A Roth IRA is a unique retirement savings vehicle that allows eligible individuals to set aside money today for a potentially tax-free income stream in the future. Like a traditional IRA, a Roth arrangement enables individuals to make annual contributions of up to $7,000 in 2025, or $8,000 for savers age 50 and older. However, the similarities between these two arrangements end there.
Contributions to traditional IRAs are made with pre-tax dollars, while distributions taken in retirement are taxable as ordinary income. By contrast, owners of Roth IRAs pay taxes on their contributions in return for tax-free withdrawals when they are at least 59½ years old and have owned their accounts for a minimum of five years.
Another difference between these two types of accounts is that taxpayers with traditional IRAs must begin taking annual required minimum distributions (RMDs) and paying the related taxes at age 72 or 73, depending on their birth year. Non-spouse beneficiaries who inherit a decedent’s traditional IRA also have an obligation to empty those accounts and pay the related taxes within 10 years of the original owner’s death. There are no minimum withdrawal requirements for Roth IRAs
Deciding which strategy is best for you depends on whether you prefer to pay Uncle Sam up front when you make contributions or when you take withdrawals in retirement when you may be in a lower tax bracket. For many investors, the answer already may be determined by the Internal Revenue Code, which limits Roth IRA participation to individuals whose modified adjusted gross income (MAGI) falls below certain thresholds.
For 2025, the ability to make annual Roth IRA contributions is phased out when a single-filing taxpayer’s MAGI is $150,000, or $236,000 for married couples filing joint returns. However, high-earning investors may rely on a back-door IRA or a Roth conversion to work around the Roth income thresholds. This strategy allows investors to make tax-deductible contributions to traditional IRAs today and convert those accounts to Roths in the future to receive the benefit of tax-free and often penalty-free withdrawals before and during retirement. The one caveat is that taxes will be applied to the converted amount.
It behooves investors to estimate their income tax rates into the future to determine whether the tax implications of a Roth conversion now will outweigh the potential future benefits, including tax-free retirement distributions and the exclusion of Social Security payments from taxable income. This decision should not be based solely on taxes. Instead, investors should seek the counsel of experienced financial advisors to help determine how these tools best fit their unique financial needs and estate planning goals.
About the Author: Brendan T. Hayes is a financial planner with Provenance Wealth Advisors (PWA), an Independent SEC-Registered Investment advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC (PWAS). He can be reached in the firm’s West Palm Beach, Fla., office at (561) 361-2001 or info@provwealth.com.
Provenance Wealth Advisors, 200 E. Las Olas Blvd., Nineteenth Floor, Ft. Lauderdale, FL 33301Â (954) 712-8888.
Brendan T. Hayes is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description or a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the preceding material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult your financial advisor about your individual situation.
Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Changes in tax laws may occur at any time and could have a substantial impact on each person’s situation. While we are familiar with the tax provisions presented herein, as financial advisors of PWA Securities, LLC, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
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Updated on October 20, 2025