Project tax-free retirement savings from a Roth IRA
2025 IRS limit: $7,000 (under 50) / $8,000 (50+).
Used to compare with what a Traditional IRA would net after tax.
Roth IRA contributions are made with after-tax money, but withdrawals in retirement (including all the growth) are tax-free. This is especially powerful if you expect to be in a similar or higher tax bracket in retirement than you are today.
If your income exceeds these limits, look up "backdoor Roth IRA" — a legal workaround using a Traditional IRA conversion.
Traditional IRA gives you a tax deduction today but you owe tax on withdrawals. Roth gives no deduction today but withdrawals are tax-free. Generally Roth wins if you're early-career (lower bracket now), if you expect higher taxes in the future, or if you want estate-planning flexibility (no required minimum distributions during your lifetime).
Yes — Roth IRA contributions (not earnings) can be withdrawn any time tax- and penalty-free. Earnings withdrawn before age 59½ (and before 5 years of account age) are subject to tax and 10% penalty, with some exceptions.
Different accounts; you can use both. 401(k) has higher contribution limits and possible employer match; Roth IRA gives more investment flexibility and tax-free growth. Common advice: contribute to 401(k) up to the match, then max a Roth IRA, then go back to 401(k).