Both a Roth IRA and a traditional IRA are individual retirement accounts you open yourself, independent of any employer. They invest in the same assets — stocks, bonds, index funds — and share the same annual contribution limits. The entire difference comes down to one question: when do you pay the tax? A traditional IRA lets you deduct contributions now and pays tax on withdrawals later. A Roth IRA uses money you have already paid tax on, then grows and withdraws completely tax-free. Getting this choice right can be worth tens of thousands of dollars over a career, depending on how your tax rate changes between now and retirement.
Side-by-side comparison
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| Contributions | Pre-tax (may be deductible) | After-tax (no deduction) |
| Growth | Tax-deferred | Tax-free |
| Withdrawals in retirement | Taxed as ordinary income | Tax-free |
| Required minimum distributions | Yes, starting at age 73 | No (during your lifetime) |
| Early withdrawal of contributions | Taxed + 10% penalty | Contributions withdrawable anytime, tax- and penalty-free |
| Early withdrawal of earnings | Taxed + 10% penalty | Taxed + 10% penalty (before age 59½ and 5-year rule) |
| Income limits to contribute | None | Yes — phases out at higher incomes |
| Income limits for tax deduction | Yes, if covered by a workplace plan | N/A |
2026 contribution limits
For 2026, the IRS increased the IRA contribution limit to $7,500 for individuals under 50. The catch-up contribution for those 50 and older is now $1,100 (up from $1,000 in 2025), bringing the total limit to $8,600 (source: IRS Notice 2025-67).
| Age | 2026 annual limit |
|---|---|
| Under 50 | $7,500 |
| 50 or older | $8,600 |
This is a combined limit across all your IRAs. You can split contributions between a Roth and a traditional IRA in the same year, but the total cannot exceed $7,500 (or $8,600 if 50+). Contributing $7,500 to a Roth and another $7,500 to a traditional IRA in the same year would result in a 6% IRS excise tax on the excess.
2026 Roth IRA income limits
Roth IRA contributions phase out based on modified adjusted gross income (MAGI). Above the upper limit, you cannot contribute directly to a Roth IRA.
| Filing status | Full contribution | Phase-out range | No contribution allowed |
|---|---|---|---|
| Single / Head of household | Below $153,000 | $153,000–$168,000 | Above $168,000 |
| Married filing jointly | Below $242,000 | $242,000–$252,000 | Above $252,000 |
| Married filing separately | $0 | $0–$10,000 | Above $10,000 |
Source: IRS Notice 2025-67 / Vanguard 2026 Roth IRA income limits.
Traditional IRAs have no income limit for contributions. However, your ability to deduct those contributions from your taxes phases out if you (or your spouse) have a workplace retirement plan and your income exceeds IRS thresholds — for 2026, $81,000–$91,000 for single filers and $129,000–$149,000 for married filing jointly (source: IRS).
When each account wins: a tax bracket comparison
The core question is whether your marginal tax rate is higher now or will be higher in retirement.
| Your situation | Better account | Reason |
|---|---|---|
| 22% bracket now, expect 12% in retirement | Traditional IRA | Deduct at 22%, withdraw at 12% — net tax saving |
| 12% bracket now, expect 22% in retirement | Roth IRA | Pay tax at 12% now, withdraw tax-free at 22% — you win |
| Peak earning years (37% bracket) | Traditional IRA | Hard to justify paying 37% upfront |
| Early career, income under $50,000 | Roth IRA | Low rate now, decades of tax-free growth ahead |
| Uncertain future tax rates | Roth IRA (slight edge) | Tax-free withdrawal eliminates rate risk |
| Near retirement, high current income | Traditional IRA | Deduction reduces taxable income this year |
For most people under 40 with moderate incomes, the Roth IRA wins. For those in their peak earning years — particularly in the 32% or 37% marginal brackets — the traditional IRA’s immediate deduction is often the better financial move.
The 5-year rule
The Roth IRA’s 5-year rule is one of its most misunderstood features. It governs when you can withdraw earnings (not contributions) tax- and penalty-free.
