Traditional vs Roth IRA Calculator: Which is Better for You in 2026?

The choice between Traditional and Roth IRA is one of the most consequential retirement decisions you'll make—potentially worth $50,000-200,000+ in lifetime tax savings or losses. Yet most people choose based on hearsay, not mathematics. A 30-year-old in the 12% bracket using Traditional IRA instead of Roth might pay $150,000 extra in retirement taxes, while a high earner in the 35% bracket using Roth unnecessarily pays $75,000 more in current taxes.

This comprehensive guide covers how Traditional and Roth IRAs work, calculating tax impact now vs later, income limits and phaseouts, conversion strategies, withdrawal rules, real tax bracket projections, and detailed scenarios showing which IRA type wins in different situations.

Table of Contents

1. Traditional vs Roth IRA: The Key Differences
2. 2026 Contribution Limits and Income Restrictions
3. The Tax Bracket Math
4. Which IRA Type Should You Choose?
5. Roth Conversion Strategies
6. Withdrawal Rules and RMDs
7. Common IRA Mistakes
8. Real Traditional vs Roth Scenarios

Traditional vs Roth IRA: The Key Differences

How Traditional IRA Works

Contributions:

• Tax-deductible (reduces taxable income)
• Lowers current year tax bill
• $7,000 limit (2026)
• $8,000 if age 50+ (catch-up)

Growth:

• Tax-deferred (no taxes on gains/dividends)

Withdrawals:

• Fully taxable as ordinary income
• Required Minimum Distributions (RMDs) starting age 73
• 10% penalty if withdrawn before 59½ (plus taxes)

Example:

• Contribute $7,000
• In 24% bracket: Save $1,680 in taxes
• True cost: $5,320
• 30 years later at 8%: $70,400
• Withdraw: Pay tax on full $70,400

How Roth IRA Works

Contributions:

• After-tax dollars (NO deduction)
• No current tax benefit
• $7,000 limit (2026)
• $8,000 if age 50+

Growth:

• Tax-free (no taxes ever on gains/dividends)

Withdrawals:

• Completely tax-free
• No RMDs (can leave forever)
• Can withdraw contributions anytime penalty-free
• 10% penalty on earnings if before 59½

Example:

• Contribute $7,000 (after-tax)
• In 24% bracket: No tax savings
• Cost: Full $7,000
• 30 years later at 8%: $70,400
• Withdraw: $0 taxes, keep all $70,400

Side-by-Side Comparison

| Feature | Traditional IRA | Roth IRA | |---------|-----------------|----------| | Contribution | Pre-tax (deductible) | After-tax | | Tax benefit | Now | Later | | Growth | Tax-deferred | Tax-free | | Withdrawals | Taxable | Tax-free | | RMDs | Yes (age 73) | No | | Income limits | Deduction phaseout | Contribution phaseout | | Early withdrawal | Penalty + tax | Contributions anytime | | Best for | High earners | Low/moderate earners, young |

The Core Question

Pay taxes now or later?

Traditional: Deduction now, pay taxes later Roth: Pay taxes now, never again

Answer depends on: Tax bracket now vs retirement

2026 Contribution Limits and Income Restrictions

Contribution Limits

2026 IRA limits (Traditional and Roth combined):

| Age | Limit | |-----|-------| | Under 50 | $7,000 | | 50+ | $8,000 |

Important: $7,000 is TOTAL across both IRA types

• Can't do $7,000 Traditional + $7,000 Roth
• Can split: $4,000 Traditional + $3,000 Roth = $7,000 total

Traditional IRA Deduction Phaseout

If you have 401k at work, deduction phases out:

Single filers (2026): | Income | Deduction | |--------|-----------| | Under $77,000 | Full deduction | | $77,000-87,000 | Partial deduction | | Over $87,000 | No deduction |

Married filing jointly (2026): | Income | Deduction | |--------|-----------| | Under $123,000 | Full deduction | | $123,000-143,000 | Partial deduction | | Over $143,000 | No deduction |

If NO 401k at work: Can always deduct Traditional IRA (no income limit)

Roth IRA Income Phaseout

Can't contribute directly to Roth if income too high:

