Roth IRA vs Traditional IRA: How They Differ and How to Choose

Roth and traditional individual retirement accounts (IRAs) both help you save for retirement, but they're taxed differently. Here's how they compare on eligibility, contributions, taxes and withdrawals, and what to weigh when choosing between them.

A retirement account is a savings and investment account designed to support you in the years after you stop working.

To encourage you to save, retirement accounts offer tax benefits that ordinary savings and investment accounts don't. Depending on the account, that can mean a lower tax bill today, investments that grow without being taxed each year or withdrawals that are tax-free in retirement. In return, each account has rules on how much you can put in and when you can take money out.

Because each type of account combines these features differently, it helps to compare them on three points:

Tax benefits today. Some accounts let you contribute before tax, which reduces your taxable income for the year and lowers your tax bill now.

Contribution limits. Every account caps how much you can add each year, and the caps vary a lot. Workplace plans generally allow more than IRAs.

Taxes in retirement. Some accounts tax your withdrawals as income. Others let you take money out tax-free.

In this article, we cover the main types of retirement accounts and then focus on the two most common individual retirement accounts, or IRAs: Roth and traditional. We look at who can contribute, how much, how each is taxed and the rules for taking money out, and finish with the factors that usually decide which one suits you.

What types of retirement accounts are there?

Retirement accounts differ in who sets them up, how much you can contribute and when your money is taxed.

Workplace plans, such as a 401(k), are set up by your employer. Your contributions come straight out of your paycheck, and many employers add money of their own, often by matching part of what you put in. They also let you save more each year: the 2026 employee limit for a 401(k) is $24,500, with more allowed from age 50 ¹.

An IRA is an account you open yourself, at a bank, brokerage or fund company. You choose the investments, and you can have one whether or not you also have a workplace plan. The yearly limit is lower: $7,500 for 2026, or $8,600 if you're 50 or older ¹.

Across both, the other big difference is when you pay tax. Traditional, or pre-tax, contributions can lower your taxable income now, and you pay tax on taxable withdrawals later. Roth, or after-tax, contributions aren't deductible, but qualified withdrawals in retirement are tax-free. Many workplace plans offer a Roth option too, and unlike a Roth IRA, it isn't limited by your income ².

What's the difference between a Roth and a traditional IRA?

There are two main types of IRAs, and the biggest difference between them is when you pay tax.

With a traditional IRA, you may be able to deduct what you put in, which lowers your taxable income for the year. Your investments then grow tax-deferred, meaning you pay no tax on them until you take the money out. Withdrawals are generally taxed as ordinary income, apart from the return of contributions you made without a deduction ³.

With a Roth IRA, you put in money you've already paid tax on, so there's no deduction now. In return, investment earnings can come out tax-free in a qualified withdrawal ⁴.

So choosing between them often comes down to your situation today and the tax bracket you expect to be in when you retire.

Who can contribute?

Anyone with earned income can use a traditional IRA. A Roth has income limits.

Both accounts generally need qualifying compensation, such as wages or self-employment income, and neither has an age limit ⁵. The big difference is income. Your ability to contribute directly to a Roth shrinks and then stops as your income rises. A traditional IRA has no income limit for contributing, though your income can affect whether you can deduct what you put in.

Income here means modified adjusted gross income, or MAGI: a figure based on your tax return's adjusted gross income, with adjustments specified for IRA eligibility.

How much can you contribute, and can you deduct it?

The limit is the same for both accounts, and it's shared between them.

For 2026, you can make up to $7,500 of regular contributions across your traditional and Roth IRAs, or $8,600 if you're 50 or older by year-end ¹. That's one limit, not one per account: anything you put into a traditional IRA reduces what you can put into a Roth that year ⁵. You can contribute for a given year until that year's tax filing deadline, not including extensions. Rollovers and conversions do not use this regular contribution allowance ⁵.

Deductions are where the two accounts split. Roth contributions are never deductible. Traditional contributions generally are, unless you or your spouse is covered by a retirement plan at work and your income passes certain levels ¹. Even then, a smaller deduction doesn't reduce how much you're allowed to contribute ⁵.

What are the tax advantages of each?

A deductible traditional contribution helps your tax bill now. A Roth's main benefit comes later.

A deductible traditional contribution lowers your tax bill for the year, so it costs you less than its face value. The money then grows without a yearly tax bill, and you pay income tax when you withdraw it, apart from any contributions you made without a deduction ³.

A Roth works the other way around. There's no deduction when you put money in, but investment earnings can come out tax-free in a qualified withdrawal ⁴. That can matter in retirement, when extra taxable income can push you into a higher bracket.

Eligible savers may also qualify for the Saver's Credit on contributions to either type of IRA. Income, age, student status and dependent status affect eligibility ⁶.

One fair tax comparison

A hypothetical shows what the tax difference means in dollars. It starts with $1,000 of pretax income, an illustrative 25% income-tax rate today and a fully deductible traditional contribution. Putting $1,000 into the traditional IRA saves $250 of tax, leaving a $750 net cost. Paying $250 of tax first leaves $750 for the Roth.

Both investments double over 20 years in the model. That leaves $2,000 in the traditional IRA before withdrawal tax and $1,500 in the Roth. The Roth withdrawal is assumed to meet the tax-free qualification rules ³.

Wealthion hypothetical, not a return forecast. Same pretax income and investment growth; full traditional deduction and qualified Roth withdrawal. Rates are illustrative. Fees, state and payroll taxes, tax credits and other tax interactions are excluded.

