Roth IRA vs. Traditional IRA: Which One Should You Choose in 2026?

Disclaimer: This article is for informational purposes only and is not intended as financial or tax advice. Consult with a qualified financial advisor or tax professional before making decisions.

If you’re trying to figure out whether to open a Roth IRA or a Traditional IRA, you’re not alone—and you’re not overthinking it. This decision can impact your tax burden for decades and potentially affect how much money you have in retirement. Here’s how to choose the right one for your situation in 2026.

The Core Difference: Taxes Now vs. Taxes Later

Before we get into the weeds, here’s the fundamental question these two account types answer differently: Do you want to pay taxes on this money now, or later?

Traditional IRA: You get a tax deduction now (when you contribute), but you’ll pay taxes later (when you withdraw in retirement).

Roth IRA: You pay taxes now (no deduction for contributions), but your withdrawals in retirement are completely tax-free.

Both types of accounts allow your money to grow tax-free. The difference is when you deal with the IRS.

2026 Contribution Limits

Good news: contribution limits increased for 2026. According to Vanguard and other major financial institutions, here are the new numbers:

• Under age 50: $7,500 per year (up from $7,000 in 2025)
• Age 50 and older: $8,600 per year (includes $1,100 catch-up contribution)

Important: This is the total you can contribute across both Traditional and Roth IRAs combined. You can’t contribute $7,500 to each—if you put $5,000 in a Roth, you can only put $2,500 in a Traditional.

Income Limits: Who Can Contribute?

Traditional IRA

Anyone with earned income can contribute to a Traditional IRA—there’s no income limit. However, whether you can deduct your contributions depends on your income and whether you (or your spouse) have access to a workplace retirement plan like a 401(k).

For 2026, if you’re covered by a retirement plan at work:

• Single filers: Full deduction if modified adjusted gross income (MAGI) is $81,000 or less; partial deduction from $81,000-$91,000; no deduction above $91,000
• Married filing jointly: Full deduction if MAGI is $130,000 or less; partial deduction from $130,000-$150,000; no deduction above $150,000
• Married filing separately: Partial deduction from $0-$10,000; no deduction above $10,000

If you’re not covered by a workplace plan but your spouse is:

• Married filing jointly: Full deduction if MAGI is $242,000 or less; partial deduction from $242,000-$252,000

Roth IRA

Roth IRAs have strict income limits. For 2026, according to Empower and major financial institutions:

• Single filers: Full contribution if MAGI is under $146,000; partial contribution from $146,000-$161,000; not eligible above $161,000 (some sources cite slightly different thresholds: $153,000-$168,000)
• Married filing jointly: Full contribution if MAGI is under $230,000; partial contribution from $230,000-$240,000; not eligible above $240,000 (some sources cite $242,000-$252,000)
• Married filing separately: Partial contribution from $0-$10,000; not eligible above $10,000

Note on the “Backdoor Roth”: If you earn too much to contribute directly to a Roth IRA, there’s a legal loophole called the backdoor Roth IRA strategy. You contribute to a Traditional IRA (which has no income limits), then immediately convert it to a Roth. This is complex and has tax implications, so talk to a tax professional if you’re considering this route.

How to Decide: The Tax Bracket Question

The fundamental decision comes down to this: Will your tax rate be higher now or in retirement?

Choose a Roth IRA If:

• You’re early in your career. If you’re in your 20s or 30s and expect your income (and tax bracket) to increase significantly over time, paying taxes now at your current lower rate makes sense.
• You expect to be in a higher tax bracket in retirement. This might sound counterintuitive (isn’t retirement income usually lower?), but if you’re saving aggressively across multiple accounts, you might have substantial retirement income.
• You value tax-free withdrawals. With a Roth, every dollar you take out in retirement is yours—no tax calculations, no surprises. This can be psychologically freeing.
• You want flexibility. Roth IRAs let you withdraw your contributions (not earnings) at any time, tax and penalty-free. This makes it more flexible if you need emergency access to your money.
• You don’t want Required Minimum Distributions (RMDs). Unlike Traditional IRAs, Roth IRAs have no RMDs during your lifetime. You can let that money grow as long as you want.

Choose a Traditional IRA If:

• You want an immediate tax break. If you’re in a high tax bracket now and need to reduce your current taxable income, the Traditional IRA deduction can be valuable.
• You expect to be in the same or lower tax bracket in retirement. Hartford Funds notes that if you expect your tax rate to be lower in retirement, paying taxes then (instead of now) makes mathematical sense.
• You’re close to retirement. If you’re in your peak earning years (40s-60s) and in a high tax bracket, the immediate deduction might be more valuable than future tax-free growth.
• You need to lower your current taxable income. Maybe you’re close to a threshold for other benefits or tax credits. The Traditional IRA deduction can help lower your MAGI.

The Math: A Real Example

Let’s say you’re 40 years old and contribute $7,500 at the beginning of each year until age 65. With a hypothetical 8% annual growth rate, you’d end up with approximately $592,158.

Traditional IRA: Every dollar you withdraw would be taxable income. If you’re in a 22% tax bracket in retirement, you’d owe about $130,275 in taxes on this money.

Roth IRA: You already paid taxes on your contributions, but every withdrawal comes out tax-free. You get to keep the full $592,158.

Of course, the flip side is that with a Traditional IRA, you got tax deductions each year you contributed (potentially saving you $1,650 per year if you were in the 22% bracket). If you invested those savings elsewhere, that could offset some of the difference.

