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Roth IRA vs. Traditional IRA: Which Should You Choose?

It comes down to one question: do you expect to be in a higher or lower bracket when you retire?

By Finbrief Editor· Reviewed by a Certified Financial Planner (CFP®)· Updated May 17, 2026· 10 min read

The 30-second answer

  • If you expect a higher tax bracket in retirement, go Roth. Pay tax now at today's lower rate, withdraw tax-free later.
  • If you expect a lower tax bracket in retirement, go Traditional. Get the deduction now at today's higher rate, pay tax later when the rate is lower.
  • If you have no idea, split your contribution 50/50. You'll be diversified across tax regimes.

How each one is taxed

A Traditional IRA works like a 401(k): you contribute pre-tax dollars (you get a deduction in the year of contribution), the money grows tax-deferred, and you pay ordinary income tax on every dollar you withdraw in retirement.

A Roth IRA is the mirror image: you contribute after-tax dollars (no deduction now), the money grows tax-free, and qualified withdrawals in retirement are 100% tax-free — including all the growth.

Run your scenario

Inputs

$

2026 IRA limit is $7,000 ($8,000 if 50+).

%

After-tax outcome

Roth IRA

$661,226

Tax-free withdrawals after age 59½

Traditional IRA

$515,756

After paying 22% on withdrawals

Roth wins by $145,470. When your retirement bracket is higher than today's, you want to pay the tax now while the rate is lower.

Simplified model. Does not include the opportunity cost of upfront Roth tax payments invested in a taxable account, RMDs, state tax, or future law changes.

Open an IRA

All three offer free Roth and Traditional IRAs.

Fidelity →Schwab →Vanguard →

Contribution and income limits (2026)

  • Annual contribution limit: $7,000, or $8,000 if you're 50 or older. This is a combined limit across Roth and Traditional.
  • Roth income phase-outs (2026): Single filers phase out between $150K and $165K MAGI; MFJ phases out between $236K and $246K.
  • Traditional IRA deduction limits: If you (or your spouse) are covered by a workplace retirement plan, the deduction phases out at lower income levels.

Above the Roth income limits? You can still contribute through a Backdoor Roth — contribute to a Traditional IRA and convert it to a Roth. There's no income cap on conversions.

When Roth wins

  • Early in your career, when you're in a low bracket but expect higher income later.
  • You want flexibility — Roth contributions (not earnings) can be withdrawn anytime without penalty.
  • You expect to leave the account to heirs — Roth heirs inherit tax-free.
  • You believe tax rates will be higher in the future (the TCJA brackets are scheduled to revert in 2026).

When Traditional wins

  • You're in a high bracket today (24%, 32%, or above) and expect to retire in a meaningfully lower one.
  • You need the deduction now to bring your AGI under a threshold (e.g., to qualify for a tax credit).
  • You're close to retirement and your earning years are nearly over.

The hybrid strategy

If your future bracket is uncertain (whose isn't?), splitting contributions between Roth and Traditional gives you what financial planners call "tax diversification." In retirement, you can pull from whichever bucket minimizes your tax bill that year.

How to open an IRA

All three of the major low-cost brokerages — Fidelity, Schwab, and Vanguard — offer free Roth and Traditional IRAs with no account minimum. Opening one takes about 10 minutes online. Funding takes 1–3 business days for an ACH transfer.

Related reading

  • How to Budget Using the 50/30/20 Rule — figure out how much you can actually contribute.
  • The Backdoor Roth IRA Guide (coming soon)
  • How much should I contribute to my 401(k)? (coming soon)

Frequently asked questions

Can I have both a Roth and a Traditional IRA?
Yes. You can split your annual contribution across both. For 2026, the combined limit is $7,000 ($8,000 if you're 50 or older).
What if I make too much for a Roth IRA?
You can still contribute through a 'Backdoor Roth' — contribute to a Traditional IRA and immediately convert to Roth. There's no income limit on conversions. Read our backdoor Roth guide for the steps and pro-rata pitfalls.
Should I prioritize my 401(k) or IRA first?
Capture your full employer 401(k) match first (it's free money). Then max your IRA (Roth or Traditional, depending on your bracket). Then return to the 401(k) for any additional contributions.
Can I convert a Traditional IRA to a Roth?
Yes, anytime — it's called a Roth conversion. You'll owe income tax on the converted amount in the year of conversion. It often makes sense in low-income years (sabbatical, layoff, between jobs).
What's the deadline to contribute for 2026?
April 15, 2027 — the tax filing deadline. You can contribute for the prior tax year up until that date.