Roth or traditional: you are choosing which marginal rate to pay, and when

Both accounts hold the same investments. The structural difference is when the tax is collected and at what rate.

A traditional contribution is deducted at your marginal rate today and withdrawn as ordinary income later. A Roth contribution is taxed at your marginal rate today and withdrawn tax-free later — if the distribution is qualified. That is the whole difference, and it is why the argument reduces to a single comparison. The accounts are not otherwise identical, and the ways in which they differ are set out below; but every one of those differences is second-order next to the rate.

The comparison, stated plainly

Traditional wins if your marginal rate when you contribute is higher than your marginal rate when you withdraw. Roth wins if it is the other way round. If the two rates are the same, the two paths produce the same after-tax result.

That last sentence carries a condition that is usually left out, and it is the one that matters most in practice. The equivalence holds only if the tax you saved by deducting the traditional contribution is also saved and invested at the same after-tax return. The algebra is easy to check: a Roth contribution of K grows to K·G and is withdrawn tax-free; a traditional contribution of K grows to the same K·G, is taxed down to K·G·(1−t), and only regains parity if the saving t·K compounds at the same rate G on the side. The annual limit is a fixed dollar amount, not a fixed after-tax cost, so the two are not comparable as they stand: $7,500 in a Roth is $7,500 of money that has already been taxed, while $7,500 in a traditional account is $7,500 that has not. The traditional path leaves the difference in your pocket this year. Spend it, or invest it in a taxable account where the return is taxed annually, and the traditional account is worth less than the Roth even at identical rates.

Why “now” is knowable and “later” is a forecast

Your rate today is a fact. It is the rate on the last dollar of your taxable income, and it is not the same as your average rate — the bracket your income lands in is the bracket that applies to the next dollar, which is the dollar a contribution moves.

Two adjustments are easy to miss. First, state tax, which can be a large fraction of the total and which does not have to be the same now as later. Second, what the contribution itself changes. A traditional contribution reduces your adjusted gross income; a Roth contribution does not. Near the edge of a phase-out keyed to adjusted gross income or a figure built from it — the premium tax credit, the student loan interest deduction, the Saver’s Credit — that reduction can be worth more than the bracket rate suggests.

The later rate is a forecast, but not a blind one. Five things move it, and they all push the same way.

1. Required minimum distributions. A traditional IRA must start distributing in the year you reach your applicable age, and that age is not simply 73. The regulation sets it by birth year: 73 for someone born on or after January 1, 1951 and before January 1, 1959, and 75 for someone born on or after January 1, 1960. The paragraph in between — the one that would define a 1959 birth year — is marked [Reserved] in the regulation as it stands, and the statute shows why. A 1959 birth year reaches 73 in 2032, which satisfies the clause setting 73, and reaches 74 in 2033, which satisfies the clause setting 75. Two clauses cover the same people, the implementing paragraph is blank, and that one birth year has no published answer. In other words, anyone younger than the 1959 birth year — which is most people still choosing between these accounts — has two extra years before forced distributions begin, and anyone born in 1959 should get a determination rather than read it off a table. A workplace plan can delay the start until the year you retire unless you are a 5% owner of the sponsoring business. Roth IRAs and designated Roth accounts are exempt from distributions during the owner’s life. So a large traditional balance converts a low-income retirement into a forced-income one, and the forced income arrives whether you need it or not.

2. Social Security’s own tax ladder. Benefits become taxable once one-half of your benefits plus all your other income passes $25,000 for a single filer or $32,000 for a joint return. Above $34,000 and $44,000 respectively, up to 85% of the benefit can be taxable. A traditional withdrawal is “other income” for that test; a Roth withdrawal is not. The consequence is that a traditional dollar in retirement can be taxed at your bracket rate and simultaneously drag another dollar of Social Security into the tax base — so the marginal rate on that dollar is higher than the bracket you think you are in. The formula is in the Publication 915 worksheet, and it is worth running with your own numbers rather than assuming.

3. Medicare’s income-related premium surcharges. These are set from a tax return that is already two years old, and a traditional distribution raises the income figure they use. The mechanism is worked through on our reference page for the Part B premium, including the events that justify a new decision.

4. The survivor’s bracket. Through the 32% bracket the single-filer brackets are exactly half as wide as the joint brackets, and the standard deduction is half as large — for 2026 the 22% bracket ends at $105,700 for a single filer and $211,400 for a joint return, and the standard deduction is $16,100 against $32,200. Above that the pattern breaks down, but it breaks down in the direction the point needs: a single filer stays in the 35% bracket $384,375 further, while the joint 35% bracket is only $256,250 wide. When one spouse dies, the survivor keeps roughly the same income and is taxed on it as a single filer. A couple who planned around a joint rate can therefore be wrong for the survivor, and a large traditional balance is what makes the error expensive.

5. The heirs. A beneficiary who inherits an IRA has to empty it within ten years, unless they are an eligible designated beneficiary — a surviving spouse, a minor child, a disabled or chronically ill person, or someone not more than ten years younger than the owner. The ten-year rule otherwise applies to Roth and traditional accounts alike. The difference is what comes out. A Roth comes out as it was, and no income tax is due, provided the account had already satisfied the owner’s five-year period; if the owner died inside it, the earnings portion is taxable to the beneficiary. A traditional account comes out as ordinary income to the beneficiary, and if the owner had already reached the required beginning date the beneficiary must also take annual distributions within the ten years. Either way the income lands in the beneficiary’s own bracket, which for a working heir is often their peak. The statute reaches this result by denying the basis reset: it does not apply to property that is a right to receive an item of income in respect of a decedent. An inherited traditional IRA is income; an inherited Roth IRA is not. That is the clearest case where a Roth is worth more than its face value.

