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In contrast, contributions to a Roth IRA are made with after-tax income. This means there is no tax deduction when contributing, but withdrawals during retirement are tax-free. The choice between the two accounts often comes down to personal circumstances, including current and expected future income tax rates.
Making the Right Choice: Traditional vs. Roth IRA
To determine which type of IRA is best suited for you, consider your expected tax bracket both now and in retirement. Generally, younger individuals with lower income may benefit more from a Roth IRA, while higher earners may find the immediate tax benefits of a Traditional IRA more appealing.