Choosing between a Roth IRA and traditional IRA at age 60 requires weighing current tax rates against future withdrawal needs. Both accounts offer tax advantages, but they work in opposite directions.
How Each Account Works
Traditional IRAs grow tax-deferred. You don’t pay taxes until withdrawal after age 59½. There’s no income limit to contribute. If your income falls below certain thresholds and neither you nor your spouse has an employer-sponsored retirement account, contributions are deductible. Once you reach age 73, required minimum distributions (RMDs) kick in.
Roth IRAs are funded with after-tax dollars. Earnings withdrawals are tax-free after age 59½, provided your first contribution was at least five years ago. Contributions can be withdrawn anytime without taxes or penalties. Roth IRAs have no RMDs, but they come with income limits — high earners can’t contribute directly.
Annual contribution limits set by the IRS are identical for both account types.
Key Factors at Age 60
Your current tax rate versus expected future rate should drive the decision. If you expect lower income — and therefore a lower tax bracket — in retirement, a traditional IRA may reduce your current tax burden. Charles Schwab notes older adults often favor traditional IRAs to lower taxable income or prepare for a backdoor Roth conversion.
If you anticipate higher tax rates in retirement, a Roth IRA makes sense since withdrawals are tax-free. Additional Roth benefits include avoiding RMDs and passing tax-free money to heirs.
Your strategy should be reviewed annually. What works this year may not be optimal next year as income, tax brackets, and retirement timelines shift.
Roth Conversion Strategy
Money in a traditional IRA doesn’t have to stay there. A Roth conversion lets you move funds from a pre-tax account to a Roth one. You pay taxes on the converted amount upfront, then growth becomes tax-free.
For earners exceeding Roth contribution limits, a “backdoor Roth IRA” offers a workaround: contribute to a traditional IRA, then convert to Roth. This strategy is particularly relevant for high-income earners approaching retirement who want to minimize future tax exposure and avoid RMDs.
At 60, the window for tax-free growth is shorter than for younger savers. Running the numbers with a financial advisor can clarify whether paying taxes now (Roth) or later (traditional) yields better net results for your specific situation.