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Roth IRA vs Traditional IRA

Tax now vs tax later — which wins at your income level and expected retirement tax rate

Factor	Roth IRA	Traditional IRA
Tax on Contributions	After-tax (no deduction)	Pre-tax (deductible if eligible)
Tax on Withdrawals	Tax-free (qualified)	Taxed as ordinary income
Best If Tax Rate	Lower now, higher in retirement	Higher now, lower in retirement
2026 Contribution Limit	$7,500 ($8,600 if 50+)	$7,500 ($8,600 if 50+)
Income Limit (2026)	Phase out $146k–$161k single; $230k–$240k MFJ	Deductibility phases out ~$73k–$83k single if covered by workplace plan
RMDs Required	No — never during owner's lifetime	Yes — starting age 73
Early Withdrawal	Contributions (not earnings) anytime penalty-free	10% penalty + taxes before 59½
Inheritance	Heirs get tax-free distributions	Heirs pay income tax on distributions
Backdoor Available	Yes — backdoor Roth conversion	N/A
Best For	Young investors, lower earners, those expecting higher future taxes	High earners wanting immediate tax break, those expecting lower retirement tax rate

⚖️ The Verdict

The Roth wins if your tax rate is the same in retirement as today (since you avoid RMDs and heirs benefit enormously). The Traditional wins if you're in a high tax bracket now and expect to be in a lower one in retirement. For most people under 40 or earning under $100k: Roth. For high earners in peak earning years expecting a lower retirement income: Traditional or a mix. When in doubt, diversify between both — future tax law uncertainty makes having both tax-free and tax-deferred buckets valuable.

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