Roth IRA vs Traditional IRA (2026)

The one-sentence difference

A Roth IRA holds money you've already paid tax on; withdrawals in retirement are tax-free, including all the growth. A traditional IRA holds money you can deduct from your taxes today, but every dollar you withdraw in retirement is taxed as ordinary income.

Both accounts shelter your money from annual taxes on dividends, interest, and capital gains while it compounds — that's the shared superpower. The choice between them is really a bet on when your tax rate will be higher: now or in retirement.

2026 contribution limits

For 2026, the annual IRA contribution limit is $7,500, up from $7,000 in 2025^[1]. That limit is combined across all your traditional and Roth IRAs — you can't put $7,500 into each.

Savers 50 and older can add a $1,100 catch-up contribution, bringing their total to $8,600^[1]. For comparison, workplace 401(k) plans allow $24,500 in 2026, plus an $8,000 catch-up at age 50+^[1].

Income limits: who can contribute

Anyone with earned income can contribute to a traditional IRA, but the tax deduction phases out if you (or your spouse) are covered by a workplace retirement plan. Roth IRAs have a hard income ceiling instead — earn too much and you can't contribute directly at all^[1].

For 2026, the Roth IRA phase-out is $153,000–$168,000 for single filers and $242,000–$252,000 for married couples filing jointly^[1]. Below the range you can contribute the full amount; inside it your allowed amount shrinks; above it you're out of luck unless you use a backdoor Roth.

How each is taxed

Traditional IRA contributions are deductible in the year you make them (if you're under the income limit), reducing your current taxable income. In retirement, every withdrawal is taxed as ordinary income, and you must eventually start taking required minimum distributions.

Roth contributions give you no tax break now, but qualified withdrawals — including all investment growth — come out tax-free. Roth IRAs also have no required minimum distributions during the original owner's lifetime, which makes them a useful tool for leaving money to heirs.

How to choose

If you expect to be in a higher tax bracket in retirement than you are now, a Roth usually wins — you pay tax at today's lower rate and never touch it again. If you expect a lower bracket, a traditional IRA usually wins — you take the deduction now at a higher rate and pay less tax later.

A few rules of thumb: early-career workers in low brackets often favor the Roth; high earners who want the current-year deduction lean traditional; and anyone above the Roth income limit may use a traditional IRA or a backdoor Roth. Many savers hedge by holding both, which also gives flexibility to manage taxes in retirement.

Whichever you pick, the most important move is simply to contribute — the account type matters far less than actually saving.

FAQ

Can I contribute to both a Roth and a traditional IRA in the same year?

Yes. The $7,500 limit is combined across both account types, so you can split it however you like — for example, $4,000 to a Roth and $3,500 to a traditional.

What if my income is too high for a Roth IRA?

You have two main options: contribute to a traditional IRA (the deduction may phase out, but the contribution is still allowed if you have earned income), or use a "backdoor Roth" — a nondeductible traditional contribution that you convert to a Roth. The backdoor route has tax nuances worth reviewing with a tax professional.

When can I withdraw without a penalty?

Generally after age 59½. Roth contributions (not earnings) can be withdrawn at any time tax- and penalty-free, which is one of the account's unique features. Withdrawing earnings or traditional IRA money early typically triggers income tax plus a 10% penalty, with some exceptions.