Single filers (2026): | Income (MAGI) | Contribution | |---------------|-------------| | Under $146,000 | Full $7,000 | | $146,000-161,000 | Reduced amount | | Over $161,000 | $0 (backdoor Roth instead) |

Married filing jointly (2026): | Income (MAGI) | Contribution | |---------------|-------------| | Under $230,000 | Full $7,000 | | $230,000-240,000 | Reduced amount | | Over $240,000 | $0 (backdoor Roth instead) |

The Backdoor Roth Loophole

If income over Roth limits:

1. Contribute $7,000 to non-deductible Traditional IRA
2. Immediately convert to Roth IRA
3. Pay taxes on gains (minimal if immediate)
4. Now in Roth IRA despite income limits

Example: Single, $200,000 income

• Too high for direct Roth contribution
• Contribute $7,000 to Traditional (non-deductible)
• Convert to Roth (taxable event, but no gain if immediate)
• Result: $7,000 in Roth IRA

Legal loophole used by high earners to get around limits.

Contribution Deadline

Deadline: Tax filing deadline (April 15, 2027 for 2026 contributions)

Can contribute for 2026:

• January 1, 2026 through April 15, 2027

Front-load if possible: More time for compound growth

The Tax Bracket Math

Basic Comparison Formula

Traditional IRA value:

After-tax value = Balance × (1 - Tax rate in retirement)

Roth IRA value:

After-tax value = Balance (already tax-free)

Traditional wins IF: Tax bracket now HIGHER than retirement Roth wins IF: Tax bracket now LOWER than retirement

Example: Same Bracket

Age 30, contribute $7,000, 24% bracket now and retirement

Traditional:

• Tax savings now: $1,680
• Invest $1,680 at 8% for 35 years: $25,278
• IRA grows: $7,000 → $105,300
• Subtract taxes at 24%: $105,300 - $25,272 = $80,028
• Plus invested tax savings: $25,278
• Total: $105,306

Roth:

• Tax savings now: $0
• IRA grows: $7,000 → $105,300
• Taxes: $0
• Total: $105,300

Virtually identical if same tax bracket!

Example: Higher Bracket Now

Age 45, contribute $7,000, 32% bracket now, 22% in retirement

Traditional:

• Tax savings now: $2,240 (32%)
• Invest $2,240 at 8% for 20 years: $10,450
• IRA grows: $7,000 → $32,600
• Taxes in retirement at 22%: $7,172
• Net IRA: $25,428
• Plus invested savings: $10,450
• Total: $35,878

Roth:

• Pay full tax now (no deduction)
• Cost: $7,000
• Grows to: $32,600
• Tax-free withdrawal
• Total: $32,600

Traditional wins by $3,278 (10% better)

Example: Lower Bracket Now

Age 25, contribute $7,000, 12% bracket now, 22% in retirement

Traditional:

• Tax savings now: $840 (12%)
• Invest $840 at 8% for 40 years: $18,240
• IRA grows: $7,000 → $152,000
• Taxes in retirement at 22%: $33,440
• Net IRA: $118,560
• Plus invested savings: $18,240
• Total: $136,800

Roth:

• Pay 12% tax now (already paid)
• Cost: $7,000
• Grows to: $152,000
• Tax-free withdrawal
• Total: $152,000

Roth wins by $15,200 (11% better)

The Tax Arbitrage Sweet Spot

Best scenarios for Traditional:

• Currently in 32-37% bracket
• Expect retirement in 12-24% bracket
• Arbitrage: 10-25% tax savings

Best scenarios for Roth:

• Currently in 10-12% bracket
• Expect retirement in 22-24%+ bracket
• Arbitrage: 10-12% tax savings

The bigger the spread, the bigger the win.

Don't Forget State Taxes

High-tax state now, low-tax state retirement:

Example: California→ Florida

• Now: 32% federal + 9.3% state = 41.3%
• Retirement: 22% federal + 0% state = 22%
• Spread: 19.3%!

Traditional IRA massive win (save 41%, pay 22% later)

Opposite: Texas → California:

• Now: 24% federal + 0% state = 24%
• Retirement: 24% federal + 9.3% state = 33.3%
• Roth wins (pay 24% now, avoid 33% later)

Which IRA Type Should You Choose?

