The core tradeoff is when you pay tax: now with a Roth, or later with a traditional account.
Tax treatment
Traditional IRA contributions may be tax-deductible, depending on income and workplace plan coverage, and withdrawals are taxed as ordinary income. Roth IRA contributions are not deductible, but qualified withdrawals, including earnings, are tax-free. The 2026 IRA limit is $7,500, with a $1,100 catch-up at 50 and over.
Which one wins
If your tax rate today is lower than you expect in retirement, Roth usually wins. If your rate is higher now, traditional often does. Many people hedge by holding both, which creates flexibility to manage taxable income in retirement.
Other rules to know
Roth IRAs have income limits for direct contributions. Contributions, but not earnings, can be withdrawn any time without penalty. The backdoor Roth strategy lets higher earners contribute indirectly, with some tax complexity. Roth IRAs have no required minimum distributions for the original owner.
Try the numbers
Use our Roth vs Traditional IRA Calculator to see this in practice. With its default example (Pre-tax amount to invest per year: $7,500; Tax rate today: 24%; Tax rate in retirement: 22%), it shows traditional wins by: $10,126. Adjust the inputs to match your situation.
Key takeaways
- Roth = pay tax now; traditional = pay tax later.
- Compare your current and expected retirement tax rates.
- Holding both gives tax flexibility.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.