The clock starts on January 1 of the tax year of your first Roth IRA contribution — not the calendar date you made the contribution. If you contribute in April 2026 for the 2025 tax year, the 5-year period began January 1, 2025, and ends January 1, 2030.
Two conditions must both be met to withdraw earnings tax-free: (1) the account must be at least 5 years old, and (2) you must be at least 59½, disabled, or using up to $10,000 for a first home purchase.
Contributions — the dollars you put in — can always be withdrawn at any time, at any age, without tax or penalty. Only the earnings are subject to the 5-year and age requirements.
A separate 5-year rule applies to each Roth conversion: if you convert traditional IRA money to a Roth and then withdraw those converted funds within 5 years before age 59½, you owe a 10% early withdrawal penalty (though not income tax, since you already paid it at conversion). The clock resets with each conversion (source: Fidelity).
Required minimum distributions
At age 73, the IRS requires you to begin withdrawing a minimum amount each year from a traditional IRA, regardless of whether you need the money. These required minimum distributions (RMDs) are calculated based on your account balance and life expectancy tables.
Roth IRAs are exempt from RMDs during the original owner’s lifetime. This makes them particularly powerful for: (1) tax-efficient estate planning, since heirs can inherit a Roth IRA and receive distributions tax-free, and (2) people who don’t need the money in their 70s and want it to keep compounding tax-free.
The backdoor Roth
If your income exceeds the Roth IRA phase-out threshold, you cannot contribute directly — but you may still access a Roth via the backdoor Roth conversion. The process: contribute to a non-deductible traditional IRA (no income limit), then convert those after-tax dollars to a Roth IRA. As of 2026, this strategy remains legal and widely used by high earners.
The key caveat is the pro-rata rule: if you hold other pre-tax IRA money (deductible traditional IRA, SEP-IRA, or SIMPLE IRA balances), the IRS treats all your IRA assets as one pool when calculating the taxable portion of the conversion. You cannot simply convert only your after-tax contributions — the pre-tax and after-tax money is blended proportionally.
Common mistakes
Confusing contribution withdrawals with earnings withdrawals. Many people believe they cannot touch Roth IRA money before 59½. That applies only to earnings. The dollars you contributed can be withdrawn at any time without tax or penalty — making the Roth IRA more flexible than it appears.
Assuming the traditional IRA deduction is automatic. If you have a 401(k) or other workplace plan and earn above $91,000 (single) or $149,000 (married filing jointly) in 2026, your traditional IRA contribution is not deductible. You are contributing after-tax dollars to an account that taxes you again on withdrawal — the worst outcome of both account types. In this situation, a Roth IRA (if income-eligible) or backdoor Roth is almost always preferable.
Ignoring the 5-year clock on conversions. Converting a large traditional IRA to a Roth and then withdrawing those converted funds within 5 years while under 59½ triggers a 10% penalty — even though you already paid income tax on the conversion. Each conversion has its own separate 5-year clock.
Contributing to a Roth when in the 37% bracket. High earners sometimes prefer the Roth’s simplicity and tax-free growth story without running the math. Paying 37% in taxes today to avoid paying 22% or 24% in retirement is not a good trade. At peak income, the traditional IRA deduction is almost always more valuable.
Getting started
For most people in their 20s and 30s earning below $153,000 (single) or $242,000 (married), the Roth IRA is the stronger default. Open one with any major brokerage, contribute up to $7,500 for 2026, and invest in a low-cost total market index fund. Contributions you make in 2026 count toward starting your 5-year clock, regardless of when during the year you make them.
If you are not sure which to choose, consider splitting contributions — for example, $4,000 to a Roth and $3,500 to a traditional — to hedge against tax rate uncertainty. You can adjust the split each year as your income and expectations change.
If your income exceeds the Roth phase-out threshold, consult a tax professional about whether the backdoor Roth makes sense given your existing IRA balances. The pro-rata rule makes the math more complicated than the strategy’s name suggests.