2026 Limits at a Glance
| Rule | 2026 limit |
|---|---|
| Annual contribution | $7,500 (under 50) / $8,600 (50+) |
| Roth income phase-out (single) | $153,000–$168,000 |
| Roth income phase-out (married) | $242,000–$252,000 |
| Traditional deduction phase-out (covered by workplace plan, single) | $81,000–$91,000 |
Over the Roth income limit? Use the Backdoor Roth strategy: contribute to a non-deductible Traditional IRA, then immediately convert. Legal, common, and effective at any income.
The One Question That Decides Everything
Do you expect to be in a higher or lower tax bracket at retirement than you are today? • Higher bracket at retirement → Roth wins (pay tax now at the lower rate) • Lower bracket at retirement → Traditional wins (defer tax to the lower-rate future)
Most people in their 20s–30s are in a lower bracket now than they'll be at peak earning years. That makes Roth the default winner for young workers. But it's not that simple — here's how to actually think about it:
- If you're earning under $50k: Almost certainly Roth — tax rates this low are a gift
- If you're earning $50k–$100k: Usually Roth, but run the numbers — especially if your employer doesn't offer a match
- If you're earning $100k–$150k: It depends on state tax, expected retirement income, and whether you max out a 401k too
- If you're earning $150k+: Roth phase-out kicks in; consider Backdoor Roth or max Traditional first
The Numbers: $6,000/yr for 30 Years
| Scenario | Roth | Traditional |
|---|---|---|
| Tax paid upfront (22% bracket) | $1,320/yr | $0 upfront |
| Account grows at 7% for 30 years | $567,000 tax-free | $567,000 pre-tax |
| Tax paid at withdrawal (22% bracket) | $0 | $124,740 |
| Net after tax | $567,000 | $442,260 |
Even at the same tax rate, Roth comes out slightly ahead because tax-free growth on dividends and capital gains inside the account is worth more over decades.
5 Rules of Thumb That Actually Help
- 1Under 40 and earning under $80k? Default to Roth — low rates now, higher rates likely later
- 2Already maxing a 401k? Add Roth IRA — diversifies your tax exposure at retirement
- 3Expect Social Security + pension? Traditional income may push you into a higher bracket — Roth hedges this
- 4Living in a high-tax state planning to retire in a low-tax state? Traditional + move = double win
- 5Can't decide? Split 50/50 — you get tax diversification and don't need to predict the future
The Roth vs Traditional IRA Calculator shows your net after-tax balance side by side for any income and tax rate combination.
Backdoor Roth: The 4-Step Workaround for High Earners
Earn above the Roth phase-out ($153,000 single / $242,000 married)? The backdoor Roth gets you the same result legally. There is no income limit on Traditional IRA contributions (only on the deduction), and no income limit on Roth conversions — chain them and you're in.
- 1Contribute up to $7,500 ($8,600 if 50+) to a Traditional IRA as a NON-deductible contribution — don't claim the deduction
- 2Wait for the funds to settle (a few days), then convert the entire balance to a Roth IRA at your brokerage — usually one online form
- 3File Form 8606 with your tax return to record the non-deductible basis — skip this and the IRS assumes the whole conversion is taxable
- 4Repeat every January. Converting quickly means near-zero gains, so the conversion itself costs $0–$5 in tax
If you have ANY pre-tax money in ANY Traditional, SEP, or SIMPLE IRA, the conversion is taxed pro-rata across all of it. With $100,000 pre-tax and a $7,500 backdoor contribution, 93% of your conversion is taxable. Fix: roll the pre-tax IRA money into your 401(k) first — 401(k) balances don't count in the pro-rata math.
Your Break-Even Tax Rate: The Whole Decision in One Table
Strip away everything else and the choice reduces to two numbers: your marginal tax rate today vs your expected rate in retirement. Here's the net result of $7,000/year for 25 years at 7% (about $443,000 pre-tax at the end):
| Rate now → rate retired | Roth nets | Traditional nets | Winner |
|---|---|---|---|
| 22% now → 12% retired | $443,000 | $487,000 | Traditional by $44,000 |
| 22% now → 22% retired | $443,000 | $443,000 | Tie (Roth edges on flexibility) |
| 22% now → 24% retired | $443,000 | $434,000 | Roth by $9,000 |
| 12% now → 22% retired | $443,000 | $396,000 | Roth by $47,000 |
A single retiree spending $60,000/year in 2026 dollars from Traditional withdrawals, after the $16,100 standard deduction, pays an effective federal rate of roughly 10–12% — well below the 22% bracket most contributors are in. Deduction-at-22%, withdrawal-at-11% is why Traditional quietly wins for many median earners.
RMDs: The Difference Nobody Prices In
Traditional IRAs force required minimum distributions starting at age 73 (75 if born 1960 or later). Roth IRAs have NO lifetime RMDs — the money can compound tax-free until you die, and heirs then get 10 more years of tax-free growth.
| Age | RMD divisor | Forced withdrawal on $1M Traditional |
|---|---|---|
| 73 | 26.5 | $37,736 |
| 80 | 20.2 | $49,505 |
| 90 | 12.2 | $81,967 |
| 95 | 8.9 | $112,360 |
Forced Traditional withdrawals stack on top of Social Security and can trigger three side taxes at once: up to 85% of your Social Security becomes taxable, Medicare IRMAA surcharges start at $106,000 MAGI (adding $888+/year in premiums), and the 3.8% NIIT threshold at $200,000 gets easier to cross. Large Roth balances sidestep all three.