choosing the right one can make a significant difference in your long-term financial plan.

Understanding the Basics

Traditional IRA

  • Contributions are often tax-deductible (depending on your income and whether you have a retirement plan at work).
  • Money grows tax-deferred.
  • You pay taxes on withdrawals in retirement.
  • Required minimum distributions (RMDs) begin at age 73.

Roth IRA

  • Contributions are made with after-tax dollars (not deductible).
  • Money grows tax-free.
  • Qualified withdrawals in retirement are tax-free.
  • No RMDs during the account holder’s lifetime.

How to Choose: Key Factors to Consider

1. Your Current and Future Tax Bracket

  • Traditional IRA: A better choice if you’re in a higher tax bracket now and expect to be in a lower one in retirement. You get a tax break now and pay later at a (hopefully) lower rate.
  • Roth IRA: Ideal if you’re in a lower tax bracket today but expect to be in a higher one in the future. You pay taxes now and enjoy tax-free income later.

2. Your Age and Time Until Retirement

  • Younger investors often benefit from Roth IRAs because they have more time for their contributions to grow tax-free.
  • Older investors who are closer to retirement and want to reduce taxable income now may prefer the Traditional IRA.

3. Access to Funds

  • Roth IRA contributions (not earnings) can be withdrawn at any time, penalty- and tax-free. This makes Roths more flexible in an emergency.
  • Traditional IRAs typically charge penalties for early withdrawals before age 59Âœ.

4. Income Limits

  • Roth IRA eligibility phases out at higher income levels:
    • For 2025: If you’re a single filer with a modified adjusted gross income (MAGI) between $150,000 and $165,000, or married filing jointly with a MAGI between $236,000 and $246,000, you may contribute a reduced amount to a Roth IRA. However, if your MAGI exceeds $165,000 (single) or $246,000 (joint), you’re not eligible to contribute directly to a Roth IRA — but you can still contribute to a traditional IRA.
  • Traditional IRA has no income limit to contribute, but tax deductibility phases out if you or your spouse are covered by a workplace retirement plan.

Can You Have Both?

Yes! If you’re eligible, you can contribute to both a Roth and Traditional IRA — as long as your total contribution doesn’t exceed the annual limit ($7,000 in 2025, or $8,000 if you’re 50 or older). A mix can give you both tax-deferred and tax-free income sources in retirement.

What About the Backdoor Roth?

If your income is too high to contribute directly to a Roth IRA, a strategy called the Backdoor Roth IRA may be an option. It involves contributing to a Traditional IRA and then converting those funds to a Roth. This can be a useful strategy for high-income earners — but it’s best done with guidance from a financial advisor or tax professional.

Bottom Line

Choosing between a Traditional and Roth IRA comes down to your current financial situation, tax bracket, and long-term goals. Both accounts offer excellent benefits — the key is understanding how those benefits align with your future plans. If you’re unsure which is right for you, speaking with a financial advisor can help you build a strategy tailored to your retirement vision.

Please contact Mills Wealth to speak to an advisor.
Recent Posts

MILLS WEALTH ADVISORS

Your Fiduciary Financial Advisor in Southlake, TX

Stop by our Southlake wealth-management office, just off TX-114 and minutes from Westlake, Trophy Club, and Colleyville, to meet the team that’s guided North Texas families and business owners for 25 years. Mills Wealth Advisors delivers fee-only financial planning, retirement-income strategies, tax-efficient investing, and exit-planning expertise to clients across the Dallas-Fort Worth metroplex. Tap the map below for turn-by-turn directions or give us a call to book your complimentary discovery meeting today.

