Planning · Retirement
Roth vs Traditional IRA
An IRA is a retirement account you open yourself — no employer required. The main decision is whether you want the tax break now or later.
Traditional IRA
Tax break now
Contributions may be tax-deductible in the year you make them, lowering your taxable income today. Money grows tax-deferred and every dollar withdrawn in retirement — contributions and gains — is taxed as ordinary income.
- Best when: you expect a lower tax bracket in retirement, or you want the deduction today.
- Required minimum distributions generally begin at age 73, or age 75 for younger savers under current law.
- Early withdrawals before 59½ generally owe income tax plus a 10% penalty.
Roth IRA
Tax break later
Contributions are made with after-tax dollars, so there's no deduction now. In exchange, qualified withdrawals in retirement — including all the growth — are completely tax-free.
- Best when: you expect the same or a higher bracket later, or you simply want tax-free income in retirement.
- No RMDs during the original owner's lifetime.
- Contributions (not earnings) can be withdrawn at any time, tax- and penalty-free.
2026 contribution limits
The limit is the combined total across all of your IRAs (Roth and Traditional) for the year — not per account.
| Limit | 2026 |
|---|
| Annual contribution (under 50) | $7,500 |
| Catch-up contribution (age 50+) | $1,100 |
| Total annual limit (age 50+) | $8,600 |
You also need at least that much in earned income (wages or self-employment) to contribute. A non-working spouse can use a Spousal IRA based on the working spouse's earnings.
2026 income limits
Income limits use Modified Adjusted Gross Income (MAGI). Above the phase-out range, the limit is fully eliminated.
Roth IRA — direct contribution phase-out
| Filing status | Phase-out range (MAGI) |
|---|
| Single / Head of household | $153,000 – $168,000 |
| Married filing jointly | $242,000 – $252,000 |
| Married filing separately | $0 – $10,000 |
Traditional IRA — deduction phase-out (if covered by a workplace plan)
| Filing status | Phase-out range (MAGI) |
|---|
| Single / Head of household | $81,000 – $91,000 |
| MFJ — contributor is covered | $129,000 – $149,000 |
| MFJ — spouse is covered, you aren't | $242,000 – $252,000 |
Anyone with earned income can contribute to a Traditional IRA — the income limits only affect whether you can deduct the contribution. High earners above the Roth limit often use a "backdoor Roth": a non-deductible Traditional IRA contribution followed by a conversion to Roth.
Workplace plans
What about the 401(k)?
A 401(k) is the employer-sponsored cousin of the IRA. The Roth vs Traditional choice works exactly the same way — tax break now or tax break later — but the contribution limits are dramatically higher, and Roth 401(k)s have no income limits at all.
Traditional 401(k)
Pre-tax payroll deferral
Contributions come out of your paycheck before income tax, lowering your taxable income today. The balance grows tax-deferred, and every dollar withdrawn in retirement is taxed as ordinary income. RMDs begin at age 73.
Roth 401(k)
After-tax payroll deferral
Contributions are made with after-tax dollars. Qualified withdrawals in retirement — including all growth — are tax-free. As of 2024, Roth 401(k)s have no RMDs during the original owner's lifetime.
2026 401(k) contribution limits
Employee limits apply to the combined total across Roth and Traditional 401(k) contributions. Employer matching is separate and doesn't count against the employee limit.
| Limit | 2026 |
|---|
| Employee elective deferral (under 50) | $24,500 |
| Catch-up contribution (age 50+) | $8,000 |
| Enhanced catch-up (age 60–63) | $11,250 |
| Total combined limit (employee + employer) | $72,000 |
High earners (over ~$145k in prior-year wages, indexed) must direct their catch-up contributions to a Roth account under SECURE 2.0. Roth 401(k)s have no income limit — unlike Roth IRAs — so anyone with access to a plan can use one.
The mental model
If your tax rate today equals your rate in retirement, Roth and Traditional produce the same after-tax balance. Roth wins if rates rise; Traditional wins if they fall. The Roth's real edge is flexibility — no RMDs, tax-free heirs, and contributions you can pull back out without penalty.