Roth vs Traditional: Which Retirement Account Is Best for You?

Quick Answer

Traditional accounts offer a tax deduction now (reduce current taxes) but taxes on withdrawals in retirement. Roth accounts offer no deduction now but tax-free growth and withdrawals forever. Choose Roth if you expect higher taxes in retirement, are young (more growth time), or have lumpy income (low-income years). Choose traditional if you're in a high tax bracket now and expect lower taxes in retirement.

Key Differences

Tax Deduction Timing: The Core Decision

Traditional contributions: Deductible in the year made. If you contribute $7,000 (2026 limit) to a traditional IRA, you reduce your 2026 taxable income by $7,000. At 22% bracket, you save $1,540 in taxes.

Roth contributions: No deduction. You contribute $7,000 after-tax dollars (money you've already paid income tax on). The contribution doesn't reduce your 2026 taxable income.

The trade-off:

• Traditional: Pay tax now (save $1,540 in 2026) by taking a deduction, then pay tax on withdrawal in retirement.
• Roth: Pay tax now (no savings in 2026), then no tax in retirement.

Which is better depends on whether your tax rate is higher or lower in retirement.

Predicting Your Retirement Tax Rate

Traditional makes sense if you expect a lower tax rate in retirement:

• You're a high earner now (32%–37% bracket) but expect to withdraw less income in retirement (22%–24% bracket).
• You're deferring income for multiple years before retirement, expecting a gap year or two with low income.

Roth makes sense if you expect a higher or equal tax rate in retirement:

• You're young and expect higher earnings and taxes later.
• Tax rates are likely to increase (current low rates are temporary, expiring in 2026).
• You'll have significant investment gains and want tax-free withdrawals to avoid capital gains tax.
• You expect Social Security to be heavily taxed in retirement (combined income-based taxation).

The 2026 Tax Bracket Cliff

Tax rates are historically low in 2026—the "temporary" tax cuts from 2017 expire December 31, 2025. Congress may extend them, but absent action, rates revert to pre-2017 levels (roughly 2% higher across brackets).

This is a strong argument for Roth conversions and Roth contributions now, locking in low tax rates. If rates rise, traditional contributions made at 22% (2026) would be withdrawn and taxed at 24%–26% (2027+), losing the tax advantage.

Age and Time Horizon

Younger than 55? Roth is usually better. You have 30–40+ years of tax-free growth. Even if retirement tax rates are identical to today's, decades of compound tax-free growth outweigh losing a deduction today.

Older than 55? Traditional might be better if you're in a high bracket now. You have fewer years until retirement and RMD requirements (age 73+), which force withdrawals and income.

Rule of thumb: If you're more than 15 years from retirement, lean Roth. If you're within 10 years, balance based on expected retirement income and tax rates.

Income Limits and High Earners

Roth IRA contributions are subject to income phase-outs:

If you earn above these limits, you can't contribute directly to a Roth IRA. High earners use the backdoor Roth (contribute non-deductible to traditional IRA, then immediately convert to Roth). This bypasses income limits on Roth contributions.

Traditional IRA contributions are also limited by income if you have access to an employer-sponsored plan:

Above these limits, traditional IRA contributions aren't deductible (though you can still contribute non-deductible amounts).

High earners often have no choice: they're above Roth phase-out limits and traditional deduction limits. Their options are backdoor Roth, 401(k) traditional/Roth deferrals, or Roth 401(k).

Required Minimum Distributions (RMDs)

Traditional IRAs require withdrawals starting at age 73 (2026 rules). The RMD is your balance divided by life expectancy factors (IRS tables). The RMD is taxable income.

Roth IRAs have no RMD for the owner. You can let the account grow indefinitely without forced withdrawals. At death, your beneficiaries must take RMDs (unless they're spouses), but you don't pay taxes on the inherited Roth.

This is an advantage of Roths for long-lived retirees and legacy planning.

RMD example: Age 73, traditional IRA balance $500,000, life expectancy factor 25.5.

• Forced RMD: $500,000 / 25.5 = $19,608 (taxable as ordinary income)
• At 24% bracket: $4,706 in taxes

A Roth IRA with the same $500,000 balance has no RMD—you can leave it invested indefinitely.