  1. Leave Westlake
    • Head south (≈ 350 ft, restricted-use road).
    • Turn left toward Trophy Club Dr / Westlake Pkwy (≈ 440 ft, restricted).
    • Turn left onto Trophy Club Dr / Westlake Pkwy (0.1 mi).
  2. Join TX-114 East
    • Turn right onto TX-114 Frontage Rd (0.4 mi).
    • Use the left lane to merge onto TX-114 E (1.4 mi).
  3. Exit for Dove Rd / White Chapel Blvd
    • Take the Dove Rd exit (0.5 mi) and keep right.
    • Continue on W State Hwy 114 (0.9 mi).
  4. North White Chapel Boulevard
    • Turn right onto N White Chapel Blvd (0.3 mi).
    • At the first traffic circle, take the 2nd exit to stay on N White Chapel Blvd (2.2 mi).
    • At the next traffic circle, take the 3rd exit (≈ 460 ft).
  5. Arrive
    • Turn right; Mills Wealth Advisors will be on the left after ≈ 130 ft.
    • Address: 1207 S White Chapel Blvd #150, Southlake, TX 76092.
  1. Leave Trophy Club
    • From Hamper Ct, head southwest to Hogans Dr (≈ 350 ft, restricted).
    • Turn right onto Hogans Dr (0.2 mi).
    • Turn right onto Indian Creek Dr (≈ 400 ft).
    • Turn left onto Trophy Club Dr and continue toward TX-114 (0.4 mi).
  2. Join TX-114 East
    • Turn left onto TX-114 Frontage Rd (0.4 mi).
    • Use the left lane to merge onto TX-114 E (1.4 mi).
  3. Exit for Dove Rd / White Chapel Blvd
    • Take the Dove Rd exit (0.5 mi) and keep right.
    • Continue onto W State Hwy 114 (0.9 mi).
  4. North White Chapel Boulevard
    • Turn right onto N White Chapel Blvd (0.3 mi).
    • At the first traffic circle, take the 2nd exit to stay on N White Chapel Blvd (2.2 mi).
    • At the next traffic circle, take the 3rd exit (≈ 460 ft).
  5. Arrive
    • Turn right; Mills Wealth Advisors is on the left after ≈ 130 ft.
    • Address: 1207 S White Chapel Blvd #150, Southlake, TX 76092.
  1. Depart Colleyville
    • Head northwest (≈ 85 ft) to Colleyville Blvd.
    • Turn right onto Colleyville Blvd (0.2 mi).
  2. Pleasant Run Road
    • Turn left onto Pleasant Run Rd (2.0 mi).
    • At the traffic circle, continue straight to stay on Pleasant Run Rd (0.6 mi).
  3. South White Chapel Boulevard
    • Pleasant Run Rd becomes S White Chapel Blvd—continue for 0.5 mi.
    • At the next traffic circle, take the 1st exit (≈ 312 ft).
  4. Arrive
    • Turn right; Mills Wealth Advisors is on the left after ≈ 131 ft.
    • Address: 1207 S White Chapel Blvd #150, Southlake, TX 76092.
  1. Keller Parkway (FM 1709)
    • Head east on Keller Pkwy toward Rufe Snow Dr.
    • Pass Scooter’s Coffee on the right. Distance: 1.5 mi.
  2. Southlake Boulevard
    • Continue straight; Keller Pkwy becomes W Southlake Blvd. Distance: 1.0 mi.
  3. Davis Boulevard (FM 1938)
    • Turn right toward Davis Blvd / S Randol Mill Ave (112 ft).
    • Turn right onto Davis Blvd and continue 0.7 mi.
  4. W Continental Boulevard
    • Turn left onto W Continental Blvd. Distance: 1.7 mi.
    • At the traffic circle, take the 2nd exit to stay on W Continental Blvd (≈ 370 ft).
  5. Arrival on S White Chapel Boulevard
    • Turn right, then the destination will be on the left after ≈ 130 ft.
    • Mills Wealth Advisors – 1207 S White Chapel Blvd #150, Southlake, TX 76092.

1207 S. White Chapel Blvd.
Suite 150
Southlake, TX 76092

For more than twenty-five years, we’ve been serving the financial needs of businesses, individuals, and families in Southlake, Texas and around the country.
Sitemap
Featured Content
Legal
Facebook X-twitter Linkedin Youtube
Copyright © 2024 Mills Wealth Advisors. All rights reserved. Disclosure