Roth IRA vs Traditional IRA: Which Should You Choose?

Both a Roth IRA and a Traditional IRA let your investments grow without annual taxes on dividends or capital gains. The fundamental difference is when you pay taxes:

• Traditional IRA: Contributions may be tax-deductible now (reducing this year's taxable income), but withdrawals in retirement are taxed as ordinary income
• Roth IRA: Contributions are made with after-tax dollars (no deduction), but qualified withdrawals in retirement are completely tax-free — including all growth

The better choice depends primarily on whether you expect to be in a higher or lower tax bracket in retirement than you are today.

The IRS limits how much you can contribute to IRAs each year. For 2026:

• Annual contribution limit: $7,000 per person
• Catch-up contribution (age 50+): Additional $1,000 = $8,000 total
• Combined limit: The $7,000/$8,000 limit applies to your total IRA contributions across all traditional and Roth IRAs — not per account
• Earned income requirement: You can only contribute up to your earned income

Spousal IRA: A non-working spouse can contribute up to $7,000 to their own IRA as long as the working spouse has sufficient earned income. This allows couples to save up to $14,000/year combined.

The Roth IRA has income limits — above certain thresholds, your ability to contribute phases out:

Single filers:

• Full contribution: income below $150,000
• Partial contribution: $150,000–$165,000
• No direct contribution: income above $165,000

Married filing jointly:

• Full contribution: income below $236,000
• Partial contribution: $236,000–$246,000
• No direct contribution: income above $246,000

Backdoor Roth IRA: High earners above the Roth income limit can still contribute indirectly: contribute to a non-deductible Traditional IRA, then convert it to a Roth IRA. This "backdoor" strategy is legal and widely used.

Choose a Roth IRA when:

• You are in a low tax bracket now and expect to be in a higher bracket in retirement.
• You are young and have decades of tax-free compound growth ahead.
• You want flexibility. Roth contributions (not earnings) can be withdrawn at any time without taxes or penalties.
• You want to avoid Required Minimum Distributions (RMDs). Traditional IRAs require withdrawals starting at age 73. Roth IRAs have no RMDs during your lifetime.
• You expect tax rates to rise. Locking in today's rates protects against future tax increases.

Choose a Traditional IRA when:

• You are in a high tax bracket now and expect to be in a lower bracket in retirement.
• You need the tax deduction to make the numbers work. For high earners, the upfront deduction is substantial.
• Your state has high income taxes now. Traditional contributions reduce both federal AND state taxable income in most states.

You can convert Traditional IRA funds to a Roth IRA at any time. You will owe income tax on the converted amount in the year of conversion — but future growth is then tax-free.

Best time to convert:

• Years when your income is temporarily lower (career transition, early retirement before Social Security)
• "Gap years" between retirement and required minimum distributions (ages 60–72)

Roth conversion ladder: Convert a series of amounts over several years to stay within lower tax brackets.

Use our Roth IRA Calculator to model the long-term value of converting.