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For 2025, the contribution limit is $7,000 per year, or $8,000 if you’re age 50 or older (thanks to the “catch-up” provision). These limits apply across all IRAs combined, so if you have both a traditional and a Roth IRA, your total contributions cannot exceed the annual cap.
It’s important to note that contributions must come from earned income, such as wages or self-employment earnings. Investment income, rental income, or pensions don’t count toward eligibility for contributions.

Eligibility depends on your income and tax filing status. For example, in 2025, single filers with a modified adjusted gross income (MAGI) above $165,000 and married couples filing jointly above $246,000 are phased out of direct contributions.
However, even if your income is too high, you may still access a Roth IRA through a “backdoor” strategy, which involves contributing to a traditional IRA and then converting it to a Roth. This option has its own rules and tax implications, so it’s wise to plan carefully.

The key difference lies in taxation. With a traditional IRA, you may deduct contributions from your taxable income, but withdrawals in retirement are taxed as ordinary income. With a Roth IRA, you pay taxes upfront, but withdrawals in retirement are tax-free.
This distinction means the “best” choice depends on your current and future tax situation. If you expect your tax rate to be higher in retirement, a Roth IRA is often more advantageous. If you expect it to be lower, a traditional IRA may save you more money.

A Roth IRA is a retirement savings account that allows you to contribute after-tax dollars, meaning you don’t get a tax deduction upfront. The trade-off is powerful: your money grows tax-free, and qualified withdrawals in retirement are also tax-free. This makes it especially attractive if you expect to be in a higher tax bracket later in life.
Unlike traditional IRAs, Roth IRAs don’t require you to take mandatory withdrawals during your lifetime. That flexibility makes them not only a retirement tool but also a potential estate planning vehicle, since you can leave the account to heirs without being forced to draw it down yourself.

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