How Each Account Is Taxed in Retirement
The fundamental difference between a Traditional IRA and a Roth IRA comes down to when the IRS collects its share. With a Traditional IRA, contributions were typically made with pre-tax dollars, so every dollar you withdraw in retirement is counted as ordinary taxable income in the year you take it. With a Roth IRA, you contributed after-tax dollars, so qualified withdrawals—generally those taken after age 59½ from an account held at least five years—are entirely free of federal income tax.
This distinction matters more than it might first appear. Traditional IRA withdrawals stack on top of your other income, potentially pushing you into a higher bracket or affecting income-based calculations for Medicare premiums (known as IRMAA surcharges). Roth withdrawals, by contrast, are not counted in those calculations. For a fuller picture of how IRAs fit alongside Social Security and pensions, see our retirement income overview.
| Criterion | Traditional IRA | Roth IRA |
|---|---|---|
| Tax on withdrawals | Taxed as ordinary income | Qualified withdrawals tax-free |
| RMD requirement | Yes, starting at age 73 | None during owner's lifetime |
| Counts toward Social Security taxation | Yes | No |
| Counts toward Medicare IRMAA income | Yes | No |
| Estate planning flexibility | Heirs pay income tax on inherited funds | Heirs receive tax-free distributions |
| Ideal withdrawal timing | Lower-income years; before RMDs grow | Higher-income years or preserve for later |
Required Minimum Distributions: A Key Structural Difference
One of the most practically significant distinctions for retirees is the required minimum distribution (RMD) rule. The IRS requires Traditional IRA holders to begin taking annual withdrawals—calculated using account balance and IRS life-expectancy tables—starting at age 73 (under current law following the SECURE 2.0 Act). Failing to take an RMD on time can trigger a penalty on the amount not withdrawn.
Roth IRAs, however, carry no RMD requirement during the original account owner's lifetime. This means your Roth balance can continue growing tax-free for as long as you live, and you have full discretion over if and when you withdraw. For retirees who don't need the funds immediately, this can be a meaningful advantage for both cash-flow flexibility and estate planning.
Understanding RMD mechanics in detail is worth the effort. Our guide on RMD rules covers how amounts are calculated, what triggers them, and what missing a deadline can mean.
Age 73
RMD start age under current law
The SECURE 2.0 Act raised the required beginning date for RMDs from Traditional IRAs to age 73 for those born between 1951 and 1959, and to 75 for those born in 1960 or later.
Up to 85%
Of Social Security that can be federally taxed
The IRS determines the taxable portion of Social Security benefits based on a combined income formula; higher combined income triggers a larger taxable share.
$44,000
Joint filer threshold for maximum SS benefit taxation
Married couples filing jointly with combined income above $44,000 may have up to 85% of their Social Security benefit subject to federal income tax, per current IRS rules.
The Social Security Tax Interaction
A factor many retirees overlook is how IRA withdrawals interact with Social Security benefit taxation. Up to 85% of your Social Security benefit can be subject to federal income tax if your combined income—defined as adjusted gross income plus non-taxable interest plus half of your Social Security benefit—exceeds certain thresholds (currently $34,000 for single filers, $44,000 for married filing jointly).
Traditional IRA withdrawals are included in that combined income figure and can push you over these thresholds. Roth IRA withdrawals are not included, which means carefully sequencing Roth withdrawals during years when you also receive significant Social Security income may help keep more of your benefit tax-free. This interaction is one reason many financial planners discuss a mixed strategy: drawing from both account types based on annual income levels. For context on how pension income adds another layer to this calculation, see our overview of pension income and taxes.
State Taxes May Differ
While federal rules on IRA taxation are uniform across the country, state income tax treatment varies considerably. Some states exempt IRA withdrawals fully or partially; others tax them at the same rate as ordinary income. Check your state's tax authority or consult a local tax professional to understand how your withdrawals will be treated at the state level.
Thinking About a Withdrawal Strategy
There is no single universally correct answer to which account type to draw from first in retirement. The right sequence depends on your current tax bracket, projected future income, Social Security timing, state tax rules, and estate goals. That said, a few general principles are widely discussed among financial professionals:
- Roth funds are often preserved longer because their tax-free status and absence of RMDs make them especially valuable in later years or for heirs.
- Traditional IRA funds may be tapped earlier in lower-income years to take advantage of lower tax brackets before RMDs force larger, potentially higher-taxed withdrawals later.
- Roth conversions—moving money from a Traditional IRA to a Roth IRA in a given tax year—are one strategy some retirees use during lower-income years to shift future withdrawals into the tax-free column, though conversions are taxable events in the year they occur.
Coordinating these decisions alongside Social Security, pensions, and any part-time income is genuinely complex. Our article on coordinating multiple income streams offers guidance on how these sources can be sequenced thoughtfully. If you're exploring income sources beyond these two account types, our broader overview of retiree income options may also be useful.
This article is for general informational purposes only and does not constitute personalized financial, tax, or legal advice. Tax rules and thresholds are subject to change. Please consult a qualified financial adviser, tax professional, or attorney regarding decisions specific to your circumstances.
