Traditional vs. Roth Retirement Accounts

Two tax treatments for retirement accounts, differing in when you pay tax.

This is an educational comparison, not a recommendation. Which option (if any) fits your situation depends on your circumstances — see the key questions in the last row, and discuss them with a qualified professional.

Category	Traditional	Roth
Purpose	Tax-deferred retirement savings	Tax-free-growth retirement savings
Potential return	Depends on underlying investments, same as Roth	Depends on underlying investments, same as Traditional
Risk	Market risk of underlying investments; future tax rates uncertain	Market risk of underlying investments; assumes current tax rate is known
Liquidity	Early withdrawals generally penalized before retirement age	Contributions (not earnings) may be withdrawn more flexibly; rules vary
Taxes	Contributions may reduce taxable income now; withdrawals taxed as ordinary income	Contributions made with after-tax dollars; qualified withdrawals generally tax-free
Fees	Depends on account provider and investments, same as Roth	Depends on account provider and investments, same as Traditional
Guarantees	None — value depends on investment performance	None — value depends on investment performance
Complexity	Moderate — subject to required minimum distribution rules	Moderate — subject to income limits on contributions
Time horizon	Long-term, retirement-focused	Long-term, retirement-focused
Key questions	Do I expect a lower tax rate in retirement than now?	Do I expect a higher tax rate in retirement than now?