This is the third post in a series. The first compared a Roth IRA against a Roth 401(k). The second compared the traditional and Roth sides of a 401(k). This one compares the traditional and Roth sides of an IRA.
In the post comparing 401(k) types, the difference came down to one thing: when you pay the tax. With this post there are two differences between the types of IRAs. The first is the same as before, tied to when you pay the tax. The second difference is what your income allows you to do, which can get confusing because each IRA uses different rules for income.
What is the same
Before discussing what is different, let’s begin with the things that are the same.
- The contribution limit. For 2026 it is $7,500, or $8,600 if you are 50 or older, and it is one shared limit across every IRA you own. Not $7,500 in each.
- You generally need earned income. Your contribution cannot exceed your taxable compensation for the year, although married couples filing jointly can qualify under the spousal IRA rules when one spouse has little or no compensation.
- There is no employer involved. No match, no plan menu, no vesting, no payroll election.
- The deadline. You have until the tax filing deadline in April to make a contribution for the prior year.
And the investment menu for each IRA is the same. Both accounts give you the entire market at any major brokerage. Any ETF, any index fund, any individual stock, any bond. If you came here from the 401(k) posts, this is a real change, because a workplace plan limits you to the lineup your plan trustee chose. Here you choose. If that is a new decision for you, I have written about what an ETF actually is, how index funds and ETFs differ, and how both compare to owning individual stocks.
Difference one: when you pay the tax
A traditional IRA contribution may lower your taxable income for the year. The money grows without being taxed along the way, and then your deductible contributions and all of the growth are taxed as ordinary income when you withdraw them.
A Roth IRA contribution never lowers your taxable income. You pay tax on the money before it goes in (meaning you are using your net pay). It grows without being taxed along the way, and then a qualified withdrawal comes out with no tax at all, on the contributions or the growth.
That is the same trade as the 401(k) version, and the reasoning for choosing one over the other is the same reasoning. Your tax rate today against your tax rate when you withdraw. I worked through that in Roth 401(k) vs Traditional 401(k), including why the comparison is not as simple as marginal rate against marginal rate, and I am not going to repeat it here.
Required distributions
That timing difference has a consequence that shows up decades later. A traditional IRA holds money that has not been taxed yet, so the government eventually requires you to start taking it out. Same as the traditional 401(k), and I covered the mechanics in Roth 401(k) vs Traditional 401(k). Under SECURE 2.0 the starting age is 73 for people born between 1951 and 1959, and 75 for anyone born in 1960 or later. Once the rules apply, you withdraw a calculated amount every year, whether you need the money or not. The taxable portion is taxed as ordinary income. For a lot of people, that is the entire distribution. The exception is if you have made nondeductible contributions, which I cover in the backdoor Roth section below.
A Roth IRA does not, and never has, had required distributions during the owner’s lifetime. Inherited accounts are different. Most non-spouse beneficiaries have to empty an inherited IRA within ten years, whether it is traditional or Roth. The difference is the tax. Roth withdrawals are generally tax free, while taxable traditional IRA withdrawals are taxed as ordinary income.
Difference two: what your income decides
Both accounts use your income to make a determination. They are just deciding on different things and that is what can be confusing.
The Roth IRA limits whether you can contribute
For 2026 the ability to contribute to a Roth IRA phases out between $153,000 and $168,000 for single filers and heads of household, and between $242,000 and $252,000 for married couples filing jointly. If you are above that top range, you cannot contribute at all.
Whether you have a 401(k) at work makes no difference to this. None. The Roth IRA contribution limit is based on your modified adjusted gross income and your filing status.
The traditional IRA limits whether you can deduct
There is no income limit on contributing to a traditional IRA. At any income, with earned income, you can put in the full $7,500 (you cannot contribute more than you earned).
What the income does impact is whether your contribution is deductible. One other important point, this income test only applies if you or your spouse are covered by a retirement plan at work. If neither of you is covered, your contributions to a traditional IRA are fully deductible no matter how much you earn.
Here are the ranges if you or a spouse are covered by a workplace plan.
- Single or head of household, covered by a workplace plan: the deduction phases out between $81,000 and $91,000.
- Married filing jointly, and the spouse making the contribution is covered: $129,000 to $149,000.
- Married filing jointly, and the spouse making the contribution is not covered but the other spouse is: $242,000 to $252,000. This is a much wider range and it is easy to miss.