Decision Tree

Step 1: Check income limits

• Over Roth limit? → Backdoor Roth or Traditional
• Over Traditional deduction limit? → Roth (or backdoor)
• Under both? → Continue to Step 2

Step 2: Compare current vs retirement bracket

• Current bracket HIGHER? → Traditional (probably)
• Current bracket LOWER? → Roth (probably)
• Same bracket? → Roth (flexibility edge)

Step 3: Consider other factors

• Need access to contributions? → Roth (can withdraw anytime)
• Want to avoid RMDs? → Roth (no RMDs)
• Value flexibility? → Roth (more options)
• Want current tax refund? → Traditional (immediate benefit)

By Income Level

$30,000-50,000 (12% bracket): → Roth IRA

• Low bracket now
• Likely higher bracket retirement
• Tax-free growth valuable

$50,000-100,000 (22% bracket): → Depends

• Roth if expect higher retirement income
• Traditional if expect lower
• Consider split strategy

$100,000-180,000 (24% bracket): → Traditional (if still deductible)

• Moderate bracket now
• Likely lower in retirement
• Good tax savings

$180,000-370,000 (32-35% bracket): → Traditional (via backdoor Roth if needed)

• High bracket now
• Almost certainly lower retirement bracket
• Maximize current deduction

$370,000+ (37% bracket): → Traditional + Backdoor Roth

• Highest bracket now
• Definite arbitrage opportunity
• Use backdoor to also get Roth benefits

By Age

Ages 20-30: → Roth strongly favored

• Low income/bracket typically
• 40+ years of tax-free growth
• Income will rise (higher bracket later)
• No RMDs = forever tax-free

Ages 30-45: → Mix of both or Traditional

• Earnings rising (higher brackets)
• Traditional saves taxes now
• But Roth still has decades to grow
• Consider 60/40 Traditional/Roth

Ages 45-55: → Traditional heavily favored

• Peak earning years (high brackets)
• Retirement close enough to project
• Tax arbitrage clearest
• Save at 32-37%, withdraw at 12-24%

Ages 55-65: → Depends on retirement income

• If continuing to work: Traditional
• If retiring soon: Roth (especially conversions)
• Convert Traditional to Roth in low-income years

By Life Situation

Just started career: → Roth (low income, decades to grow)

Established professional: → Traditional (high bracket)

Business owner with variable income: → Traditional in high years, Roth in low years

Planning to retire in different state: → Consider state tax rates

Large inheritance expected: → Roth (already have future income source)

Planning to work part-time in retirement: → Traditional (income continues, stay in moderate bracket)

The Hedge Strategy

Don't put all eggs in one basket:

Option 1: Split contributions

• $4,000 Traditional (tax savings now)
• $3,000 Roth (tax-free later)

Option 2: Year-by-year

• Low-income years: Roth
• High-income years: Traditional

Option 3: Account diversification

• 401k: Traditional
• IRA: Roth
• Mix at retirement

Benefits of both:

• Flexibility in retirement
• Can manage tax bracket
• Hedge against tax law changes
• Options for inheritance planning

Roth Conversion Strategies

What is a Roth Conversion?

Move Traditional IRA → Roth IRA

Process:

1. You have Traditional IRA with $50,000
2. Convert some/all to Roth
3. Pay taxes on converted amount (ordinary income)
4. Now in Roth: Tax-free forever

Why convert?

• Future tax-free growth
• No RMDs
• Tax-free inheritance
• Lock in current (lower?) tax rates

When to Convert

Best conversion years:

Low-income year:

• Between jobs
• Business slow year
• Sabbatical
• Early retirement (before Social Security)

Example:

• Normal income: $120,000 (24% bracket)
• Laid off, new job starts next year
• This year income: $30,000
• Convert $40,000 Traditional → Roth
• Total income: $70,000 (22% bracket)
• Pay $8,800 tax on conversion instead of $9,600 normal rate

Early retirement (60-70):

• Retired at 62
• Social Security not started yet (wait till 70)
• Low income years 62-70
• Convert Traditional to Roth each year
• Fill up 12% and 22% brackets
• At 70: Start SS and enjoy Roth withdrawals

Roth Conversion Ladder

Strategy for early retirees (FIRE movement):

Year 1 of retirement:

