Roth vs Traditional IRA in 2024 — Which One Is Right for You?

## The simple Roth vs Traditional decision **Pay taxes now (Roth)** or **pay taxes later (Traditional)?** If your current tax rate is higher than your expected retirement rate → Traditional wins. If your retirement rate will be higher (or the same) → Roth wins. For most young workers in lower brackets (10–22%), Roth IRA is almost always the right choice. ## The backdoor Roth IRA If you earn above the Roth income limit ($161,000 single, $240,000 married in 2024): 1. Make a non-deductible Traditional IRA contribution ($7,000) 2. Convert it to a Roth IRA (no taxes if you have no other Traditional IRA balances) This is perfectly legal and widely used by high earners. ## Mega backdoor Roth If your 401(k) plan allows after-tax contributions AND in-service distributions: 1. After maxing the $23,000 pre-tax limit, make after-tax contributions (up to the $69,000 total limit) 2. Convert these after-tax contributions to Roth This allows up to ~$46,000 in additional Roth contributions annually. ## IRA vs 401(k): when to prioritise 1. 401(k) up to employer match (free money first) 2. Roth IRA to $7,000 (more investment options, no RMDs) 3. Max out 401(k) to $23,000 4. Taxable brokerage