If you are married and file separately, different and much tighter rules apply to both accounts. Check the IRS tables before you contribute.
It is important to know that ‘being covered’ means actively participating in a workplace plan. If your employer offers a 401(k) plan but you never contributed and nothing was contributed on your behalf, you are not covered and your IRA contribution is deductible.
So the two rules answer different questions. The Roth IRA asks whether you can contribute at all. The traditional IRA lets you contribute either way and asks whether you can deduct. And only the traditional IRA cares whether you or your spouse are covered by a retirement plan at work.
The backdoor Roth, if your income is too high
First, check whether you need this at all. If your income is under the Roth limits above, you can contribute to a Roth IRA directly and none of this section applies to you. The backdoor exists for one reason, which is that the front door is closed.
There is a legal two-step maneuver commonly called the backdoor Roth. It exists because of three rules that do not line up with each other.
You cannot contribute to a Roth IRA above $168,000 single or $252,000 joint.
You can always contribute to a traditional IRA at any income. You may not be able to deduct it, but you can always put the money in.
And converting a traditional IRA to a Roth has no income limit at all. None. That rule is separate from the contribution rules, and it is the one that stays open.
So here is how the maneuver works.
Step one. You contribute $7,500 to a traditional IRA. Your income is too high for a deduction, so you do not take one. That leaves $7,500 of already-taxed money sitting in a traditional IRA. The IRS calls that basis.
Step two. You convert that money to a Roth IRA. Since you already paid tax on that $7,500, the conversion itself can be tax-free. There is one big catch to that, which I will get to in a minute.
You now have $7,500 in a Roth IRA that you were not permitted to contribute to directly. Two legal steps that add up to something the front door does not allow, which is where the name comes from. It is well established, and the IRS has not treated it as abusive.
One thing it does not do is let you save more. That nondeductible contribution comes out of the same shared $7,500 IRA limit.
The pro rata rule
The backdoor works cleanly if the money you just contributed is the only money in your traditional IRA. For a lot of people, including myself, it is not.
If you have rolled over a 401(k) from an old job, that balance is sitting in a traditional IRA, and it changes the tax math behind this maneuver.
When you convert a traditional IRA, the IRS does not look only at the account you converted from. It adds up every traditional, SEP and SIMPLE IRA you own, using their year-end value, and treats them as one pool of funds. Your conversion comes out of that pool proportionally, part already-taxed money and part never-taxed money.
Let me try to show this math with a simple example. Assume you carry $92,500 in a traditional IRA from an old 401(k) rollover. Now you add $7,500 with a new annual contribution. You are over the salary limit so these funds get you no tax deduction. The total pool is $100,000, but only 7.5 percent of it has already been taxed (this last contribution). Now you do your backdoor Roth. When you convert $7,500, only about $563 (7.5%) of that total comes across tax free. The other $6,937 is taxable income that year.
You cannot get around it by converting only the new money. The IRS treats the conversion as coming from the whole pool no matter which account you actually pull from.
That is the pro rata rule, and it is the first thing to check before anyone recommends the backdoor to you.
Rolling the pre-tax money into your 401(k)
Workplace plans do not get factored into the pool of IRA money. Only traditional, SEP and SIMPLE IRAs count. That point is important because many 401(k) plans will accept incoming rollovers, which gives you a way to empty the pool of IRA money that can work against you in the pro rata rule.
It is called a reverse rollover. Instead of moving 401(k) money out to an IRA, which is what most people do when they leave a job, you move IRA money into your current employer’s plan. You do not have to be changing jobs to do it. If your plan accepts roll-ins, you can do it while employed, at any time.
Only pre-tax money can be rolled in. Any nondeductible money you have already contributed stays behind in the IRA, and that is exactly what you want. The pre-tax money leaves, the basis stays, and the backdoor Roth that follows comes across with minimal to no tax.
There are a few things to consider before taking this route:
- Does your plan accept roll-ins at all? Employers are not required to accept them so check with your plan administrator before doing anything.
- Timing. Make sure you have this correct. The pro rata rule uses your IRA balances as of December 31 of any given year. So make sure you do the backdoor Roth in the same year you do the reverse rollover.
- Your IRA balances can be invested across stocks, ETFs, and anything else the brokerage offers. Your 401(k) account has a more limited selection of investments. Just make sure you are okay with this before any reverse rollover.
