Is it better to open a Roth or Traditional IRA? It’s a real headscratcher but NextAdvisor’s Senior Contributing Editor Farnoosh Torabi says you really can’t go wrong with either one.

But depending on your situation, you might be better off with one over the other. Keep watching to learn more about what is a Roth versus a Traditional IRA, and how to get started investing.

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When it comes to saving for retirement, one of the most important decisions you’ll make is whether to use a traditional IRA or a Roth IRA. Both have advantages and disadvantages, so it’s essential to understand the differences between them before making a choice.

A traditional IRA allows you to deduct your contributions from your taxable income, which can reduce your taxes in the year you make the contribution. The contributions grow tax-deferred until you withdraw them in retirement, at which point they are taxed at your current tax rate. Traditional IRAs also have required minimum distributions (RMDs), meaning you must start withdrawing money after turning age 72, and the withdrawals are subject to income tax.

On the other hand, a Roth IRA does not offer an immediate tax break, but the money grows tax-free, and there are no RMDs. Contributions to a Roth IRA are made with after-tax dollars, so you won’t be taxed on the money when you withdraw it in retirement. Additionally, if you follow the rules and meet the requirements, the earnings on the contributions are tax-free as well.

So how do you decide which one is right for you? Here are some factors to consider:

Current tax rate: If you are in a high tax bracket now and expect to be in a lower one in retirement, it may make sense to take the tax deduction now with a traditional IRA. However, if you are just starting out in your career and in a lower tax bracket, a Roth IRA may make more sense.

Future tax rates: Predicting future tax rates can be challenging, but if you expect them to increase, a Roth IRA might be a better choice since you’ll be able to withdraw the money tax-free in retirement.

Withdrawal needs: If you anticipate needing to withdraw money from your IRA before age 59.5, a Roth IRA may be advantageous since contributions can be withdrawn tax-free at any time. However, with a traditional IRA, early withdrawals come with a 10% penalty as well as income tax.

Estate planning: Roth IRAs offer some estate planning advantages since there are no RMDs, and the account can continue to grow tax-free for your heirs. Additionally, Roth IRAs do not reduce the taxable portion of your estate.

Ultimately, the decision between a traditional and Roth IRA depends on your individual circumstances and goals. It’s always a good idea to consult with a financial advisor or professional to determine which one is right for you. Regardless of which one you choose, the most important thing is to start saving as early as possible to ensure a comfortable retirement.