Withdrawal Rules: When You Can Access Your Money

Traditional IRA

Withdrawals before age 59½ face:

• Income taxes on the full amount
• A 10% early withdrawal penalty

Exceptions to the penalty:

• First home purchase (up to $10,000 for individuals, $20,000 for couples)
• Qualified higher education expenses
• Unreimbursed medical expenses exceeding 7.5% of adjusted gross income
• Health insurance premiums while unemployed
• Birth or adoption expenses (up to $5,000)
• Substantially equal periodic payments under rule 72(t)

Required Minimum Distributions (RMDs): At age 73, you must start taking withdrawals from your Traditional IRA. The IRS calculates your RMD based on your account balance and life expectancy.

Roth IRA

More flexible, but the rules are nuanced:

Your contributions can be withdrawn at any time, tax and penalty-free. This is because you already paid taxes on this money.

Your earnings can be withdrawn tax and penalty-free if:

• You’re at least 59½, AND
• The account has been open for at least 5 years

If you withdraw earnings before meeting both requirements, you’ll pay income taxes and potentially a 10% penalty (though some exceptions apply).

No RMDs: You never have to take money out if you don’t want to. This makes Roth IRAs excellent for leaving tax-free money to heirs.

Additional Considerations

If You Already Have a 401(k)

If your employer offers a 401(k) with matching contributions, max out the match first (that’s free money). Then, according to CNBC Select, consider adding a Roth IRA to your savings strategy. Since your 401(k) has the same tax treatment as a Traditional IRA, adding a Roth gives you tax diversification—you’ll have both pre-tax and post-tax money to draw from in retirement.

You Can Do Both

Nothing says you have to choose just one. You can contribute to both a Roth and Traditional IRA in the same year, as long as your combined contributions don’t exceed $7,500 (or $8,600 if you’re 50+).

You might split contributions based on:

• Your current tax situation each year
• How much income you expect in retirement
• Desire for tax diversification

Spousal IRAs

If you’re married and your spouse has little to no earned income, they can still contribute to an IRA using your income. The working spouse’s income must be at least equal to the contributions made to both IRAs combined. This can be a powerful way to double your household’s retirement savings.

For Kids and Young Adults

According to Vanguard, minors with earned income can own and contribute to an IRA (controlled by a parent until they reach 18 or 21). Younger investors almost always benefit more from a Roth IRA since they’re typically in lower tax brackets now and will be in higher brackets later.

The Conversion Option

You can convert a Traditional IRA to a Roth IRA at any time. You’ll owe income taxes on the amount you convert (since you got a deduction when you contributed to the Traditional IRA), but then that money grows tax-free from that point forward.

This can be strategic if:

• You have a year with unusually low income
• You expect tax rates to increase in the future
• You want to avoid RMDs
• You want to leave tax-free money to heirs

The tax implications can be complex, so consult with a tax advisor before converting.

Common Mistakes to Avoid

Not contributing at all because you can’t decide. Paralysis by analysis is real. If you truly can’t decide, just pick one and start contributing. Even a Traditional IRA that you later convert to a Roth is better than not saving at all.

Only thinking about taxes. Yes, taxes are important, but also consider your need for flexibility, your desire to avoid RMDs, and your estate planning goals.

Forgetting about state taxes. Some states don’t tax retirement income at all. If you might retire to a no-income-tax state, a Traditional IRA might be more valuable than you think.

Not coordinating with your other retirement accounts. Think holistically about all your retirement savings, not just your IRA in isolation.

Quick Decision Framework

Still not sure? Use this simplified decision tree:

1. Are you under 30? → Probably Roth (you have decades of tax-free growth ahead)
2. Are you in your peak earning years and maxing out retirement accounts? → Probably Traditional (take the tax break now)
3. Do you expect to have a pension or substantial Social Security in retirement? → Probably Roth (your retirement income might be higher than you think)
4. Are you self-employed with variable income? → Consider Traditional in high-income years, Roth in lower-income years
5. Do you want to pass wealth to heirs? → Roth (they won’t pay income tax on inheritance)

Where to Open an IRA

The decision of which type of IRA matters more than where you open it, but you want a provider with:

• Low or no fees
• Good investment options
• Easy-to-use platform
• Solid customer service

Popular options include Vanguard, Fidelity, Charles Schwab, and other major brokerages. Most offer both Traditional and Roth IRAs with similar investment choices.

The Bottom Line

The “right” choice depends on your specific situation: your age, income, tax bracket, career trajectory, and retirement plans. As Empower notes, if you aren’t sure which type of IRA is best for your situation, consider speaking with a financial professional who can analyze your situation and give you personalized advice.

But here’s what you definitely should do: Start contributing to one (or both). The earlier you start, the more time your money has to grow. The difference between a perfect choice and a good choice is tiny compared to the difference between contributing and not contributing at all.

You have until April 15, 2027 to make contributions for the 2026 tax year, but don’t wait—the earlier in the year you contribute, the sooner that money starts growing.

Additional Resources

Related WMN Articles: HSA vs FSA: Which Is Right for You in 2026?, How to Price Your Services When Starting a Business

Vanguard: Roth IRA vs. Traditional IRA

Fidelity: IRA Comparison

Empower: Roth vs. Traditional IRAs

Hartford Funds: Traditional IRA vs. Roth IRA 2026

CNBC Select: How to Choose Between a Roth and Traditional IRA

IRS: Traditional and Roth IRAs

Disclaimer: This article is for informational purposes only and is not intended as financial or tax advice. Consult with a qualified financial advisor or tax professional before making decisions.