The rules that differ regardless of rate

A rate comparison does not tell you everything, because the two accounts are not otherwise identical.

	Traditional	Roth
Contribution deducted	Yes, unless your income is inside the phase-out	No
Can you contribute at any income?	Yes — the deduction phases out, the contribution does not	No — direct contributions stop above the phase-out
Required distributions during your life	Yes, from your applicable age — 73 for 1951–1958, 75 from 1960, and 1959 is unresolved in the regulation	No
Withdrawals in retirement	Ordinary income	Tax-free if qualified
What makes a withdrawal qualified	—	A 5-year period plus 59½, death, disability, or a first home
Inherited by a beneficiary who is not an eligible designated beneficiary	Ten years, and taxable	Ten years, and not taxable
2026 limit	$7,500 shared with Roth	$7,500 shared with traditional

The limit is genuinely shared. If you contribute to both, the Roth limit is the general limit reduced by everything you put into non-Roth IRAs for the year. You cannot put $7,500 in each. For 2026 the limit is $7,500, with a $1,100 catch-up at 50 and over; the workplace elective deferral limit is $24,500, with an $8,000 catch-up and $11,250 for ages 60 to 63.

The income rules are where the two diverge most sharply, and the divergence is not symmetrical.

2026	Traditional deduction phases out	Roth contribution phases out
Single or head of household, covered by a workplace plan	$81,000 – $91,000	$153,000 – $168,000
Married filing jointly, contributing spouse covered	$129,000 – $149,000	$242,000 – $252,000
Married filing jointly, contributor not covered but spouse is	$242,000 – $252,000	$242,000 – $252,000
Married filing separately, covered	$0 – $10,000	$0 – $10,000

Above the phase-out, a traditional contribution is still permitted — it simply becomes nondeductible, tracked as cost basis on Form 8606. Above the Roth phase-out, a direct Roth contribution is not permitted at all. If neither you nor your spouse is covered by a workplace plan, the deduction phase-out does not apply to you.

The two five-year clocks, which are not the same clock

This is the part of the Roth rules most often compressed into a single sentence, and the compression loses the thing that causes trouble.

The account’s clock decides whether a distribution is qualified, and therefore whether the earnings come out tax-free. It runs from the first tax year for which a contribution was made to a Roth IRA set up for you. Until it has run, nothing you take out is a qualified distribution — even at 75.

A separate clock for each conversion decides only whether the 10% additional tax applies to the part of the conversion you had to include in income. Publication 590-B is explicit that the two are different: “A separate 5-year period applies to each conversion and rollover,” and the conversion clock “isn’t necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution.” Its own example: a conversion made on February 25, 2025 and a regular contribution for 2024 made on the same day — the conversion’s five years begin January 1, 2025, the regular contribution’s begin January 1, 2024.

The practical consequence is worth stating separately from the mechanics. A return of your regular contributions is not included in your gross income, and the ordering rules put regular contributions first — before conversions, before earnings. So the money you put in directly is reachable at any time, with no tax and no penalty. What you cannot do is reach a converted amount early without the recapture tax, which is why a Roth used as an emergency reserve has to be understood as a stack with an order to it, not a single balance.

Where the rate comparison does not decide the question

If you are over the Roth phase-out. You can contribute to a traditional IRA and convert it. For most people the conversion is not a taxable event beyond any gain in the interim, because the contribution was nondeductible. The trap is the pro-rata rule, and it is the single most expensive surprise in this area: the taxable part of a conversion is not determined by which dollars you chose to convert. Your basis is divided across the year-end value of all your traditional IRAs — Form 8606 line 6 is literally “the total value of all your traditional IRAs as of December 31” — so an old pre-tax rollover IRA turns a mostly-tax-free maneuver into a mostly-taxable one. Rolling the pre-tax balance into a workplace plan first removes it from the fraction, provided the plan accepts rollovers, which is a plan-document question rather than a tax one.

If your income is low enough for the Saver’s Credit. The credit is 50%, 20% or 10% of up to $2,000 of contributions, or $4,000 on a joint return, and it disappears above $40,250 for a single filer, $60,375 for a head of household, and $80,500 for a joint return in 2026. You must be at least 18, not claimed as a dependent, and not a full-time student. A credit is not a deduction — it comes off the tax itself — and at the 50% rate a $2,000 contribution is worth up to $1,000. For a small saver that can outweigh the rate comparison entirely, and because the credit is measured in AGI while a traditional contribution reduces AGI, the two interact.

If your deduction is phased out entirely and you are not converting. A nondeductible traditional contribution is strictly worse than a Roth: no deduction going in, and the earnings come out as ordinary income. The only reason to make one is to convert it.

What this page does not cover

Federal income tax only. State treatment varies, and it matters here more than in most comparisons — some states exempt retirement income, a few have no income tax at all, and a state’s treatment of a Roth conversion need not match its treatment of wages, so where you will live in retirement is a genuine input rather than a footnote. The page also does not model your marginal rate under the many phase-outs that use adjusted gross income, the qualified business income deduction, the alternative minimum tax, or the Social Security worksheet in full. And the limits and phase-out ranges are restated every year; the figures here are for tax year 2026, from Notice 2025-67.