• Income: $20,000 (investment income)
• Convert: $70,000 Traditional → Roth (fills 22% bracket)
• Pay: ~$9,000 tax

Year 2:

• Convert another $70,000
• Pay ~$9,000 tax

Over 10 years:

• Convert $700,000 total
• Pay ~$90,000 total tax
• Rest of life: Tax-free Roth withdrawals

vs. not converting:

• At 73: RMDs start
• Forced to withdraw and pay taxes
• Could push into higher brackets
• Less control

Partial Conversions

Don't have to convert all at once:

Have $200,000 Traditional IRA, in 24% bracket:

Smart: Convert $20,000/year for 10 years

• Each year: $20,000 taxed at 24% = $4,800
• Total over 10 years: $48,000 tax

Unwise: Convert all $200,000 this year

• Income spikes
• Could push to 35-37% bracket
• Tax bill: $60,000-70,000
• $12,000-22,000 extra vs spreading it out!

Fill up current tax bracket without jumping to next.

The Pro-Rata Rule

If you have both deductible and non-deductible Traditional IRA:

Example:

• Traditional IRA: $90,000 (all pretax)
• Non-deductible Traditional: $10,000 (after-tax)
• Total: $100,000

Convert $10,000 → Roth:

You can't choose to convert just the $10K non-deductible Pro-rata rule: 90% taxable, 10% non-taxable

Converting $10,000:

• $9,000 taxable
• $1,000 non-taxable

Surprise tax bill on $9,000!

Backdoor Roth works best if you have NO pretax Traditional IRA money.

Withdrawal Rules and RMDs

Traditional IRA Withdrawals

Age under 59½:

• 10% penalty + income tax
• Exceptions: First home ($10,000), disability, death, medical, education

Age 59½ - 73:

• Can withdraw anytime
• Pay income tax (no penalty)
• No requirements to withdraw

Age 73+:

• MUST take Required Minimum Distributions (RMDs)
• Calculated based on life expectancy
• 50% penalty on amount not withdrawn!

Roth IRA Withdrawals

Contributions (the $7K/year you put in):

• Can withdraw ANYTIME, tax-free, penalty-free
• Even at age 30
• Even before 5-year rule

Earnings (growth on contributions):

Before 59½:

• 10% penalty + taxes (unless exception)

After 59½ AND 5-year rule met:

• Completely tax-free, no penalty

5-year rule: First Roth contribution must be 5 years ago

Required Minimum Distributions (RMDs)

Traditional IRA: MUST take RMDs at 73

Age 73: $500,000 balance RMD: $18,691 (based on IRS table) Must withdraw and pay tax

Age 80: $600,000 balance RMD: $31,250 Must withdraw and pay tax

If you don't take RMD: 50% penalty! (Miss $30,000 RMD = $15,000 penalty + still owe tax)

Roth IRA: NO RMDs

• Can leave money forever
• Tax-free growth continues
• Great for inheritance

Qualified Charitable Distribution (QCD)

Age 70½+: Can donate RMD to charity

Example:

• RMD: $25,000
• Donate $25,000 from IRA → qualify charity
• Satisfies RMD (no penalty)
• Not counted as income (no tax!)
• Don't need to itemize

Better than:

• Take RMD ($25K income, pay tax)
• Donate $25K (need to itemize to deduct)

QCD lets you avoid income entirely.

Common IRA Mistakes

Mistake 1: Ignoring Roth When Young

Age 25, $50,000 income, 12% bracket

Choosing Traditional:

• Save $840/year in taxes
• Seems smart!
• At retirement: Pay 22-24% on withdrawals
• Net loss: 10-12%

Should choose Roth:

• Pay 12% now
• Tax-free withdrawals later at higher bracket
• Net gain: 10-12%

Young + low bracket = Roth usually wins

Mistake 2: Not Converting in Low-Income Years

Retired at 60, Traditional IRA: $400,000

Not converting:

• Age 60-73: Leave it alone
• Age 73: RMDs start at $15,000+
• Plus Social Security: $30,000
• Total income: $45,000+
• Tax bracket: 22%

Smart conversions:

• Age 60-65: Convert $50,000/year (fill 12% bracket)
• Pay: $6,000/year tax
• Total 5 years: $250,000 converted, $30,000 tax
• Age 65+: Mix of Roth (tax-free) + remaining Traditional (smaller RMDs)
• Save thousands in lifetime taxes

Mistake 3: Over-Contributing

Contributed $7,000 but income exceeded Roth limits

Penalty:

• 6% excise tax per year until removed
• $420 first year
• If left 3 years: $1,260 penalty!

