Roth IRA vs. Traditional IRA: How to Choose

Here’s the drive-thru window answer to the “Should I contribute to a Roth IRA (opens in a new tab) or a traditional IRA (opens in a new tab)?” question:

A Roth IRA is a stronger choice if you expect your tax rate to be the same or higher in retirement, because withdrawals in retirement are not taxed. A traditional IRA makes more sense if you expect your tax rate to be lower in retirement, because contributions made now are deductible.

Of course, there are a lot of details between the lines of our abridged Roth IRA vs. traditional IRA answer. We’ll guide you through all of it — how much, if anything, the IRS will let you contribute to both types of IRAs, what’s deductible and what’s not, the rules about borrowing money before retirement and other important pros and cons.

Roth vs. traditional IRA? How to choose

Consider the tax benefits of each. Consider a traditional IRA to get a tax break now, and a Roth IRA to reduce your taxes in the future.
Calculate your Roth IRA contribution amount. Find out how much you’re eligible to contribute.
Calculate your traditional IRA contribution amount. Find out how much you can deduct.
Compare early withdrawal fees and penalties. The IRS has different rules for borrowing money or withdrawing cash from a Roth versus a traditional IRA before age 59½.
Consider benefits after retirement. Factor in how long you want your money to remain invested and how much you want to leave to your heirs.

Tax benefits of Roth and traditional IRAs

The biggest difference between a Roth and a traditional IRA is how and when you get a tax break.

Traditional IRA: The benefit of a traditional IRA is that your contribution is tax deductible. Taxes come due in retirement when you take distributions, or make withdrawals, from the IRA.
Roth IRA: The benefit of a Roth IRA is that your withdrawals in retirement are not taxed. A Roth IRA operates in reverse of a traditional IRA: You pay taxes upfront, meaning your contributions are not deductible.

One thing that Roth and traditional IRAs have in common is that in both accounts, earnings on your investments grow tax-free.

CONSIDER YOUR CURRENT AND PROJECTED TAX BRACKET

To help you figure out which tax setup will be most beneficial to you in the future, let’s start with your present: What’s your income tax bracket?

If you’re currently in a low tax bracket (the 22% bracket or lower), a Roth IRA is probably a good choice. This is more likely the case if you’re in the early stages of your career, or you’ve changed careers and will be at a higher rung of the income ladder when you retire.

Why a Roth? Withdrawals from a Roth IRA in retirement are not subject to income tax. So when your future flush self starts drawing income from your Roth IRA savings, you won’t have to pony up income taxes to the IRS when your tax rate has gone up.

If you’re in a high tax bracket or close to retirement age, a traditional IRA makes the most sense. Why? A traditional IRA enables you to take a tax deduction when it benefits you most.

After their 40s or mid- to late 50s, people tend to migrate to a lower tax bracket due to full- or semi-retirement, taking on lower-paying but more meaningful work, or simply needing to draw less income if expenses have gone down. And since withdrawals from a traditional IRA are taxable as income as long as they’re taken after age 59½, by choosing a traditional IRA you save again on the backside because you’re taking out that money when you’re in a lower tax bracket.

Calculate your Roth IRA contribution amount

Both traditional and Roth IRAs come with eligibility rules and restrictions that determine how much you can contribute. Assuming you’re eligible for both, you can contribute to a traditional and a Roth IRA during the same year, as long as the total amount does not exceed the maximum allowable contribution limit of $7,500 in 2026, or $8,600 if you’re age 50 and over.

The amount you’re allowed to contribute to a Roth IRA isn’t an all-or-nothing scenario — it’s a “heck, yeah!,” “sorta” and “sorry, not this year, cowboy” scenario. Roth IRA contribution limits are based on household income, and those at higher incomes often find themselves squeezed out of Roth eligibility either partially or completely. In 2026, the ability to contribute phases out between $153,000 and $168,000 of modified adjusted gross income for single filers and between $242,000 and $252,000 for married couples filing jointly.

Tip

Unlike a traditional IRA, the amount you make has no influence on Roth IRA deductibility. That sounds like good news, but please hold your confetti: It’s actually moot news. Remember, contributions to a Roth IRA are not deductible in the first place.

If you’re eligible to contribute up to the full amount, you should be beaming.

If you’re allowed only a partial Roth IRA contribution, that’s still something. Strive to contribute as much as the IRS allows since the Roth is a more flexible account than the traditional IRA. Then, go on and see if you qualify for a deductible traditional IRA and get an IRA twofer.

If you don’t meet the Roth IRA contribution limits, there are things you can do to close the gap between the Roth income limit and how much of your income is taxable. A few MAGI-lowering tricks: Contribute to your workplace retirement plan and/or an HSA, and be sure to take any and all deductions available to you, such as student loan interest.

Backdoor Roth IRA

Still don’t qualify for a Roth after you’ve lowered your taxable income? It’s time to sneak in through the back door. A backdoor Roth IRA is a way to indirectly invest in a Roth by making a traditional IRA contribution, even if it’s fully taxable, and transferring the money into a Roth account. You’ll owe taxes on any gains on your investments before the conversion is complete and any contributions that you did deduct when you funded the account, but if you do it quickly you can minimize the tax damage.

