Roth vs Traditional IRA
Roth IRA vs Traditional IRA
The single decision that shapes your retirement tax bill. The right answer depends almost entirely on one number: your future tax bracket vs your current one.
Roth IRA
Pay tax now, withdraw tax-free in retirement.
Traditional IRA
Deduct contributions today, pay tax on withdrawals later.
At a glance
| Roth IRA | Traditional IRA | |
|---|---|---|
| Tax break | On withdrawals (tax-free) | On contributions (tax-deductible) |
| 2026 contribution limit | $7,000 ($8,000 at 50+) | $7,000 ($8,000 at 50+) |
| Income phase-out (single) | $150K–$165K MAGI | Deductibility phases out if covered by workplace plan |
| Required minimum distributions (RMDs) | None — ever | Yes, starting age 73 |
| Early withdrawal of contributions | Anytime, tax/penalty-free | 10% penalty + tax before 59½ (with exceptions) |
| Early withdrawal of earnings | Penalty unless 5-year rule + qualifying event | 10% penalty + tax before 59½ |
| Best when… | Tax bracket lower today than in retirement | Tax bracket higher today than in retirement |
| Estate planning | Heirs inherit tax-free | Heirs pay ordinary income tax |
Pick Roth IRA
Pick Roth if you're early-career, you expect higher income later, or you want a tax-free chunk to manage your bracket in retirement. Roth is also the default winner for most people in their 20s and early 30s — your bracket will only go up from here.
Pick Traditional IRA
Pick Traditional if you're at peak earnings (high marginal bracket today), live in a state with high income tax now but plan to retire to a no-tax state, or you simply need the deduction to free up cash for other priorities like the employer 401(k) match.
The one number that decides it
Mathematically, Roth and Traditional are equivalent if your tax bracket today equals your bracket in retirement. The only thing that differs is when the IRS takes their cut. So the practical question becomes: which way is your bracket moving?
Most people early in their careers will see their bracket rise over the next 20–30 years. They should pay tax now (Roth) and lock in today's lower rate. People at peak earnings — typically 45–60 with kids out of the house — will see their bracket fall in retirement. They should defer (Traditional) and pay tax later at the lower rate.
When you can't predict your bracket
Most people can't reliably forecast their retirement bracket. Tax law changes. Income shocks happen. The simple defense: own both. Splitting contributions between Roth and Traditional builds tax diversification — you can withdraw selectively in retirement to control your bracket each year. If a year requires a large withdrawal (medical, home repair), pulling from Roth keeps you in a lower bracket and avoids spiking Medicare premiums.
The 'no RMDs' superpower
The Roth IRA is the only major US retirement account with no Required Minimum Distributions during the original owner's lifetime. That means you can let it compound untouched for decades after age 73 and pass the entire balance to heirs. For multi-generational wealth planning, that compounding window is enormous — a Roth IRA inherited at age 50 can be drained over 10 years tax-free, often after 30+ extra years of growth.
What about the backdoor Roth?
If your income is above the Roth contribution phase-out, you can still get money in via the backdoor Roth: contribute non-deductibly to a Traditional IRA, then convert to Roth. The conversion is taxable to the extent you have pre-tax money in any Traditional IRA (the pro-rata rule), so it works cleanly only if your Traditional IRA balance is zero or pre-tax dollars are in a 401(k) instead. High earners should talk to a CPA before pulling the trigger.