CALCMONEY // COMPARE
Traditional IRA vs. Roth IRA
The tax treatment is reversed. Everything else flows from that single difference. Here is the full breakdown for 2026.
Traditional IRA
You contribute pre-tax dollars and get a deduction today. The money grows tax-deferred. You pay ordinary income tax on every dollar you withdraw in retirement. Best when your current tax rate is higher than your expected retirement rate.
Roth IRA
You contribute after-tax dollars with no deduction. The money grows tax-free. Qualified withdrawals in retirement are completely tax-free, including all gains. Best when your retirement tax rate will be higher than today, or when you want tax-free income for heirs.
Side-by-Side Comparison
2026 Rules| Rule | Traditional IRA | Roth IRA |
|---|---|---|
| 2026 Contribution Limit | $7,000 ($8,000 if 50+) | $7,000 ($8,000 if 50+) |
| Tax on Contributions | Pre-tax (deductible) | After-tax (no deduction) |
| Tax on Qualified Withdrawals | Taxed as ordinary income | Tax-free |
| Income Limit to Contribute | None (deductibility phases out) | $161k single / $240k married |
| Required Minimum Distributions | Yes, starting at age 73 | None during owner's lifetime |
| Early Withdrawal Penalty | 10% + taxes before 59½ | 10% on earnings before 59½ |
| Withdrawal of Contributions | Taxed + potential penalty | Free at any time, no penalty |
| Best When Tax Rate Is Higher | Now (deduction is more valuable) | In retirement (growth tax-free) |
| Backdoor Conversion | Can convert to Roth (taxable event) | Accepts backdoor contributions |
| Estate Planning | Heirs pay income tax on inherited funds | Tax-free inheritance to heirs |
The Break-Even Math
When does each account win?| Scenario | Better Choice | Reason |
|---|---|---|
| Current rate: 32%, retirement rate: 22% | Traditional IRA | Deduction saves more now than future tax costs |
| Current rate: 22%, retirement rate: 32% | Roth IRA | Tax-free growth avoids the higher future rate |
| Same rate now and in retirement | Roth IRA (slight edge) | Tax-free compounding on gains; no RMDs |
| High earner above Roth income limit | Traditional + Backdoor Roth | Get both with pro-rata planning |
| Young, low current income, decades to grow | Roth IRA | Decades of tax-free compounding; rate likely rises |
| Near retirement, peak earnings | Traditional IRA | Deduction at high rate; draw down at lower rate |
Frequently Asked Questions
Should I choose a Traditional IRA or Roth IRA?
If you expect to be in a higher tax bracket in retirement than you are now, a Roth IRA is generally better. If your tax rate is higher now and you expect it to drop in retirement, a Traditional IRA gives you a bigger immediate deduction. When uncertain, splitting contributions between both provides tax diversification.
Can I have both a Traditional IRA and a Roth IRA?
Yes. You can contribute to both in the same year, but your combined contributions cannot exceed $7,000 ($8,000 if you are 50 or older) in 2026.
What is the income limit for a Roth IRA in 2026?
In 2026, Roth IRA contributions phase out between $146,000 and $161,000 for single filers, and between $230,000 and $240,000 for married filing jointly. Above these limits you cannot contribute directly but can use the backdoor Roth strategy.
What is a backdoor Roth IRA?
A backdoor Roth IRA is a strategy for high earners who exceed Roth contribution income limits. You contribute to a non-deductible Traditional IRA, then immediately convert it to a Roth IRA. The conversion is a taxable event on any pre-tax funds.