Solution:

• Withdraw excess + earnings before filing taxes
• Or recharacterize to Traditional

Always check income limits before contributing!

Mistake 4: Forgetting to Invest

Contribute $7,000 to IRA... and forget to invest it

Result:

• Money sits in settlement fund (0.01% interest)
• 30 years later: $7,000 → $7,021
• If invested at 8%: $7,000 → $70,400

Lost: $63,379!

Contribution ≠ invested. Must buy index funds/stocks!

Mistake 5: Early Withdrawal Temptation

Age 40, Roth IRA: $50,000 ($35K contributions, $15K earnings)

Emergency: Need $20,000

Option A: Withdraw $20,000 (all contributions)

• Tax: $0 (contributions always free)
• Penalty: $0
• But lost forever from retirement

Option B: Withdraw $40,000 ($35K contributions + $5K earnings)

• Tax: $500 (10% of $5K earnings)
• Penalty: $500 (10% of $5K earnings)
• Plus lost retirement growth

Roth flexibility is both blessing and curse—too easy to raid.

Mistake 6: Not Doing Backdoor Roth

Single, $180,000 income

Mistake:

• "I can't contribute to Roth" (over $161K limit)
• Doesn't contribute at all

Smart:

• Contribute $7,000 to Traditional (non-deductible)
• Immediately convert to Roth
• Now have $7,000 in Roth despite income

High earners leaving Roth benefits on table by not using backdoor.

Real Traditional vs Roth Scenarios

Scenario 1: Recent Graduate, First Job

Profile:

• Age: 24
• Income: $52,000
• Tax bracket: 22% federal (after standard deduction)
• Maxing 401k? No, contributing 6% (employer match)
• Can save: $7,000 for IRA

Traditional IRA:

• Contribute $7,000 (deductible)
• Tax savings: $1,540
• Can invest $1,540 too (via lower tax bill)
• Age 67: IRA grows to $266,000 (at 8%, 43 years)
• Tax at withdrawal (assume 24%): $63,840
• Net: $202,160
• Plus invested $1,540 → $58,500
• Total: $260,660

Roth IRA:

• Contribute $7,000 (after-tax)
• Tax savings: $0
• Cost: Full $7,000
• Age 67: IRA grows to $266,000
• Tax at withdrawal: $0
• Total: $266,000

Roth wins by $5,340 (2%)

Plus Roth benefits:

• No RMDs
• Tax-free inheritance
• Access to contributions anytime

Decision: Roth IRA

Scenario 2: Mid-Career High Earner

Profile:

• Age: 42
• Income: $160,000
• Tax bracket: 32% federal
• State: California (9.3%)
• Combined: 41.3%
• Has 401k, deduction phases out

Traditional IRA:

• Contribute $7,000 (not deductible—over income limit!)
• Tax savings: $0
• Grows: $7,000 → $56,000 (25 years at 8%)
• Withdrawals: Taxed on earnings only (complex)
• Messy situation

Backdoor Roth:

• Contribute $7,000 to Traditional (non-deductible)
• Immediately convert to Roth
• Tax on conversion: $0 (no gains yet)
• Grows: $7,000 → $56,000 (tax-free)
• Withdrawals: $0 tax

Backdoor Roth wins easily

Decision: Backdoor Roth IRA

Scenario 3: Early Retirement Conversion

Profile:

• Age: 58
• Just retired early
• Traditional IRA: $600,000
• Social Security starting: Age 70 (12 years)
• Current income: $25,000 (investment income)
• Tax bracket: 12%

Strategy: Roth conversion ladder

Years 58-70 (12 years):

• Each year: Convert $50,000 Traditional → Roth
• Taxable income: $25,000 + $50,000 = $75,000
• Tax: ~$8,600/year (22% bracket)
• Total converted: $600,000
• Total tax: $103,200

Age 70+:

• Social Security: $35,000
• Roth withdrawals: $40,000 (tax-free!)
• Traditional: $0 (all converted)
• Taxable income: Only $35,000 (12% bracket)
• RMDs: $0 (no Traditional IRA left)

If didn't convert:

• Age 73+ RMDs: $22,000+/year forced
• Plus Social Security: $35,000
• Total taxable: $57,000+ (22% bracket)
• Lifetime taxes: $150,000-200,000

Converting saves $50,000-100,000 in lifetime taxes!

