Roth IRA vs Traditional IRA Calculator

Roth vs Traditional: The Core Difference

Both accounts grow tax-advantaged. The difference is when you pay tax:

| Account | Contribution | Growth | Withdrawal | |---------|-------------|--------|------------| | Traditional IRA | Pre-tax (deductible*) | Tax-deferred | Taxed as ordinary income | | Roth IRA | After-tax (no deduction) | Tax-free | 100% tax-free |

*Traditional IRA contributions are fully deductible only if you (and your spouse) have no workplace retirement plan, or if your income is below the deductibility phase-out.

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2026 IRA Contribution Limits and Income Phase-Outs

| | Under 50 | Age 50+ | |--|----------|---------| | Annual contribution limit | $7,000 | $8,000 |

Roth IRA phase-out (2026):** Single $150,000–$165,000 | MFJ $236,000–$246,000. Above these MAGI levels you cannot contribute directly, but the **backdoor Roth conversion (contribute to Traditional IRA, then convert immediately) remains available regardless of income.

Traditional IRA deductibility phase-out (2026, with workplace plan): Single $79,000–$89,000 | MFJ $126,000–$146,000. Above these limits, contributions are non-deductible — but you can still contribute; you simply don't get the immediate deduction.

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When Roth Wins

• You are early in your career (lower bracket now, higher later)
• You expect tax rates to rise over time (rising federal deficits make this plausible)
• You want tax-free income in retirement to reduce Social Security taxation
• You want no Required Minimum Distributions (Roth IRAs have no lifetime RMDs)
• You may need early access to contributions (Roth principal is withdrawable penalty-free after 5 years)

When Traditional Wins

• You are in your peak earning years (35%/37% bracket) and expect lower income in retirement
• You want to reduce taxable income this year to qualify for other credits/deductions
• You live in a high-tax state now and plan to retire in a no-income-tax state
• You expect to die before RMDs become burdensome (heirs may prefer a Roth, however)

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The Roth Conversion Ladder

A common strategy: accumulate in a Traditional IRA during high-earning years, then convert to Roth in low-income years (early retirement, career gap, years before Social Security begins). You pay income tax on the conversion at the lower rate, and all future growth is tax-free.

Optimal conversion amounts stay within the 12% or 22% bracket — converting into the 24%+ bracket typically erases the benefit over holding a Traditional IRA.

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Roth IRA Withdrawal Rules

• Contributions (principal): Withdrawable anytime, penalty-free, tax-free
• Conversions: Penalty-free after 5 years from the conversion date (per-conversion clock)
• Earnings: Tax-free and penalty-free after age 59½ AND 5 years from account opening

The 5-year rule runs from January 1 of the year you first contributed to *any* Roth IRA — not each individual account.