Roth vs. Traditional IRA

Deciding which type of individual retirement account to invest in — traditional or Roth — often comes down to taxes.¹

In 2026, you can contribute up to $7,500 to an IRA, or $8,600 if you’re aged 50 or older.

When Should You Choose a Roth vs. a Traditional IRA?

A traditional IRA is often the better option if  you’re in a higher tax bracket today than you will be in retirement — usually the case for workers in their peak earning years. A Roth could make more sense if you’re in a lower tax bracket now than you might be in retirement; this is often the situation for many younger employees.

What Are the Differences Between a Roth and a Traditional IRA?

A traditional IRA offers an upfront tax deduction, which is particularly attractive for savers in higher tax brackets. For 2026, all or some contributions are deductible if modified adjusted gross income is less than $91,000 for single filers and $149,000 for married joint filers. Withdrawals in retirement will be taxed as regular income. By then, retirees may be in a lower tax bracket.

A Roth IRA’s tax break comes at the back end. Contributions are made with money that’s already been taxed, but withdrawals in retirement are tax-free. Savers can make a full or partial contribution to a Roth IRA if their modified adjusted gross income is under $168,000 for single filers and $252,000 for married joint filers. Many 457(b), 403(b), and 401(k) plans have added a Roth option with no income limits on contributions.

Other benefits a Roth has over a traditional IRA²: You can withdraw your contributions to a Roth at any time without triggering penalties or taxes.³ Also, a Roth doesn't have required minimum distributions, which are annual taxable withdrawals that start at age 73 for many retirees.

There are exceptions to the rule. A Roth lowers take-home pay, so younger workers on tight budgets might prefer a tax-deductible traditional IRA. And today’s high earners who expect tax rates to go up later might want to have some money in a tax-free Roth.

Disclosures

^{1 MissionSquare does not provide tax advice. Please consult your tax advisor regarding your specific situation.}

^{2 Distributions from a traditional IRA are subject to federal income tax. However, no tax applies to any portion of a distribution that represents nondeductible contributions made to the IRA. In addition to income tax, you may have to pay a 10% early withdrawal penalty if you're under age 59 1/2 at the time of the distribution, although a number of exceptions apply.}

^{3 Contributions: If you contribute to a Roth IRA, you can make tax-free withdrawals if you’ve owned a Roth IRA for at least five years (as defined by the IRS) and meet the requirements for a “qualifying event”: age 59 1/2, a “first-time” home purchase, a disability, or death (with withdrawals going to your beneficiaries). Otherwise, you may have to pay income taxes and penalties to withdraw your earnings. Withdrawals: Roth IRA contributions can be withdrawn at any time without taxes or penalties. If you have a traditional IRA, you may not be able to withdraw your money before age 59 1/2 without paying a penalty. There can be many exceptions to the IRS rules, so carefully research all of your options.}

Try the Roth Analyzer

Use this tool to see if a Roth IRA might be right for you.