Core Insights - The article discusses the considerations of switching from pre-tax IRA contributions to Roth IRA contributions, highlighting the trade-offs between immediate tax benefits and long-term tax-free growth [1][2][3] Group 1: IRA Types - A traditional IRA is a pre-tax account where taxes are paid upon withdrawal, leading to a tax liability on the total balance, including gains [2] - A Roth IRA is an after-tax account that allows for tax-free growth and withdrawals, with no required minimum distributions (RMDs) [3] Group 2: Contribution Limits - Both traditional and Roth IRAs have the same annual contribution limits, which are $7,000 for tax year 2025, with an additional $1,000 for individuals aged 50 or older [3] Group 3: Opportunity Cost - There is a potential opportunity cost associated with contributing to a Roth IRA, particularly later in life, as immediate tax payments reduce the capital available for investment [5][6] - For example, investing $500 monthly in a Roth IRA over 10 years at a 10% return would yield approximately $102,000, but the effective contribution would be $600 when accounting for taxes [6][7] - In contrast, a traditional IRA allows for the full $600 to be invested upfront, potentially growing to about $123,000 under the same conditions, although taxes would reduce the final amount [7]