At the same 25% tax rate, both paths leave $1,500 to spend. A lower tax rate at withdrawal leaves more from the traditional account; a higher one leaves less. The upfront tax cost matters alongside the balance shown in each account.

What are the rules for taking money out?

This is where the two accounts differ most, especially before age 59½.

Roth withdrawals come from your regular contributions first, and those can come out at any time without income tax or the 10% additional tax. Conversion amounts come next, before earnings. The taxable portion of a conversion can face a separate five-year early-withdrawal penalty rule before age 59½, unless an exception applies ³.

Earnings are different. A tax-free qualified withdrawal requires both the five-tax-year period and a qualifying condition: age 59½, disability, death or an eligible first-home withdrawal, subject to a $10,000 lifetime limit. The five-tax-year period begins January 1 of the first tax year for which a contribution was made to any Roth IRA for the owner ³.

Traditional IRA withdrawals are generally taxed as ordinary income, apart from the return of after-tax contributions. Before 59½, the taxable portion generally faces an extra 10% tax unless an exception applies ³. Later in life, traditional IRAs also require you to take money out each year. These required minimum distributions, or RMDs, currently start with the year the owner turns 73 ⁷. The regulations specify age 75 for people born in 1960 or later ⁸. The first payment is generally due by April 1 of the following year; subsequent payments are due by December 31 ⁷.

How do you choose between them?

There's no single right answer, but a few questions help clarify it.

Your tax rate now and later. If you expect to be in a higher bracket in retirement, paying the tax now in a Roth can come out ahead. If you expect a lower one, a traditional IRA's deduction can be worth more, if the contribution is deductible.

Where you are in your career. An early-career worker may face a low tax rate now; a higher earner may get more from a deduction, if it is available. Career stage alone doesn't establish the future tax rate.

When you might need the money. Regular Roth contributions can come out at any time without income tax or the additional 10% tax, and a Roth has no required withdrawals during the original owner’s lifetime. A traditional IRA is less flexible on both counts.

You also don't have to pick just one. You can hold a traditional and a Roth IRA at the same time, alongside a workplace plan, as long as your IRA contributions stay within the one limit ⁵. Many savers use more than one account so that in retirement they can draw on both taxable and tax-free money, depending on what each year's tax bill looks like.

Both accounts are intended to support retirement. Their different tax rules change how much saving costs today and how much is available to spend later. The comparison depends on the deduction actually available, the tax on withdrawals and the conditions for accessing the money. Those factors can point to different answers for different savers. We are not making any recommendations.

Frequently asked questions

What if I earn too much for a Roth? A traditional IRA contribution may still be possible. A later Roth conversion can be partly taxable: the taxable and tax-free shares are calculated proportionately across relevant IRA balances, including certain workplace IRAs ^5, 9.

Is it too late to contribute for 2026? Contributions for 2026 can generally be made until April 15, 2027, excluding filing extensions, subject to the compensation and eligibility rules ⁵.

Sources & Disclosure

¹ 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500. Internal Revenue Service news release IR-2025-111, November 13, 2025, and Notice 2025-67, 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living; 2026 401(k) and IRA limits, Roth income phase-out ranges and traditional IRA deduction phase-out ranges. ² Ten differences between a Roth IRA and a designated Roth account. Internal Revenue Service, accessed November 13, 2026; the absence of an income restriction on designated Roth workplace contributions. ³ Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs). Internal Revenue Service, chapters 1 and 2; traditional after-tax basis, the 10% additional tax and exceptions, Roth ordering, regular contributions, conversion periods, qualified withdrawals and the first-home lifetime limit. Tax rules underlie Wealthion’s hypothetical; its growth and tax rates are illustrative assumptions. ⁴ Roth IRAs. Internal Revenue Service, accessed November 13, 2026; contributions are not deductible and qualified distributions, including earnings, are tax-free. ⁵ Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs). Internal Revenue Service; qualifying compensation, age and spousal rules, shared regular-contribution limit, deadlines, deduction restrictions and conversions. ⁶ Retirement Savings Contributions Credit (Saver's Credit). Internal Revenue Service; eligible contributions to traditional and Roth IRAs and income, age, student and dependent-status requirements. ⁷ RMD comparison chart (IRAs vs. defined contribution plans). Internal Revenue Service; current age-73 starting rule, first and subsequent payment deadlines, and no lifetime required distributions for original Roth IRA owners. ⁸ Treasury regulations, Code of Federal Regulations, title 26, section 1.401(a)(9)-2(b)(2) and section 1.408-8(a)(3), (b)(1). Electronic Code of Federal Regulations, accessed November 13, 2026; applicable distribution ages, including age 75 for people born in 1960 or later, and application to IRAs. ⁹ Instructions for Form 8606 (2025). Internal Revenue Service, Definitions, Part I line 6 and Part II; aggregation of relevant IRA balances, nondeductible basis and Roth conversion taxation.

Wealthion is a dba of Greylock Peak Investments, a registered investment adviser. This article is general information only. It is not investment advice or an offer or solicitation, and it is not tailored to your circumstances. Guests’ views are their own and may not reflect those of Wealthion. Wealthion has not verified guest statements, including any performance figures. Investing involves risk, including loss of principal, and past performance does not guarantee future results. Wealthion refers readers to other registered investment advisers and shares in the fees they receive from referred clients, which creates a conflict of interest. Please see our Form ADV Part 2A and consult your own financial advisor before investing.