Roth IRA vs. Traditional IRA: Taxes, RMDs, and How to Choose

A Roth IRA and a Traditional IRA differ mainly in when you pay income tax. A Roth is funded with after-tax dollars; it grows tax-free and qualified withdrawals are tax-free, with no required minimum distributions for the owner. A Traditional IRA is often deductible now (lowering this year's taxable income), grows tax-deferred, and every withdrawal is taxed as ordinary income — with RMDs starting at age 73 or 75. Both share one combined 2026 contribution limit of $7,500 ($8,600 if 50+). Roth tends to win if you expect an equal or higher tax rate later; Traditional if you expect a lower one.

Run your own numbers. Our Roth vs. Traditional calculator models your specific break-even using your current and expected retirement tax rates — this page explains the rules behind it.

The Core Difference: When You Pay the Tax

Almost everything that separates a Roth IRA from a Traditional IRA flows from one design choice: which side of your career the tax is collected on.

A Traditional IRA is usually a pre-tax account. When you contribute, you may deduct the amount, lowering this year's taxable income. The money grows tax-deferred for decades, and then the IRS collects — every dollar you withdraw in retirement is taxed as ordinary income, just like a paycheck. You got the tax break up front; you settle up at the end.

A Roth IRA reverses the order. You contribute money you have already paid income tax on — there is no deduction. In exchange, the account grows tax-free and qualified withdrawals (after age 59½ and the 5-year rule) come out entirely tax-free. You paid the tax up front; you owe nothing at the end.

That is the whole comparison in one sentence: a Traditional IRA defers the tax; a Roth IRA prepays it. If your tax rate were identical in both years, the two would produce the same after-tax result. The decision is really a bet on whether your tax rate will be higher or lower in retirement than it is today — plus a handful of structural perks the Roth carries (no RMDs, easier early access) that often tip the scales on their own.

Roth IRA vs. Traditional IRA at a Glance

Contribution Limits and Income Rules for 2026

Both accounts draw from one shared contribution limit. For 2026 you can put in $7,500 total across all your IRAs, or $8,600 if you are 50 or older (a $1,100 catch-up), and you need earned income at least equal to what you contribute (IRC §219(f)(1)). The limit is per person, not per account — $7,500 split between a Roth and a Traditional, not $7,500 in each.

Where the two diverge is the income rules, and this is the most-confused part of the comparison — because each account has an income limit, but they do completely different things:

The Roth income limit decides whether you can contribute at all. Above a modified-AGI threshold your direct Roth contribution shrinks, then disappears. For 2026 the phase-out runs $153,000–$168,000 for single/head-of-household, $242,000–$252,000 for married filing jointly, and $0–$10,000 for married filing separately (IRS Notice 2025-67). (Higher earners can still get money in through the backdoor Roth.)

The Traditional income limit decides only whether your contribution is deductible — not whether you can contribute. Anyone with earned income can put money in a Traditional IRA at any income level. But if you (or your spouse) are covered by a workplace retirement plan, the deduction phases out:

If neither you nor your spouse is covered by a workplace plan, a Traditional IRA contribution is fully deductible at any income. Source: IRS Notice 2025-67 (2026 figures). A non-deductible Traditional contribution is still allowed — it just creates after-tax basis (tracked on Form 8606) rather than a deduction.

Required Minimum Distributions: A Major Difference

This is one of the clearest dividing lines. A Roth IRA has no required minimum distributions during the original owner's lifetime (IRC §408A(c)(5)). You are never forced to take the money out; it can keep compounding tax-free for as long as you live, which also makes a Roth a powerful asset to leave to heirs.

A Traditional IRA requires you to start withdrawing — and paying tax — whether you need the money or not. Under SECURE 2.0 §107, RMDs begin at age 73 for owners born 1951–1959 and age 75 for those born in 1960 or later. Miss one and the penalty is steep (25% of the shortfall, reduced to 10% if corrected promptly). For retirees with large Traditional balances, RMDs can push taxable income — and Medicare IRMAA surcharges — higher than expected. Roth IRAs sidestep that entirely.

Withdrawals and Early Access

The Roth IRA is far friendlier before retirement. Because of the ordering rules (IRC §408A(d)), the money you contributed to a Roth comes out first — and it can be withdrawn at any age, tax-free and penalty-free, since you already paid tax on it. Only the earnings face the under-59½ restrictions (and a few exceptions, like a $10,000 first-home allowance, can waive the penalty on those too).

A Traditional IRA has no such carve-out. Because nothing in it has been taxed yet, any withdrawal before 59½ is generally taxed as ordinary income and hit with a 10% early-distribution penalty under IRC §72(t), unless an exception applies. That makes a Traditional IRA effectively off-limits for pre-retirement needs in a way a Roth is not.

Which One Should You Choose?

There is no universal winner — the honest answer is that it depends on your tax rate today versus the rate you expect in retirement. A useful way to frame it:

• Lean Roth if you expect your tax rate to be the same or higher later — common for younger savers, anyone early in their earning years, and people who simply value certainty (a Roth removes all future tax-rate risk). The no-RMD and easy-early-access features are bonuses that often favor the Roth even when the bracket math is a wash.
• Lean Traditional if you expect a lower rate in retirement — common for high earners in their peak-income years who can take the deduction at a high marginal rate now and withdraw at a lower one later.

Two cautions on that logic. First, the deduction only helps if you actually qualify for it (see the phase-out table above). Second, predicting your retirement tax rate decades out is genuinely hard — which is exactly why many savers hedge by using both. Our Roth vs. Traditional calculator lets you plug in your own rate assumptions and see the break-even. As always, this is educational framing, not personalized advice.

Can You Have Both? Yes — Here's Why You Might

Nothing stops you from contributing to a Roth and a Traditional IRA in the same year — as long as the combined total stays within the $7,500 / $8,600 limit. Spreading contributions across both creates tax diversification: in retirement you can choose which account to draw from each year, pulling taxable dollars from the Traditional up to the top of a low bracket and tax-free dollars from the Roth beyond that. That flexibility is valuable precisely because nobody knows future tax rates.

There is also a one-way bridge between them: you can convert a Traditional IRA to a Roth at any income level — there is no income limit on conversions. You pay ordinary income tax on the pre-tax amount converted in the year you do it, and the money then grows and (eventually) withdraws tax-free. That mechanism is the engine behind the backdoor Roth for high earners and the multi-year conversion strategies used to fill up low-tax years. The reverse — Roth back to Traditional — is not allowed.

Worked Example: The Same $7,000, Two Ways