Roth IRA vs. Traditional IRA: Which One, When

Both accounts let your investments grow without taxes year to year. The difference is when the IRS takes its cut.

• Traditional IRA: Contributions may be tax-deductible today. Grows tax-deferred. Every withdrawal in retirement is taxed as ordinary income.
• Roth IRA: Contributions are after-tax. Grows tax-free. Qualified withdrawals in retirement - including all the growth - come out completely tax-free, not just tax-deferred.

The question isn't which account is better in the abstract. The question is: at what tax rate will you pay taxes on this money?

For most people in their 20s and early 30s, this calculation points toward Roth. You're likely in the 12% or 22% bracket. Over a 30-40 year career, income typically rises and distributions in retirement can push people into higher brackets than they expected.

The IRA contribution limit for 2026 is $7,500 - that's across all your IRAs combined. Age 50 and older: $8,600.

Roth IRA eligibility phases out at higher incomes. Single filers: phase-out begins at $153,000, eliminated at $168,000. Married filing jointly: $242,000 to $252,000.

• The IRA is not an investment. It's an account. Opening a Roth IRA doesn't mean you've invested in anything - you fund it, then choose investments inside it.
• You can contribute to an IRA and a 401(k) in the same year. The limits are completely separate.
• You have until Tax Day to make IRA contributions for the previous calendar year.

The bottom line

For early-career earners in the 22% bracket or below, expecting income to grow: the Roth is worth serious consideration.