Decision: Aggressive Roth conversions in low-income years

Scenario 4: Young Couple, One High, One Low Earner

Profile:

• Ages: 29 & 30
• Partner A: $95,000 (24% bracket)
• Partner B: $40,000 (12% bracket)
• Both can contribute to IRA

Strategy:

Partner A (high earner):

• Traditional IRA: $7,000
• Tax savings: $1,680 (24%)
• Or max 401k instead if has one

Partner B (low earner):

• Roth IRA: $7,000
• Pay 12% now, avoid 22-24% later

Combined benefit:

• $1,680 tax savings from A
• Tax-free growth from B
• Diversification

Total IRA savings: $14,000/year

By retirement (35 years):

• Partner A Traditional: $7,000/yr → $800,000, tax at 22% = $624,000 net
• Partner B Roth: $7,000/yr → $800,000, tax-free = $800,000
• Total: $1.424 million

Decision: Traditional for high earner, Roth for low earner

Scenario 5: Business Owner With Variable Income

Profile:

• Age: 38
• Business owner
• Income varies: $60K-180K year-to-year

2025: Low year ($65,000) → Roth IRA: $7,000 (22% bracket)

2026: High year ($170,000) → Traditional IRA: $7,000 would save 32%, but over deduction limit → Backdoor Roth: $7,000

2027: Moderate year ($90,000) → Traditional IRA: $7,000 (24% bracket, deductible)

Strategy: Flexible based on year

• Low income years: Roth
• High income years: Traditional (if deductible) or Backdoor
• Build mix of both for retirement flexibility

Over 30 years:

• ~$100,000 Traditional (high-income years)
• ~$150,000 Roth (low-income years)
• Tax-optimized for variable income

Decision: Tactical year-by-year based on income

Key Takeaways

✓ Low bracket now (under 22%): Choose Roth — pay low taxes now, avoid higher taxes later

✓ High bracket now (32%+): Choose Traditional — save high taxes now, pay lower taxes later

✓ Same bracket now and later: Slight Roth edge — flexibility, no RMDs, inheritance benefits

✓ Young workers default to Roth — low bracket + decades of tax-free growth = powerful

✓ Peak earners use Traditional — save at 32-37%, withdraw at 12-24% = 10-25% arbitrage

✓ High earners use backdoor Roth — over income limits doesn't mean no Roth, use loophole

✓ Convert Traditional → Roth in low-income years — early retirement sweet spot for conversions

✓ Diversification is smart — mix of Traditional and Roth provides flexibility in retirement

Conclusion

The Traditional vs Roth IRA decision hinges on a single comparison: your tax bracket now versus your expected tax bracket in retirement. A young professional in the 12-22% bracket choosing Traditional over Roth might pay an extra 10-12% in lifetime taxes ($50,000-150,000 on a well-funded account), while a peak earner in the 35% bracket choosing Roth over Traditional unnecessarily pays an extra 13-15% more in current taxes.

The mathematics are clear: save taxes at high rates, pay them at low rates. Traditional wins for high earners projecting lower retirement income (most people), while Roth wins for young earners with low current income but high future earnings potential. The crossover point is between 22-24% brackets where either choice is reasonable—choose Roth for flexibility and simplicity, or Traditional for immediate tax savings.

High-income earners exceeding Roth limits should use backdoor Roth conversions to capture tax-free growth benefits regardless of income. Early retirees should aggressively convert Traditional to Roth during low-income years between career end and Social Security start, potentially saving six figures in lifetime taxes. And when in doubt, split contributions between both account types to hedge uncertainty about future tax rates and provide maximum flexibility in retirement.

Use our Traditional vs Roth IRA calculator to input your specific income, tax bracket, expected retirement bracket, and years to retirement to see which IRA type provides the highest after-tax value in your situation.

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