Roth IRA vs. Traditional IRA

By the TidyTally team · Last updated October 21, 2026

Both Roth and Traditional IRAs are tax-advantaged accounts for retirement savings, and the core difference is simple: when do you pay the tax? With a Roth, you pay tax on the money now and withdraw it tax-free later. With a Traditional IRA, you may get a tax deduction now and pay ordinary income tax on withdrawals later. Which is better depends on your tax rate today compared with your expected tax rate in retirement — and on a few rules worth knowing.

The core difference: now or later

A Traditional IRA lets you contribute pre-tax or tax-deductible money (if you are eligible for the deduction), your investments grow tax-deferred, and withdrawals in retirement are taxed as ordinary income. A Roth IRA is funded with after-tax dollars, grows tax-free, and qualified withdrawals in retirement are tax-free.

The question is whether you expect your tax bracket to be higher now or in retirement. If you expect it to be lower later, the Traditional IRA's upfront deduction may be more valuable. If you expect it to be higher later — or just want tax-free income and simpler planning — the Roth may be a better fit. Many younger workers early in their careers favor the Roth for that reason.

2026 contribution limits

For 2026, the IRS limit for combined Roth and Traditional IRA contributions is $7,500, up from $7,000 in 2025, with an additional $1,100 catch-up contribution for those age 50 and older, for a total of $8,600. The limit applies across all your IRAs combined, and you must have earned income at least equal to your contribution.

Always confirm current limits with the IRS before contributing, because they are adjusted for inflation periodically.

Income limits

Roth IRA eligibility phases out at higher incomes. For 2026, the phase-out range is $153,000 to $168,000 of modified adjusted gross income for single filers and heads of household, and $242,000 to $252,000 for married couples filing jointly. Within the range you can contribute a reduced amount; above it you cannot contribute directly.

Traditional IRAs have no income limit for contributing, but the tax deduction may be reduced or eliminated if you or your spouse are covered by a workplace retirement plan and your income is above certain thresholds. Higher earners sometimes use a "backdoor" Roth conversion, which has its own tax rules and is worth discussing with a professional.

Withdrawal rules

Roth IRA contributions (not earnings) can be withdrawn at any time without tax or penalty, which gives some flexibility. Earnings can be withdrawn tax-free once you are 59½ and the account has been open for at least five years. Withdrawing earnings earlier may trigger tax and a 10% penalty unless an exception applies.

Traditional IRA withdrawals before age 59½ are generally subject to income tax and a 10% penalty, with some exceptions. Traditional IRAs also require minimum distributions (RMDs) starting at age 73 for people born between 1951 and 1959, and age 75 for those born in 1960 or later. Roth IRAs have no required minimum distributions for the original owner during their lifetime, which makes them useful for estate planning.

What the difference can be worth

As an illustration, if you contributed $7,500 at the start of each year for 30 years and earned an average 7% annually (a hypothetical rate, not a promise), you would have about $758,000, of which $225,000 is your own contributions. In a Roth, that entire balance could be withdrawn tax-free in retirement. In a Traditional IRA, withdrawals would be taxed as income. You can model your own numbers in the Retirement Savings Calculator and Compound Interest Calculator.

How to choose — and why you can do both

Consider a Roth if you are early in your career, in a relatively low tax bracket now, expect higher income later, or value tax-free flexibility in retirement. Consider a Traditional IRA if you are in a high bracket now, can claim the deduction and expect a lower bracket in retirement.

You are not forced to pick only one. Splitting contributions diversifies your tax exposure, and many people also have a workplace plan — see our guide to 401(k) basics and employer match. A common sequence is to contribute enough to your 401(k) to capture the full employer match, then fund an IRA, then return to the 401(k) for additional savings.

Frequently asked questions

Keep reading

• 401(k) Basics: How It Works and How the Match Works
• How Much Should You Save for Retirement?
• Inflation and Your Savings