Roth IRA vs. Traditional IRA: Which Is Best for Your Retirement?

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Roth IRAs and traditional IRAs can both help you save for retirement. But when it comes to taxes, they work in an opposite manner. One gives you a tax break now, while the other offers tax-free withdrawals in retirement. Understanding when you want to pay taxes, and how your tax bracket may change in retirement, are the keys to choosing which might be a better option for you.

In 2026, new contribution limits and rising income thresholds are pushing more savers into the Backdoor Roth strategy, which is an option all taxpayers should understand. To that end, here is a fully refreshed guide with the latest IRS data and the most relevant planning strategies for 2026 when it comes to Roth and traditional IRAs.

Roth IRA Limits for 2026

IRA limits can change as often as every year, so it’s important to pay attention to current figures. The 2025 IRA limits apply to tax-year 2025 returns filed before Apr. 15, 2026. The 2026 limits go into effect starting Jan. 1, 2026. Here’s the latest information from the IRS:

The Tax Bracket Decision Framework

The common answer you’ll hear when deciding between a traditional and a Roth IRA is that “it depends on your tax situation.” While that is true, it’s not very actionable for savers trying to make that exact decision.

With that in mind, here’s a breakdown of when you should choose a Roth IRA and when you should choose a traditional IRA:

Choose a Roth IRA if:

• You expect to be in a higher tax bracket in retirement.
• You’re early in your career and currently in a lower bracket.
• You believe today’s tax rates are historically low.
• You want tax-free withdrawals and flexibility with no required minimum distributions.

Choose a traditional IRA if:

• You are in a high-earning year or a high tax bracket today.
• You expect lower taxable income in retirement.
• You want an immediate tax deduction to reduce this year’s bill.

Or choose both — as a tax diversification strategy:

For many taxpayers, a combination of a Roth and a traditional IRA makes sense. That way, you can be flexible with your deductions during your earning years, and you can control your taxable income in retirement by choosing which type of account to withdraw from each year.

How Does a Roth IRA Work?

A Roth IRA is a tax-deferred retirement investment account that allows for tax-free withdrawals on qualified distributions. While you won’t get a deduction on your contributions, your money still grows tax-free while it’s in the account.

Main advantages:

• Earnings grow tax-free
• No mandatory distribution requirements or age limit on contributions
• Tax- and penalty-free withdrawals in retirement
• Tax- and penalty-free withdrawals of contributions at any time

Main drawbacks:

• No tax deduction on contributions
• Penalties may apply for early withdrawals
• Income restrictions on contributions

Best for: Young savers, those in low income-tax brackets, those who prioritize tax-free income in retirement

How Does a Traditional IRA Work?

A traditional IRA is a tax-deferred retirement account that offers income tax deductions on most contributions. Essentially, you take your tax benefits today and enjoy tax-deferred growth on your investments until it’s time to pay taxes at withdrawal.

Main advantages:

• Tax deduction on eligible contribution
• Tax-deferred earnings growth
• No earnings limit on contributions

Main drawbacks:

• Distributions taxed as ordinary income
• Early withdrawal penalties
• Required distributions when you reach a certain age
• Income limitations on the deductibility of contributions

Best for: High earners in top tax brackets, or those who anticipate being in a lower tax bracket in retirement

Earn Too Much for a Roth? Meet the Backdoor Roth

Although the income limits for contributing to a Roth IRA did increase for 2026, to $168,000 for singles and $252,000 for married couples, many high-earning professionals are currently locked out of contributing directly to a Roth IRA.

The Backdoor Roth is a legal workaround.

Imagine, for example, that you earn $300,000 in income one year. You’re prohibited from making a nondeductible Roth IRA contribution. However, there are no income limitations to making nondeductible contributions to a traditional IRA. So, step one for high earners is to park some money in a nondeductible traditional IRA.

Then, you can immediately convert that traditional IRA to a Roth IRA. As your money went into the Traditional IRA on an after-tax basis, there’s no tax involved on the conversion to a Roth IRA (unless your assets appreciated in value before the conversion).