Medicare and Social Security Taxation

Traditional IRA withdrawals increase your Modified Adjusted Gross Income (MAGI), which affects:

1. Medicare premiums: Higher MAGI increases Part B and Part D premiums (IRMAA—Income-Related Monthly Adjustment Amount). Above $103,000 (single, 2026), you pay 35%–85% more for Medicare.

2. Social Security taxation: Up to 85% of Social Security benefits are taxed if your combined income (AGI + 50% of SS benefits) exceeds $25,000 (single) or $32,000 (married).

Roth withdrawals don't count toward MAGI or combined income. Withdrawing from a Roth IRA doesn't increase Medicare premiums or trigger Social Security taxation.

Example: Retiree age 72, earning $50,000 from pensions, receiving $30,000 Social Security, holding $200,000 traditional IRA and $200,000 Roth IRA.

• If they withdraw $30,000 from traditional IRA: MAGI rises to $80,000. Medicare premiums increase, and up to 85% of Social Security is taxed. Tax bill: roughly $10,000+.
• If they withdraw $30,000 from Roth IRA: MAGI stays $50,000. No Medicare increase, no Social Security taxation. Tax bill: $0.

The Roth withdrawal is vastly superior in this scenario.

Conversion Strategies: Filling Lower Tax Brackets

A hybrid approach: contribute to a traditional account, then convert to Roth in low-income years.

Example: Early retiree age 55, no income for 2–3 years before Social Security starts at 62.

• Years 55–61: Annual income is $0–$20,000 (part-time work). Marginal tax bracket is 10%.
• Age 62+: Social Security + pensions = $80,000. Marginal tax bracket is 22%+.

Strategy: In years 55–61, convert $50,000/year of traditional IRA to Roth. Tax cost: $50,000 × 10% = $5,000 per year.

If they waited until age 65 to convert the same $250,000, tax cost would be $250,000 × 22% = $55,000. Savings: $50,000 by converting in low-income years.

Use the /products/roth-conversion tool to model conversions.

Employer 401(k) Choices: Traditional vs. Roth

Many employers offer both traditional and Roth 401(k) options. The same trade-off applies:

• Traditional 401(k): Deferrals reduce taxable income immediately. At age 59.5+, withdrawals are taxed.
• Roth 401(k): Deferrals are after-tax. Withdrawals are tax-free.

High earners often split contributions: traditional 401(k) to get a tax deduction now (reducing their high bracket), and Roth for tax-free growth on some funds.

Example: Attorney earning $250,000, in 35% bracket.

• Contribute $15,000 to traditional 401(k): Saves $5,250 in taxes ($15,000 × 35%).
• Contribute $8,500 to Roth 401(k): No deduction, but growth is tax-free.
• Total deferred: $23,500 (annual employee limit).

The split balances a large tax deduction now (traditional) with some tax-free growth (Roth) in retirement.

Spousal IRAs and Income Considerations

If you're married and one spouse has no earned income, the working spouse can fund a spousal IRA (traditional or Roth) for the non-working spouse.

Example: High-earning spouse earns $200,000, non-working spouse has $0 income.

• High earner can contribute $7,000 to their own traditional or Roth IRA (depending on income limits).
• High earner can also contribute $7,000 to a spousal IRA for the non-working spouse.
• Total: $14,000 contributed.

If the working spouse contributes to a traditional IRA, it's a deduction for the working spouse (subject to phase-out limits). A spousal Roth IRA for the non-working spouse is often ideal because the non-working spouse has zero income and is in the 0% bracket—converting later is free.

Decision Framework

Sources

• Internal Revenue Service. "Roth IRA Rules." IRS.gov.
• Internal Revenue Service. "Traditional IRA Rules." IRS.gov.
• Internal Revenue Service. "Roth Conversions." IRS.gov.
• IRS Publication 590-A: Contributions to IRAs.
• IRS Publication 590-B: Distributions from IRAs.
• CFA Institute. "Tax-Efficient Retirement Withdrawal Strategies."