In this guide
The difference is when you pay tax: a traditional account taxes withdrawals, a Roth taxes the money before it goes in. If your tax rate is the same now and in retirement, the two leave you with exactly the same amount. Traditional wins if your rate will be lower in retirement, Roth wins if it will be higher. The rules below, from IRS Publications 590-A and 590-B and IRS guidance, decide the rest.
The decision rule
- Lower rate expected in retirement: traditional keeps more. You skip tax at today's higher rate.
- Higher rate expected in retirement: Roth keeps more. You pay at today's lower rate and never again.
- Cannot tell: hold some of each. In retirement, two buckets let you choose how much taxable income you show in a given year.
The rate that matters is your marginal rate, the rate on your last dollar, not your average. How federal tax brackets work explains the difference. The tax bracket headroom tool shows how much room you have left in your current bracket.
The math, computed
Take $10,000 of pre-tax pay, a balance that triples before you withdraw, and a 22% rate now. Only the retirement rate changes.
| Traditional | Roth | |
|---|---|---|
| Pre-tax pay | $10,000 | $10,000 |
| Tax now at 22% | $0 | $2,200 |
| Amount invested | $10,000 | $7,800 |
| Value after tripling | $30,000 | $23,400 |
| Kept after tax, 12% in retirement | $26,400 | $23,400 |
| Kept after tax, 22% in retirement | $23,400 | $23,400 |
| Kept after tax, 32% in retirement | $20,400 | $23,400 |
The tie at equal rates is exact. A $3,000 gap opens in either direction when the retirement rate is 10 points off.
The contribution-limit effect
Limits are set in dollars of contribution, not dollars of after-tax value. For 2026 the IRA limit is $7,500 (see all 2026 limits). A full Roth IRA costs you $7,500 of after-tax money, which is $9,615 of pre-tax pay at 22%. A full traditional IRA costs $7,500 of pre-tax pay. If the balance triples, the Roth is worth $22,500 all yours. The traditional account is worth $22,500 before tax and $17,550 after 22% tax.
Those are not the same comparison. The Roth used more of your income to fill the same limit. It only favors Roth if you have the spare income to fill it either way. If you spend the tax saved from the traditional deduction and the Roth saver does not spend anything extra, the Roth saver has put more to work.
Rules that change the answer
| Rule | Traditional | Roth |
|---|---|---|
| Deduction now | Possible, with limits if you have a workplace plan | None |
| Income limit to contribute (IRA) | None to contribute | Phases out for 2026 at $153,000 to $168,000 single, $242,000 to $252,000 joint |
| Required withdrawals during your life | Start at age 73 | None from a Roth IRA, and none from a Roth 401(k) since 2024 |
| Contributions taken out early | Taxed, and 10% penalty if under 59 1/2 in most cases | Contributions come out first, tax free and penalty free |
Required minimum distributions
The IRS says traditional IRA and 401(k) owners must start withdrawals at age 73. It also says Roth IRAs and designated Roth accounts in 401(k) and 403(b) plans carry no required withdrawals while the owner is alive. SECURE 2.0 removed the lifetime requirement for Roth 401(k)s beginning in 2024. Beneficiaries of Roth accounts still follow the required distribution rules after the owner dies.
Withdrawal order and the two 5-year rules
IRS Publication 590-B sets the rules for Roth IRA withdrawals. A distribution is qualified, and so tax free, if it comes after the 5-year period and at age 59 1/2 or later, or on death or disability, or for a first-home purchase up to $10,000. There are two separate 5-year clocks.
- The qualified-distribution clock. It starts January 1 of the year of your first contribution to any Roth IRA. Earnings come out tax free only after it has run.
- The conversion clock. Each conversion has its own 5-year period. Taking a converted amount out inside its period triggers a 10% penalty if you are under 59 1/2, even though the converted amount itself was already taxed.
Withdrawals come out in a fixed order: contributions first, then conversions, then earnings. That is why Roth contributions are the most flexible money in either account type. They are still retirement money. Pulling them out early gives up the tax-free growth.
Your 2026 IRA limit is one combined pool across traditional and Roth IRAs, $7,500 or $8,600 at 50 or older. A 401(k) Roth option uses the 401(k) limit, which has no income cap.
Which to choose in common cases
| Situation | Usually favors |
|---|---|
| Early career, in the 10% or 12% bracket | Roth |
| Peak earnings, 24% bracket or higher, expecting less income later | Traditional |
| A low-income year, such as between jobs or a sabbatical | Roth, or a conversion |
| Expect a large pension or rental income in retirement | Roth |
| No idea | Split between both |
| Above the Roth IRA income range | Traditional IRA, or a Roth 401(k) at work if offered |
If you carry debt that costs more than your expected investment return, paying it down can beat either account. See pay off a loan early or invest.
Frequently asked questions
Is Roth or traditional better?
Neither wins in general. Traditional leaves more if your tax rate in retirement is lower than today's, Roth leaves more if it is higher, and they tie if the rates are equal.
Can I contribute to both a Roth IRA and a traditional IRA?
Yes, but the IRS applies one combined limit to all your IRAs: $7,500 for 2026, or $8,600 if you are 50 or older. You cannot fill both.
Does a Roth 401(k) have required minimum distributions?
Not anymore while you are alive. Under SECURE 2.0, designated Roth accounts in 401(k) and 403(b) plans have no lifetime required distributions starting in 2024, matching Roth IRAs.
What is the 5-year rule for a Roth IRA?
Earnings are tax free only if your first Roth IRA contribution was made at least 5 tax years ago, counted from January 1 of that year, and you are 59 1/2 or older or meet another exception. Each conversion has its own separate 5-year clock for the 10% penalty.
Can I take my Roth contributions out without paying tax?
Yes. Roth IRA withdrawals come out contributions first, and the IRS treats contributions you made yourself as tax free and penalty free at any age. Earnings and converted amounts follow rules that depend on the 5-year clocks and your age.
Is there an income limit for a traditional IRA?
No limit on contributing. If you or your spouse has a workplace plan, the deduction phases out, for example from $81,000 to $91,000 single in 2026.
Do Roth IRAs have an age limit for contributions?
No. The IRS says you can keep contributing to a Roth IRA after 70 1/2 as long as you have earned income and are under the income limit.
Sources
- Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), Internal Revenue Service. Checked October 2026.
- Roth IRAs, Internal Revenue Service. Checked October 2026.
- Retirement plan and IRA required minimum distributions FAQs, Internal Revenue Service. Checked October 2026.
- 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (Notice 2025-67), Internal Revenue Service. Checked October 2026.
Written by
Teja PagidimarriTeja Pagidimarri built 43dots to answer money questions with numbers you can check. He is a software developer, not a licensed financial advisor, so every guide here is built the way an engineer would: figures pulled from the primary source, math shown in the open, and the calculators built from the actual published formulas.
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