Traditional IRA vs. Roth IRA: An Overview

Individual Retirement Accounts (IRAs) are commonly used savings vehicles for U.S. adults planning for retirement. Two of the most widely used options are the Traditional IRA and the Roth IRA. While both accounts are designed to support long-term retirement savings, they differ in how contributions, taxes, and withdrawals are handled.

Understanding the structural differences between a Traditional IRA vs. Roth IRA can help individuals evaluate how each may fit into a broader retirement strategy, keeping in mind that tax laws, income limits, and personal circumstances can change over time.

What Is a Traditional IRA?

Traditional IRAs were introduced in 1974 and are held by tens of millions of U.S. households. These accounts allow individuals, within certain limits, to make contributions that may be tax deductible, depending on income and whether the individual is covered by a workplace retirement plan.

Tax Treatment and Distributions

Contributions to a Traditional IRA may reduce taxable income in the year they are made. However, withdrawals are generally taxed as ordinary income. Distributions taken before age 59½ may be subject to a 10% federal income tax penalty, in addition to regular income taxes, unless an exception applies.

Once an account holder reaches age 73, required minimum distributions (RMDs) generally must begin. These required withdrawals can affect taxable income and should be considered as part of ongoing retirement income planning.

Income Limits for Deductibility

For individuals covered by an employer-sponsored retirement plan, the ability to deduct Traditional IRA contributions is subject to income phaseouts. For the 2026 tax year, deductibility phases out between $129,000 and $149,000 for married couples filing jointly, and between $81,000 and $91,000 for single filers.

These thresholds are set by the IRS and may be adjusted periodically, which introduces regulatory risk for long-term planning.

What Is a Roth IRA?

Roth IRAs were established in 1997 and differ from Traditional IRAs primarily in how contributions and withdrawals are taxed. Contributions are made with after-tax dollars, meaning they do not provide an upfront tax deduction.

Tax-Free Qualified Withdrawals

If certain requirements are met, qualified Roth IRA distributions are generally tax-free. To qualify, the account must satisfy a five-year holding period, and the distribution must occur after age 59½, or meet other IRS-defined criteria.

Unlike Traditional IRAs, Roth IRAs are not subject to required minimum distributions during the original account owner’s lifetime, which may provide additional flexibility for managing withdrawals.

Income Limits for Contributions

Eligibility to contribute directly to a Roth IRA is subject to income limits. For 2026, contributions are phased out between $242,000 and $252,000 for married couples filing jointly, and between $153,000 and $168,000 for single filers.

Individuals whose income exceeds these limits may need to explore alternative retirement savings options.

Contribution Limits and Catch-Up Contributions

The IRS sets annual contribution limits that apply across all IRAs combined. For 2026, the total contribution limit for Traditional and Roth IRAs combined is $7,500.

Individuals who are age 50 or older by the end of the tax year may be eligible to make catch-up contributions, bringing the combined limit to $8,600. These limits are subject to change and should be reviewed annually.

Comparing Traditional IRA vs. Roth IRA Features

When evaluating a Traditional IRA vs. Roth IRA, key differences include the timing of taxation, income eligibility, and distribution requirements. Each account type carries tax-related and regulatory considerations that may affect retirement planning outcomes.

Because tax laws and individual circumstances vary, understanding these distinctions can support more informed decision-making, while recognizing that no single account type is universally appropriate for all investors.

Final Considerations

Both Traditional and Roth IRAs can play a role in retirement savings strategies. The choice between them involves trade-offs related to taxes, income limits, and withdrawal rules. Reviewing IRS guidance and consulting qualified professionals may help clarify how these accounts function within a broader financial picture.

All investing involves risk, including the potential loss of principal, and retirement accounts are subject to legislative and regulatory changes over time.