Roth vs. Traditional IRA
Roth = pay tax now, tax-free in retirement. Traditional = deduct now, pay tax in retirement. The right answer depends on whether your tax bracket today is higher or lower than your expected retirement bracket. Most people should do both for tax diversification.
The short answer
Roth if your tax rate today is lower than it will be in retirement. Traditional if higher. Split if you genuinely do not know.
The arithmetic is exactly symmetrical, which is the thing almost every article on this topic obscures. At the same tax rate going in and coming out, the two produce an identical result. There is no compounding advantage to either.
What breaks the tie is the rate differential, and everything else is a second-order consideration on top of it.
Since most people cannot forecast their retirement bracket with confidence, holding both is a legitimate answer rather than a fence-sitting one — it gives you the ability to draw from whichever is cheaper in a given year.
Why the rate is the only thing that matters
A $7,500 contribution growing at 7% for 30 years, reaching $57,092.
| Roth, 22% now | $57,092 | You paid $1,650 of tax up front. Every dollar withdrawn is yours. |
|---|---|---|
| Traditional, 22% later | $44,532 | The contribution cost you only $5,850 after the deduction — invest that difference and the two are identical. |
| Traditional, 12% later | $50,241 | Dropping two brackets in retirement is what makes the traditional side win. |
Same rate both times, same outcome. The traditional account only wins if your retirement rate is lower, and the Roth only wins if it is higher.
Where people go wrong
- Believing the Roth compounds better. It does not — the difference is entirely the tax rate.
- Comparing a Roth contribution against a traditional one without investing the tax saving the traditional gives you.
- Ignoring required minimum distributions, which apply to traditional accounts from 73 and to Roth IRAs not at all.
- Forgetting that Roth contributions — though not earnings — can be withdrawn at any time without tax or penalty.
Common questions
How much can I contribute in 2026?
$7,500 across all your IRAs combined, plus a $1,100 catch-up if you are 50 or over, giving $8,600. Per IRS Notice 2025-67.
What are the 2026 Roth income limits?
Contributions phase out between $153,000 and $168,000 for single filers and heads of household, and between $242,000 and $252,000 for married couples filing jointly. Above the top of the range you cannot contribute directly.
Which should I choose if I cannot predict my retirement bracket?
Hold both. Tax diversification lets you draw from whichever account is cheaper in a given year, and it hedges the genuine possibility that rates change in ways nobody forecast. Many people naturally end up with a traditional 401(k) and a Roth IRA, which achieves this without any planning.
| Roth | Traditional IRA | |
|---|---|---|
| Contribution treatment | After-tax (no deduction) | Pre-tax (deductible if income limits met) |
| Growth | Tax-free | Tax-deferred |
| Withdrawals in retirement | Tax-free | Taxed as ordinary income |
| 2026 contribution limit | $7,500 ($8,600 if 50+) | $7,500 ($8,600 if 50+) |
| 2026 income limits | Single $153-168K, MFJ $242-252K phaseout | Deduction phases out if you have a workplace plan |
| Required minimum distributions | None during your lifetime | Begin at age 73 |
| Early withdrawal of contributions | Anytime, penalty-free | 10% penalty + tax before age 59½ |
| Best for | Lower current bracket, longer horizon | Higher current bracket, retiring to low-tax state |
Choose Roth if
- You're early in your career (low bracket now).
- You expect tax rates to rise generally.
- You want flexibility — contributions can come back out tax-free.
- You plan to leave money to heirs (no RMDs).
Choose Traditional IRA if
- You're in peak earnings (24%+ bracket).
- You'll retire in a state with no income tax.
- You need the current-year tax deduction.
- You expect your retirement income to be much lower than today.
Run the numbers yourself
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