The term “backdoor Roth IRA” is a colloquialism, not a specific type of account. The term simply describes the process that high earners can use to effectively contribute to a Roth IRA by converting a Traditional IRA.

Why high earners use it:

• No income limits on conversions
• Creates long-term tax-free retirement income

Warning: The Pro-Rata Rule

As with all “tax tricks,” the backdoor Roth IRA comes with a huge caveat.

The IRS requires you to treat your IRAs as one combined pool for the purposes of the conversion calculation. This means that if you already have pretax balances in any IRA, your conversion may trigger a tax bill. This is something you’ll want to understand fully — and perhaps consult with an accountant about — before you make a move.

2026 SECURE 2.0 Updates You Should Know

The SECURE 2.0 Act was passed in 2022, and it changed some important features regarding traditional and Roth IRAs. Here are the highlights, per the IRS:

1. Catch-Up Contribution Indexing

For the first time, the traditional $1,000 catch-up contribution will be indexed to inflation.

• 2025: $1,000
• 2026: $1,100

Over time, that figure will steadily rise in future years.

2. 529-to-Roth Rollovers

You may now roll over up to $35,000 lifetime from a 529 college plan into a Roth IRA, if:

• The 529 has been open 15 years
• Annual rollover limits follow IRA contribution limits
• Beneficiary rules are followed

The major benefit for parents is that unused 529 money will no longer languish in these college funding accounts. If your child no longer needs the money, or if all college expenses are already covered, account owners can now roll the remaining balance into a Roth IRA.

Key Differences Between a Roth IRA and a Traditional IRA

Traditional and Roth IRAs have numerous important differences you will want to be aware of before making a choice. Here’s a rundown of some key differences between the two.

Eligibility for Roth IRA vs. Traditional IRA

One of the main benefits to IRAs, Roth or traditional, is their accessibility — especially to self-employed people who can’t take advantage of a 401(k) plan. However, a traditional IRA is a little easier to qualify for:

Traditional IRA:

• Anyone with earned income can contribute
• Deduction limits may apply if you or your spouse are eligible to be covered by a workplace retirement plan

Roth IRA:

• Single filers have a phaseout range of $153,000 to $168,000 — income must be below these levels to be eligible for a Roth contribution
• Married filers have a phaseout range of $242,000 to $252,000
• High earners could consider the Backdoor Roth IRA strategy to get around these income limits

Converting a Traditional IRA to a Roth IRA

A Roth conversion lets you shift pre-tax IRA money into a Roth, paying taxes now in exchange for tax-free withdrawals later. The most important rules to remember about an IRA conversion are:

• The conversion is taxable.
• It cannot be reversed.
• Converted funds must stay in the Roth for five years after the conversion before they can be withdrawn penalty-free.

Conversions make sense in:

• Low-income years: You’ll be in a lower tax bracket, so you’ll pay less in taxes on the conversion
• Years with large deductions: If you have a lot of writeoffs, you’ll be able to offset some or all of the taxable income from your conversion
• Early retirement “gap years” before Social Security begins: This is another strategy designed to take advantage of lower-income years so that you’ll pay less tax on your conversion

Final Thoughts: Choosing Between Roth IRA and Traditional IRA

Although various factors can play a role, the bottom line is that choosing between a Roth IRA and a Traditional IRA comes down to one question:

Do you want your tax break now, or later?

• A Traditional IRA provides immediate tax relief in the form of deductible contributions: however, you’ll pay on your contributions and earnings upon withdrawal.
• A Roth IRA gives you your tax break later, in the form of tax-free withdrawals. However, you won’t get a tax deduction on your contributions.

For many investors, the correct answer is both. As future tax laws, brackets and legislation are uncertain, having the flexibility of both types of accounts often makes the most sense from a tax perspective.

Whichever you choose, the most important factor when it comes to retirement savings is to “just do it.” Either account is a better option than not saving for retirement at all.

Note: Tax laws can change. Consult a CPA for personalized guidance.

Vance Cariaga contributed to the reporting for this article. 

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