INSIGHT

Traditional IRA vs Roth IRA: Which route is right for your retirement savings? 

Michael Watson, Sergio Fernandez • December 16, 2025

Services: Wealth Management

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High earners face a tax optimization puzzle that most IRA guidance ignores. Generic advice assumes everyone falls into the same tax brackets and has identical retirement goals, but when you’re managing a significant retirement portfolio, the stakes are different.  

Your income likely puts you in phase-out ranges that complicate contribution strategies, and your retirement lifestyle expectations demand sophisticated tax planning that goes far beyond basic traditional IRA vs Roth IRA “pay now or pay later” comparisons.

Our analysis cuts through the generic advice to provide the nuanced perspective that ambitious, high-earning professionals need to maximize their retirement savings efficiency. 

What is a traditional IRA? 

A traditional IRA offers immediate tax advantages by allowing you to deduct contributions from your current taxable income, reducing this year’s tax bill while your investments grow tax-deferred until withdrawal.  

For high earners, however, the deduction isn’t automatic—it depends on your income level and whether you participate in an employer-sponsored retirement plan. 

For 2025, you can contribute up to $7,000 to a traditional IRA, with an additional $1,000 catch-up contribution if you’re 50 or older, bringing your total potential contribution to $8,000. These limits represent a modest increase from previous years and remain consistent across both traditional and Roth IRAs. 

The deduction phase-out creates a critical planning consideration for high earners. If you’re covered by a workplace retirement plan and are married and file jointly, your traditional IRA deduction begins phasing out at $123,000 in modified adjusted gross income and disappears completely at $143,000. For single filers, the phase-out range runs from $77,000 to $87,000.  

Here’s how this impacts your planning: 

• Full deduction available: Your entire $7,000 contribution (or $8,000 with catch-up) reduces your taxable income dollar-for-dollar 
• Partial deduction phase-out: You receive a reduced deduction based on a complex IRS calculation 
• No deduction available: You can still contribute to a traditional IRA, but receive zero current tax benefit 

This phase-out structure means many high earners lose the primary advantage of traditional IRAs—the immediate tax deduction—making the contribution decision far more complex than standard guidance suggests. The 2025 IRS contribution limits provide the complete details on these thresholds and calculations. 

What is a Roth IRA? 

A Roth IRA operates on the opposite tax principle from traditional IRAs: you contribute after-tax dollars now in exchange for completely tax-free withdrawals in retirement. This means no immediate tax deduction, but your investments grow tax-free and you’ll never owe taxes on qualified withdrawals after age 59½. 

The 2025 contribution limits mirror traditional IRAs—$7,000 for most contributors, with an additional $1,000 catch-up contribution for those 50 and older. However, Roth IRAs use income phase-outs that are significantly more generous for high earners than traditional IRA deduction limits. 

For married couples filing jointly, Roth IRA contribution eligibility begins phasing out at $230,000 in modified adjusted gross income and disappears entirely at $240,000. Single filers face phase-out between $146,000 and $153,000. This creates distinct planning opportunities compared to traditional IRAs: 

• Full contribution available: You can contribute the complete $7,000 (or $8,000 with catch-up) to your Roth IRA 
• Partial contribution phase-out: Your contribution limit reduces gradually based on your income level 
• No direct contribution allowed: You exceed income thresholds but may still access Roth benefits through backdoor conversion strategies 

The higher income thresholds mean that many high earners who lose traditional IRA deduction benefits can still contribute directly to Roth IRAs, making this option often more accessible for sophisticated retirement planning. 

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Traditional IRA vs Roth IRA: Which should high-earners invest in? 

The choice between traditional and Roth IRAs becomes particularly nuanced for high earners.  

Compare present vs future tax brackets 

Your decision hinges on comparing current tax brackets against projected retirement brackets, but the calculation extends beyond simple rate comparisons. 

Current income tax brackets favor traditional IRA deductions for many high earners, particularly those in the 32% or 35% brackets who expect lower retirement tax rates. If you’re earning enough to place you in these brackets today but plan to withdraw conservatively in retirement, the immediate tax savings from traditional IRA deductions may compound over decades. 

However, Roth IRAs offer compelling advantages for high earners who expect to maintain substantial income streams in retirement or face higher future tax rates.  Tax-free growth may become particularly valuable when managing large portfolios, as it eliminates required minimum distributions (while the account owner is alive) and provides maximum estate planning flexibility. 

Guidelines for making the choice: A practical framework for high earners 

Keep in mind that everyone’s goals and financial situation are different. Before committing to any investment strategy, consider speaking with a qualified financial advisor or wealth management professional.  

That said, this chart could be a good starting point for you to begin to consider whether a traditional IRA vs Roth IRA is better for you.  

Consider traditional IRAs when you: 

• Currently pay 32% or 35% marginal tax rates and expect to be in the 22% or 24% brackets during retirement 
• Can deduct contributions (income below phase-out thresholds) 
• Plan to relocate to a lower-tax state in retirement 
• Need current-year tax deductions to optimize your overall tax strategy 

Consider Roth IRAs when you: 

• Expect to maintain high income in retirement from business ownership, rental properties, or substantial portfolio withdrawals 
• Have maximized other tax-deferred options and want diversification 
• Prioritize estate planning benefits and tax-free wealth transfer 
• Are already phased out of traditional IRA deductions 

For many high earners, the right retirement savings plan involves contributing to both traditional and Roth IRAs at different points in your career or even concurrently. Tax diversification provides flexibility to optimize withdrawals based on your actual retirement tax situation rather than today’s projections.  

You might prioritize traditional IRA contributions during peak earning years when marginal rates are highest, then shift toward Roth strategies as income stabilizes or during years with lower taxable income.  

This approach also allows you to manage retirement tax brackets strategically—withdrawing from traditional accounts up to favorable bracket thresholds, then drawing from Roth accounts for additional needs without pushing yourself into higher tax territory. 

Keep your IRA investments tax-efficient 

No matter which IRA you contribute to (likely a combination of both), it’s important to be strategic about the investments within those accounts to help maximize your return.  

Asset location strategies optimize tax efficiency by placing different investment types in traditional versus Roth accounts based on expected returns and tax characteristics.  

High-growth investments may perform better in Roth accounts where gains remain tax-free, while bond investments may suit traditional accounts where current tax deductions offset lower expected returns. 

Create your personalized IRA strategy 

The traditional IRA vs Roth IRA decision isn’t one-size-fits-all, particularly for high earners navigating complex tax situations and substantial retirement portfolios. Your optimal strategy depends on current versus projected retirement tax brackets, income phase-out thresholds, estate planning priorities, and long-term wealth accumulation goals. 

Ready to optimize your IRA strategy for your specific situation? BPM’s wealth management team specializes in sophisticated retirement planning for high earners with complex portfolios. We help you navigate phase-out thresholds, coordinate tax-efficient strategies, and build retirement plans designed for your lifestyle goals. Get in touch with us today.