Key takeaways
- Roth = after-tax money in, tax-free forever out. Traditional = tax break now, taxed withdrawals later.
- 2026 direct Roth IRA: full contribution under $153k single / $242k joint MAGI; phases out completely at $168k / $252k.
- Over the limit? The backdoor Roth (and mega backdoor via your 401(k)) are legal workarounds — with one trap, the pro-rata rule.
- If your tax rate is the same now and in retirement, Roth and traditional give identical after-tax results. Run the tool below to see it.
What it is
After-tax money in
No deduction today. You contribute dollars you've already paid tax on — up to $7,500 for 2026 ($8,600 if 50+).
Tax-free growth, forever
Dividends, interest, capital gains inside the account are never taxed — no annual tax drag like a brokerage account.
Tax-free withdrawals in retirement
After 59½ (and any 5-year rule satisfied), withdrawals — contributions and earnings — are 100% tax-free. No required minimum distributions, ever.
Contributions are never locked up
You can withdraw what you contributed anytime, tax- and penalty-free. (Earnings withdrawn early face tax + 10% penalty, with exceptions.)
When does the IRS take its cut?
The one picture that explains Roth vs. traditional
Same dollars, same growth — the only question is when tax is taken.
Illustration: $10,000 pre-tax at 7% for 30 years, 24% tax rate. The math surprise: at equal tax rates, both paths end with the same after-tax dollars — try it in the tool below.
Do you qualify? (2026)
Two gates: you need earned income at least equal to your contribution, and your modified adjusted gross income (MAGI) must clear the limits. Inside the phase-out band, your allowed contribution shrinks proportionally to zero.
| Filing status | Full contribution | Phase-out band | Locked out |
|---|---|---|---|
| Single / head of household | MAGI under $153,000 | $153,000 – $168,000 | Over $168,000 |
| Married filing jointly | MAGI under $242,000 | $242,000 – $252,000 | Over $252,000 |
| Married filing separately* | — | $0 – $10,000 | Over $10,000 |
*If you lived with your spouse at any point during the year. Figures are for tax year 2026 — the IRS adjusts them most years. Check the current IRS figures →
$7,500
annual limit, under 50 (all IRAs combined)
$8,600
annual limit, 50+ (includes $1,100 catch-up)
You can contribute for a tax year until that year's filing deadline — for 2026, generally April 15, 2027.
Over the income limit?
The regular backdoor Roth (nondeductible IRA, convert, watch the pro-rata rule) and the mega backdoor Roth (after-tax 401(k) plus in-service rollover) each have their own full walkthrough now — including the HR questions that decide mega eligibility and who should skip both. Explore the tricks →
Same dollar, four destinations
Interactive tool
Put the same pre-tax dollars into an HSA, Roth IRA, traditional 401(k), or taxable brokerage — drag the sliders for return, years, and tax rates, and watch the after-tax ranking change. Every assumption sits next to the number it produces.
Compare the four accountsThe decision
Favor Roth when…
- Your tax rate now is lower than you expect in retirement (early career, low-income years).
- You want tax diversification — some pre-tax, some Roth, optionality later.
- Estate planning matters: Roth IRAs pass to heirs income-tax-free with no RMDs forcing your hand.
Favor traditional when…
- Your marginal rate now is higher than retirement (peak earning years, high-tax state).
- The deduction drops you into a lower bracket or under a phase-out cliff today.
- You plan early-retirement Roth conversions in low-income years before 59½.
Who should skip it
Peak earners at 32%+
Paying top-bracket tax today to avoid a lower retirement rate is a bad trade. Favor traditional, or split — the rate rule lives here →
Over the limit with messy IRAs
Big pre-tax IRA balances you can't roll into a 401(k) make the backdoor pro-rata taxed. Clean first, or skip — details →
Watch out for
The pro-rata rule. Backdoor with existing pre-tax IRA balances and part of every conversion is taxable. Empty the pre-tax IRAs into your 401(k) first.
The 5-year rule. Each conversion has its own 5-year clock — touch converted dollars before it runs out (and before 59½) and you owe a 10% penalty.
Forgetting Form 8606. No form, no proof of after-tax basis — the IRS taxes the conversion as if it were all pre-tax.
Going 100% Roth at a 32%+ marginal rate. Paying top-bracket tax today to avoid a lower retirement rate is a bad trade — split with pre-tax.
What next?
The Roth IRA is one layer of the tax pyramid — see how it stacks against the HSA (triple tax benefit), the 529, and traditional accounts, and what order to fund them in.