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Traditional vs. Roth IRA: Contributions, Taxes, and Withdrawals
Compare traditional and Roth IRA tax treatment, contribution rules, and withdrawals. Check direct Roth contribution room with the free PFC calculator.
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Traditional and Roth IRAs can both hold retirement savings, but their tax treatment differs. Start by checking which contributions are permitted and whether a traditional contribution would be deductible. Then compare the timing of taxes using assumptions about your own circumstances.
Traditional vs. Roth IRA at a glance
| Question | Traditional IRA | Roth IRA |
|---|---|---|
| Contribution deduction | May be deductible if you qualify | No deduction |
| Income restriction | Deduction may be limited by income and workplace plan coverage | Direct contribution eligibility depends on MAGI |
| Retirement withdrawals | Deductible contributions and earnings generally taxable | Qualified distributions are tax-free |
| Annual contribution ceiling | Shares the annual cap with Roth IRAs | Shares the annual cap with traditional IRAs |
Source: IRS: traditional and Roth IRA overview.
Contribution eligibility is different from deductibility
A traditional IRA contribution is not automatically deductible. Workplace retirement-plan coverage and income can affect the deduction. A nondeductible contribution creates basis that must be tracked; do not treat it as an immediate tax saving. Direct Roth eligibility has separate MAGI rules.
Source: IRS Publication 590-A: IRA contributions and deductions.
Compare equal amounts before tax
Here is a simplified illustration, not a forecast: assume $5,000 available before tax, a fully deductible traditional contribution, a 22% current marginal tax rate, and identical investments that double. Ignore state tax and other effects. A traditional IRA could grow from $5,000 to $10,000 before withdrawal tax. The equivalent Roth deposit is $3,900 after current tax and grows to $7,800.
| Withdrawal tax assumption | Traditional after tax | Roth qualified distribution |
|---|---|---|
| 12% | $8,800 | $7,800 |
| 22% | $7,800 | $7,800 |
| 32% | $6,800 | $7,800 |
The example shows why the tax rate at contribution and withdrawal matters. Equal $5,000 deposits into each account would use different amounts of after-tax cash. Actual deductions, tax brackets, fees, and investment outcomes can change the comparison.
Check withdrawal rules as well
A qualified Roth distribution generally requires the five-tax-year period and age 59½ or another qualifying condition. Nonqualified distributions and conversions have additional rules. Original Roth IRA owners have no lifetime required minimum distributions; traditional IRAs generally do. Inherited accounts have their own rules.
Source: IRS Publication 590-B: distributions and required minimum distributions.
Use PFC for the contribution check
Read the 2026 Roth IRA limits article, then enter age, compensation, Roth MAGI, and prior IRA contributions in the Roth IRA contribution calculator. It estimates direct contribution room; it does not calculate traditional deductibility, conversion tax, or the after-tax investment comparison above.