The mechanics, side by side
A Traditional IRA accepts pre-tax (deductible) contributions, grows tax-deferred, and is fully taxed as ordinary income when you withdraw in retirement. A Roth IRA accepts after-tax contributions, no deduction today, grows tax-free, and is withdrawn tax-free in retirement, provided you're 59½ and the account has existed for at least five years.
Both share the same 2026 contribution limit: $7,000, or $8,000 at age 50+. You can split that limit between the two in the same year, for example $4,000 Roth and $3,000 Traditional. The total can never exceed the IRS cap, no matter how many IRAs you own.
The income limits that matter
- Roth IRA direct contributions in 2026 phase out between $150,000–$165,000 single, $236,000–$246,000 married filing jointly.
- Traditional IRA deductibility (if covered by a workplace plan) phases out at $79,000–$89,000 single, $126,000–$146,000 MFJ.
- Above the Roth phase-out, the Backdoor Roth IRA technique allows high earners to fund a Roth indirectly via a non-deductible Traditional IRA contribution + immediate conversion.
- There is no income limit for non-deductible Traditional IRA contributions, but the tax efficiency is far weaker than either Roth or pre-tax Traditional.
Which to pick, by tax bracket
The cleanest decision rule: if you expect to be in a higher marginal bracket in retirement than today, choose Roth. If you expect to be in a lower bracket, choose Traditional. If the answer is genuinely uncertain, split contributions.
Most workers under 40 in the 12% or 22% bracket should default to Roth. Federal rates are at multi-decade lows, and 30+ years of tax-free compounding is dramatically valuable. High earners in the 32% or higher bracket should default to Traditional, because retirement income almost certainly drops them into a lower bracket. Within marriages with one spouse in a low bracket and one in a high bracket, splitting across the two accounts often beats either pure strategy.
Beyond taxes: behavior and flexibility
Roth contributions (not earnings) can be withdrawn at any time, for any reason, without taxes or penalties. This makes the Roth IRA an unusually flexible backup emergency fund, especially in the first decade of saving when your contributions still equal most of the balance. The earnings, however, are locked until 59½ and a five-year holding period.
Traditional IRAs trigger Required Minimum Distributions (RMDs) starting at age 73, the IRS forces you to withdraw a percentage each year whether you need it or not. Roth IRAs have no RMD for the original owner, which makes them ideal for late-life estate planning and for heirs who can stretch tax-free growth across another decade.
How to actually open one
- Pick a brokerage with no IRA account fee and a wide low-cost index-fund menu, Fidelity, Schwab and Vanguard are the standard choices.
- Open the account online in 10 minutes. Link your bank, choose Roth or Traditional.
- Set a monthly automatic transfer at $583/month for the under-50 limit, or $666 at 50+.
- Invest the contribution, leaving it in a money-market or 'cash' position is the most common rookie error. A single target-date index fund is sufficient for most savers.
- Repeat every January, and bump contributions to the new IRS limit whenever it increases.
Eligibility and income limits in 2026
Roth IRA contributions phase out as your modified adjusted gross income (MAGI) climbs. For 2026, single filers can contribute the full $7,000 up to a MAGI of $150,000, with the contribution phasing out completely at $165,000. Married filing jointly: full contribution up to $236,000, phasing out at $246,000. Above these caps you cannot contribute directly, but you can still execute a Backdoor Roth (see our dedicated guide).
Traditional IRA contributions have no income limit, but the deduction is phased out for active participants in an employer retirement plan: $79,000–$89,000 single, $126,000–$146,000 MFJ. Above the deduction phase-out you can still contribute non-deductibly, though most people in that range are better served by Roth conversions or a Backdoor Roth.
When the choice between Roth and Traditional flips
Roth wins when your retirement marginal tax rate will be higher than today. Common scenarios: you're a 22% bracket worker today and expect to retire on $120k+ of income (24% bracket), you anticipate large RMDs from a Traditional 401(k), or you simply think federal tax rates will be higher in 30 years (a defensible bet given U.S. fiscal trajectory).
Traditional wins when today's marginal rate is materially higher than your retirement rate. Examples: a 32–35% bracket professional today who plans to retire on $80k of income (12–22% bracket), or a high earner in a high-tax state who plans to retire in a no-income-tax state like Florida or Texas. The break-even is closer than people think, when your current and retirement brackets are within 5 percentage points, the choice is largely a wash and Roth's flexibility (no RMDs, tax-free heirs) usually wins the tiebreaker.
The five-year rule, in plain English
Two five-year rules apply to Roth IRAs and they're commonly confused. Rule one: the account must be open for five tax years before any earnings can be withdrawn tax-free, even after age 59½. Rule two: each Roth conversion (e.g., a Backdoor Roth) has its own separate five-year clock, withdraw converted dollars before five years have passed and you pay the 10% penalty, even if you're over 59½ on contributions.
Original contributions can be withdrawn at any time, for any reason, with no tax and no penalty. That makes a Roth IRA a quiet emergency-fund backstop in early adulthood, though pulling contributions still costs you the lost compounding.
Action checklist for this tax year
- Confirm your 2026 MAGI projection, if under the Roth phase-out cap, contribute directly; if above, plan a Backdoor Roth.
- Check whether your employer plan offers a Roth 401(k), most do as of 2026, and split contributions to hedge tax-bracket risk.
- If you're in the 32%+ bracket, run last year's tax return through a 'Roth conversion' scenario in TurboTax or your CPA's planning tool to see the cost of converting an old Traditional IRA in a low-income year.
- Set the IRA contribution as a January auto-transfer rather than an April scramble, you capture an extra year of tax-free growth and avoid the deadline crunch.
- Document everything (Form 5498 from the brokerage, Form 8606 if non-deductible), you'll thank yourself in 25 years when you withdraw and need to prove cost basis.