The whole comparison in one place
| Feature | Traditional IRA | Roth IRA |
| Tax on the way in | Deductible, partly deductible, or not deductible depending on income and workplace plan coverage | Never deductible. You pay tax before it goes in |
| Tax on the way out | Taxed as ordinary income on every deductible dollar and all growth | Nothing, on a qualified withdrawal |
| Can you contribute at all | Yes, at any income, subject to compensation rules | Yes, subject to compensation and income limits |
| Does a workplace plan matter | Yes, for the deduction only | No, not at all |
| 2026 limit | $7,500, or $8,600 if you are 50 or older, shared across both | $7,500, or $8,600 if you are 50 or older, shared across both |
| What you can buy | Anything the brokerage offers | Anything the brokerage offers |
| Lifetime RMDs | Yes, starting at 73 or 75 depending on birth year | None |
How to choose
Most of this is decided by the rules rather than by judgment, so work through it in that order.
Start with what you are eligible for
Two different income tests, and they cut off at very different numbers. Sorting out where you land answers most of this before judgment enters into it.
The key fact the ranges above make easy to miss: the traditional deduction phases out at much lower income than the Roth does. A single filer covered by a workplace plan loses the deduction entirely at $91,000, but can contribute to a Roth until $153,000. That leaves a wide band where traditional offers you nothing and Roth is fully available.
Here is how it stacks up for a single filer covered by a plan at work.
- Under $81,000. Full deduction and full Roth. Both are genuinely open and the choice is yours.
- $81,000 to $91,000. Partial deduction, full Roth.
- $91,000 to $153,000. No deduction, full Roth. There is no real decision here. Traditional is offering you nothing.
- $153,000 to $168,000. No deduction, partial Roth.
- Above $168,000. Neither door is open directly. This is where the backdoor comes in.
If you are married filing jointly, the structure is identical. Substitute the joint numbers listed above and the same five bands apply.
And if neither you nor your spouse is covered by a workplace plan, the deduction never phases out at all. A high earner with no plan at work has the reverse situation: a full traditional deduction at any income, and no Roth above the limit.
If the traditional deduction is gone, choose Roth
A nondeductible traditional IRA contribution is the worst of both. No deduction today, and the growth is taxed as ordinary income on the way out. For most people a plain taxable brokerage account would be the better home for that money. Long-term capital gains are taxed at a lower rate than ordinary income, you can reach the money at any age, and your heirs get a stepped-up basis that retirement accounts never provide. So if you are eligible for a Roth IRA and your traditional contribution would not be deductible, I see no reason to choose traditional unless the nondeductible contribution is the first step of a conversion.
If both are open, it comes down to your tax rate
Your rate today against your rate when you withdraw. If your rate in retirement will be higher, Roth wins. If it will be lower, traditional wins. Nobody knows for certain, but you can reason about it.
In a low bracket with decades ahead, I would choose Roth. The deduction is small and you are settling a known tax bill instead of an unknown one. In a high bracket, the deduction is worth enough that traditional deserves a serious look. If you cannot decide, split it and give yourself two kinds of money in retirement.
I worked through that reasoning in more detail in Roth 401(k) vs Traditional 401(k), and it applies the same way here.
If you have never opened one
The mechanics take about fifteen minutes and I walked through them in How to open your first Roth IRA. One thing worth doing early even if you are not ready to fund it seriously: the five year clock for qualified Roth withdrawals starts with the first tax year you contribute to any Roth IRA, so opening one with a small amount starts that clock running.
Conclusion
Two accounts, one shared limit, two questions. When do you want to pay the tax, and what does your income allow you to do about it.
Start with the second question because your income may make part of the decision for you. If you can contribute directly to a Roth but cannot deduct a traditional contribution, the choice gets pretty easy. If both are fully available, then you are back to the question we started with: your tax rate today against your tax rate when you withdraw.
And if your income closes the Roth door entirely, there may still be a backdoor. Just make sure you check your existing IRA balances before taking that path.
Whichever you choose, the account is one piece of a larger picture. How these fit against everything else you own, and when you can actually access any of it, is in Accessible Wealth vs. Retirement Accounts.
Start investing. Stay consistent. Give your money time to grow.
Cheers!
Christopher
Weekly Notes — October 10, 2026