Traditional vs. Roth IRA: 2026 Limits and After-Tax Comparison

1. Traditional and Roth IRAs defer tax at different points

A U.S. Traditional IRA contribution may be fully deductible, partly deductible, or nondeductible depending on factors such as workplace-plan coverage and income. Investment income inside the account is generally tax-deferred until distribution; pretax contributions and earnings may be taxable when withdrawn. Any after-tax basis is not automatically taxed again. Roth IRA contributions are not deductible, while qualified Roth IRA distributions are generally tax-free. That does not mean Roth earnings are tax-free under every withdrawal condition: qualification generally involves a five-tax-year period plus a qualifying event such as reaching age 59½, death, or disability. Check IRS Publication 590-A and Publication 590-B.

2. Compare tax timing using equal pretax resources

Compare the accounts using the same pretax resources available for saving, not the same deposit amount. Results can match when the Traditional contribution is fully deductible, both accounts earn the same return, the tax rate is the same at contribution and withdrawal, and the Roth distribution is qualified. A partial or unavailable deduction, fees, changing tax rates, and distribution rules can change the result.

3. Check 2026 contribution limits and eligibility

For 2026, the annual limit across a person’s Traditional and Roth IRAs is $7,500, plus a $1,100 catch-up for someone age 50 or older ($8,600 total). Contributions also cannot exceed eligible compensation. Direct Roth contributions phase out by modified adjusted gross income (MAGI).

A Traditional IRA deduction also depends on workplace-plan coverage, filing status, and MAGI. For 2026, the phaseout is $81,000–$91,000 for a single or head-of-household filer covered by a workplace plan, and $129,000–$149,000 for a jointly filing couple when the contributor is covered. A jointly filing couple may have a $242,000–$252,000 phaseout when only the contributor’s spouse is covered. Use the IRS calculation; being inside a range does not mean the deduction is simply all or nothing.

Hypothetical comparison with equal pretax resources

Assume $1,000 of pretax resources available to save, a 20% tax rate now and at retirement, and the same investment growth that doubles the invested balance. If the $1,000 Traditional contribution is fully deductible, it grows to $2,000 and leaves $1,600 after 20% withdrawal tax. With the same pretax resources, paying $200 tax now leaves $800 to invest in a Roth; doubling it produces $1,600, assuming a qualified tax-free distribution. This comparison assumes a full Traditional deduction, equal growth and tax rates, a qualified Roth distribution, and no fees, state taxes, or other tax effects. It is not a forecast or an individualized result.

Sources and References:

• IRS Publication 590-A (2025): Contributions to IRAs
• IRS Publication 590-B (2025): Distributions from IRAs
• IRS 2026 IRA contribution and deduction limits