Roth IRA vs Traditional IRA: Which Should You Choose?

What is the difference between a Roth IRA and a traditional IRA?

The difference is when you pay income tax. A traditional IRA lets you deduct contributions now (if you qualify), the money grows tax-deferred, and every dollar you withdraw in retirement is taxed as ordinary income. A Roth IRA gives no deduction, but the money grows tax-free and qualified withdrawals, including all the earnings, are never taxed.

An IRA, or individual retirement account, is an account you open yourself at a bank or brokerage, separate from any workplace plan. Both types share the same 2026 contribution limit of $7,500, or $8,600 if you are 50 or older, and you can't contribute more than your earned income for the year. The limit is combined: $4,000 in a Roth and $3,500 in a traditional IRA uses up the whole $7,500.

What is the Roth vs traditional formula?

For the same amount of pre-tax income, the after-tax value of each account is: Traditional = C × (1 + r)^n × (1 − T_later) and Roth = C × (1 − T_now) × (1 + r)^n. Here C is the pre-tax income you set aside each time, r is the annual return, n is the number of years, T_now is your marginal tax rate today and T_later is your tax rate on withdrawals.

Both formulas contain the same growth factor (1 + r)^n, so the only thing that differs is which tax rate gets multiplied in. Multiplication doesn't care about order, which means the accounts tie exactly when T_now equals T_later. The Roth wins when T_now is lower, and the traditional IRA wins when T_later is lower. Your marginal rate is the rate on your last dollar of income, combining federal and any state income tax, not your average rate.

One caveat changes the math in the Roth's favor. The formula compares equal pre-tax income, so a $7,500 traditional contribution is matched against a smaller Roth contribution. If you instead put the same $7,500 in either account, the Roth holds more spending power, because the traditional balance still owes tax, unless you invest the tax savings from the deduction.

Roth vs traditional IRA: a worked example

Suppose you set aside $7,500 of pre-tax income every year from age 30 to 65, start from a zero balance, and earn 6% a year. In the traditional IRA, the full $7,500 goes in and grows to $835,761. In the Roth, you pay tax first, so only $7,500 × (1 − T_now) goes in. The table shows what our IRA calculator produces after all taxes for three tax-rate scenarios.

When your rate is 22% both now and in retirement, both accounts end at $651,893 after tax. If you're in the 12% bracket now and expect 22% later, perhaps because you're early in your career, the Roth comes out about $83,600 ahead. Reverse the rates and the traditional IRA is ahead by the same amount. A regular taxable brokerage account trails in every case because it pays tax on its growth each year.

How much does a maxed-out Roth IRA grow?

Contributing the full $7,500 to a Roth every year from 30 to 65 at 6% builds a balance of $835,761, all of which can come out tax-free. Our Roth IRA calculator shows that the same deposits in a taxable account, with growth taxed at 22% each year, would reach only $634,155 after paying $104,826 in tax along the way. The tax-free advantage is $201,606.

That $835,761 is the same number the traditional IRA reached in the example above, but the traditional balance is before tax. At a 22% withdrawal rate it is worth $651,893. This is why people who can afford to max out an IRA often lean Roth: the limit caps the dollars, and Roth dollars are worth more.

Should I do Roth or traditional?

Pick based on where you expect your marginal tax rate to go. These situations usually point one way or the other.

• Lean Roth if you're early in your career or in the 10% or 12% bracket, expect your income to rise, or expect tax rates in general to be higher later.
• Lean Roth if you want flexibility: contributions can be withdrawn at any time, and there are no required minimum distributions, which also makes a Roth useful to leave to heirs.
• Lean traditional if you're in your peak earning years, in the 24% bracket or higher, and expect a smaller income in retirement.
• Lean traditional if the deduction keeps you under an income threshold that matters to you, such as eligibility for a credit or a lower bracket.
• Split between both if you can't tell. Having some taxable and some tax-free money lets you choose which to withdraw each year in retirement to manage your bracket.

Who can contribute to a Roth IRA or deduct a traditional IRA?

Anyone with earned income can contribute to a traditional IRA, but the Roth has an income cap. For 2026, the amount you can put directly into a Roth phases out between $153,000 and $168,000 of modified adjusted gross income (MAGI) for single filers and heads of household, and between $242,000 and $252,000 for married couples filing jointly. Above the top of the range, you can't contribute directly.

The traditional IRA deduction has its own phase-out, but it only applies if you or your spouse are covered by a retirement plan at work. For 2026 it is $81,000 to $91,000 of MAGI for a single filer covered by a plan and $129,000 to $149,000 for a covered married couple filing jointly. If neither spouse has a workplace plan, the deduction has no income limit. High earners above the Roth limit sometimes make a nondeductible traditional contribution and convert it to a Roth, known as a backdoor Roth; any pre-tax IRA balances you hold make part of that conversion taxable under the pro-rata rule.

What are the withdrawal rules for each?

Traditional IRA withdrawals are taxed as income, and before age 59½ they usually also carry a 10% additional tax unless an exception applies, such as disability, up to $10,000 for a first home or qualified higher education costs. Required minimum distributions (RMDs) begin at 73, or 75 for anyone born in 1960 or later; our guide on how RMDs are calculated walks through the math.

Roth IRAs are more flexible. Your contributions come out first and can be withdrawn at any time without tax or penalty. Earnings are tax-free once you are 59½ and the account has been open at least five tax years; earlier withdrawals of earnings may be taxed and penalized. The original owner never has to take RMDs from a Roth IRA.

Does the 401(k) change the decision?

Most workplace 401(k) plans now offer both a traditional and a Roth option, and the same tax-rate comparison applies. The 401(k) limit is much higher, $24,500 in 2026, and a Roth 401(k) has no income limit, so high earners who can't use a Roth IRA can still get Roth treatment at work. Capture any employer match first, since matching contributions are an immediate return. See how much to save for retirement for the overall savings target.