Roth vs traditional IRA: the key differences

Both accounts let your investments grow without yearly taxes on dividends or gains. The difference is when you pay income tax.

The math: same money, different tax timing

Take $7,500 of earnings, invested for 30 years at a 7% average return. Today you are in the 22% federal bracket.

• Roth: you pay 22% tax first, so $5,850 goes into the Roth. It grows to $44,532, all tax-free.
• Traditional: the full $7,500 goes in, thanks to the deduction. It grows to $57,092, but every withdrawal is taxed at your rate in retirement.

What you keep from the traditional IRA depends entirely on your future tax rate:

Notice the tie in the middle. When your tax rate is the same now and later, the two accounts end up exactly equal. That is why the decision is not about which account is “better,” but about which tax rate is lower.

The same logic works in reverse for a younger worker. Someone in the 12% bracket today who expects to be in the 22% bracket later would put $6,600 into a Roth, grow it to $50,241 and keep all of it. The traditional IRA would leave them $44,532 after tax, so the Roth wins by $5,709.

The hidden Roth advantage when you max out

The example above compares the same pre-tax money. In real life, many savers simply put the maximum $7,500 into whichever account they choose. A $7,500 Roth contribution is worth more than a $7,500 traditional contribution, because the Roth money has already been taxed and the traditional money has not.

At 7% for 30 years, $7,500 in a Roth grows to $57,092 that you keep in full. The same $7,500 in a traditional IRA also grows to $57,092, but at a 22% rate you keep only $44,532. If you can afford to max out, the Roth lets you shelter more after-tax money inside the same $7,500 limit. See the full growth with the Roth IRA calculator.

2026 income limits for each account

Roth IRA: can you contribute?

Traditional IRA: can you deduct it? Anyone with earned income can contribute to a traditional IRA. The deduction is limited only if you or your spouse are covered by a retirement plan at work:

This matters a lot. A single worker with a 401(k) earning $95,000 cannot deduct a traditional IRA at all, so a nondeductible traditional IRA would give no tax break now and taxable growth later. For that person, a Roth IRA is the clear choice.

2026 federal tax brackets: where are you now?

Your current bracket is the starting point for the decision. These are the 2026 brackets on taxable income, after the standard deduction of $16,100 for single filers and $32,200 for married couples:

Not sure of your bracket? The 2026 tax calculator shows your marginal rate in seconds.

Who should choose a Roth IRA

• Early-career workers in the 10% or 12% bracket, whose income will likely rise.
• Anyone who expects a bigger retirement income, for example from a pension, large 401(k) balances or rental income.
• Savers who want flexibility. You can withdraw Roth contributions at any time without tax or penalty, which makes it a backup emergency fund.
• People who want to avoid RMDs or leave tax-free money to heirs.
• Workers with a 401(k) above the deduction limit, since they would get no deduction from a traditional IRA anyway.

Who should choose a traditional IRA

• Peak earners in the 24% bracket or higher who expect a lower rate in retirement.
• People who need the deduction now, for example to qualify for income-based credits or to lower their taxable income in a high-earning year.
• Workers without a workplace plan, who can deduct a traditional IRA at any income.
• People planning to retire early in a low-tax state, who may be able to withdraw or convert at low rates before Social Security starts.

When you can't decide: split it

Nobody knows what tax rates will look like in 20 or 30 years. Splitting your savings between pre-tax and Roth accounts gives you tax diversification: in retirement, you can take money from whichever account keeps your tax bill lowest each year. A simple approach is to use your 401(k) for pre-tax savings, especially to capture the employer match, and use a Roth IRA for the rest. Check your workplace plan with the 401(k) calculator.

Earning too much for a Roth? A backdoor Roth means making a nondeductible traditional IRA contribution and converting it to a Roth. It works best when you have no other pre-tax IRA money, because the pro-rata rule can make part of the conversion taxable. Talk to a tax professional before trying it.

Retirement factors people forget

Social Security taxes. Traditional IRA withdrawals count toward the “combined income” that decides whether up to 50% or 85% of your Social Security benefits are taxed. Roth withdrawals do not.

Medicare premiums. Higher income in retirement can trigger income-related surcharges on Medicare Part B and Part D. Roth withdrawals do not count toward that income.

Required minimum distributions. Traditional IRAs force withdrawals starting at age 73, or 75 for people born in 1960 or later, even if you don’t need the money. Large RMDs can push you into a higher bracket. Roth IRAs have no RMDs for the original owner.

Your heirs. Most non-spouse heirs must empty an inherited IRA within 10 years. Inherited Roth money comes out tax-free, while inherited traditional money is taxed at the heir’s rate, often during their peak earning years.

Frequently asked questions

Sources

2026 IRA contribution limits and income phase-out ranges are from the IRS announcement of 2026 retirement plan limits (Notice 2025-67), summarized by the Journal of Accountancy. Tax brackets and standard deductions are from IRS Revenue Procedure 2025-32. Rules on Roth withdrawals and RMDs are from IRS Roth IRA guidance.