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Roth vs. Traditional IRA: Who's Winning the Savings Race?
10 Jun
Summary
- Roth IRAs attract more new contributions than traditional IRAs.
- Fewer households hold Roth IRAs compared to traditional IRAs.
- Younger savers with expected future income prefer Roth IRAs.
While traditional IRAs are held by more households, Roth IRAs are seeing greater engagement in terms of new contributions. As of 2024, about a quarter of U.S. households owned a Roth IRA, compared to nearly a third for traditional IRAs. However, IRS data from 2022 indicated that taxpayers were approximately twice as likely to contribute to a Roth IRA than to a traditional one.
This higher contribution activity for Roth IRAs is especially notable among younger savers who anticipate their income and tax rates will increase later in life. Traditional IRAs often gain ownership through rollovers from workplace retirement plans like 401(k)s when employees leave a company, which helps explain their broader household ownership despite lower active contribution rates.