Calculate your traditional IRA amount

A Roth has income limits, but there are no such restrictions with traditional IRAs. Titans of industry and everyday workers alike are eligible to open and contribute up to the traditional IRA contribution limits allowed by the IRS. The “bad news” is that your income affects how much of your IRA contribution you’re allowed to deduct from your taxes.

In addition to the size of your paycheck, traditional IRA deductibility takes into account your relationship status, your work perks and how you represent to Uncle Sam each April. Or, in the words of the IRS: your income, tax filing status, and whether you and/or your spouse are covered by an employer’s retirement plan.

Keep in mind: Even if you’re allowed to take the full deduction, this doesn’t automatically mean that a traditional IRA is the best choice for you — it just means that you’ve got an IRA, sure thing. There are perks that come with a Roth that may be more meaningful to you than the immediate deductibility you get from a traditional IRA, and those perks should factor into your decision.

If you’re allowed only a partial IRA deduction, don’t feel like you’re being shortchanged. A deduction is a deduction. Even better, if you also qualify for a Roth IRA contribution, you can contribute to both types during the same year as long as you do not exceed the maximum allowable contribution limits.

And if the IRS says you can’t take any deduction at all, think of it as their way of saying, “We think you should use this time to explore other retirement savings opportunities.” One of those opportunities might be funding a nondeductible IRA with after-tax dollars to get the benefit of having your investments grow tax-free.

Compare early withdrawal fees and penalties

It’s generally not a good idea to withdraw money from an IRA early and the rules do a good job of deterring it: You must be at least age 59½ to avoid early withdrawal penalties and taxes. But sometimes dipping into your retirement savings is unavoidable.

When you take money out of a traditional IRA before retirement, the IRS socks you with a hefty 10% early-withdrawal penalty and taxes the money you take out as income at your current tax rate.

The Roth has better terms for borrowers: It allows you to withdraw contributions without having to pay income taxes or an early withdrawal penalty. However, dip into the earnings from your Roth IRA before age 59½, and the rules are different: That money will be subject to both income taxes and a 10% early-withdrawal penalty.

The rules above apply to distributions, or withdrawals, that the IRS deems “unqualified,” which pretty much includes all events and circumstances that aren’t on the list of the following “qualified” distributions.

PENALTY-FREE WITHDRAWALS

In some instances you can avoid all the penalties of dipping into your retirement accounts early. The IRS rules for traditional IRA and for Roth IRA “qualified distributions” include:

First-time home purchase: You can withdraw up to $10,000 (a lifetime limit) penalty-free to buy, build or rebuild a first-time home. And if you’re married and your spouse qualifies for a first-time home purchase (opens in a new tab), they can also make a $10,000 penalty-free withdrawal.
Higher education expenses: Included are tuition, fees, books, supplies and other costs of attending an eligible education institution for you, your spouse and the children and grandchildren of you or your spouse.
Medical expenses: There are several health-care and health-related situations where the IRS will waive the 10% early withdrawal requirement. They include withdrawing money to pay for unreimbursed medical expenses, health insurance premiums after 12 weeks of unemployment and if you become disabled before age 59½.
Birth or adoption: You can withdraw up to $5,000 per child penalty-free.
Personal emergency: You can take one penalty-free withdrawal per year of up to $1,000 for an emergency expense.
You’ve inherited an IRA: IRAs left to a beneficiary or an estate are exempt from the 10% penalty tax on early withdrawals, as long as you don’t designate yourself as the account owner or roll it over into your IRA or other retirement plan.

These exceptions waive only the 10% penalty; income tax generally still applies to pre-tax money you withdraw.

Which IRA treats you better on qualified withdrawals? Even though both Roth and traditional IRAs waive the 10% early withdrawal penalty in these allowable circumstances, the Roth IRA also wins this round as long as any earnings you withdraw meet the Roth’s five-year-minimum holding requirement. The five-year rule (opens in a new tab) states that earnings can be withdrawn tax-free only after the account has been open at least five years, counted from the first tax year you contributed.

With a traditional IRA you’re still required to pay income taxes on all withdrawals, which can take a sizable bite out of the amount you’re left with. Since you already paid your income taxes on the contributions you made in a Roth IRA, the IRS can’t double-dip and charge you taxes twice.

Consider benefits after retirement

It seems fitting that we end this article where we began: forecasting the future.

Let’s fast-forward to retirement. You’ll be subject to required minimum distributions (opens in a new tab) from your traditional IRA starting at age 73 (age 75 if you were born in 1960 or later).

Taking RMDs is not a big deal if you’re retired and already living off your retirement savings. But if you’re a sprightly and financially flush member of the silver-haired set who doesn’t necessarily need to withdraw funds from the IRA, the requirement is less appealing. Not only will you have to interrupt the growth of what’s in your account by making withdrawals, but you will owe income tax on them. You can keep contributing to a traditional IRA at any age as long as you have earned income.

For those who live long and continue to prosper, the Roth is less stringent: It has no required minimum distribution rules during your lifetime. You’re free to let your savings stay put in the account and continue to grow tax-free as long as you live. You’re also allowed to continue contributing to a Roth at any age as long as you have earned income. If you’re fortunate enough to not need to tap into the account for income right away and you want to pass on a larger account to your heirs, Roth is the way to go.

Editorial note: Contribution limits, income phase-outs and required-distribution ages are set by law and adjusted regularly. Figures here are for 2026.