The Traditional and Roth IRA Guide
Okay so I spent a chunk of this spring going back and forth on how to split our monthly investing between Traditional and Roth, and it turns out the actual decision is smaller than the internet makes it sound. It comes down to one bet: do you think your tax rate is higher now or higher later. Everything else is just mechanics. Here's what I found once I actually sat down with the numbers instead of the vibes.
Same account shape, opposite tax timing
Both are IRAs. Same contribution limit, same custodians, same investment options once the money's in there. The entire difference is when the IRS gets paid.
Traditional IRA
Pay taxes on the back end
Deduct now
Roth IRA
Pay taxes on the front end
Tax-free later
2026 income phase-outs
This is the part that trips people up. Roth eligibility phases out entirely above a certain income. Traditional IRA deductibility phases out too, but only if you or your spouse have a workplace plan available. Figures below are single-filer MAGI ranges for 2026, married filing jointly is roughly double, check current IRS figures since these adjust for inflation every year.
Under the threshold, you can put in the full $7,500 (or $8,600 at 50+) directly into a Roth.
In the phase-out band, the max you can contribute shrinks on a sliding scale. Your custodian or a quick worksheet does the math for you.
Above the ceiling, direct Roth contributions aren't allowed. This is where the "backdoor Roth" (contribute to a Traditional, then convert) comes in, worth its own research before you try it.
Limits, deadlines, and penalties
This is the stuff I actually keep written down. It's the same short list every year, the numbers just move a little.
Common mistakes
None of these are exotic. They're just the ones I see over and over when people ask me about this.
It triggers a 6% excise tax on the excess every year it sits there uncorrected. Fixable, but annoying, and easy to avoid by checking your MAGI first.
If you or your spouse have a workplace retirement plan, a Traditional IRA deduction phases out at a much lower income than people expect. Contributing doesn't guarantee a tax break.
Your contributions come out clean any time. Your earnings are a different bucket, and pulling those early can trigger both tax and penalty.
The $7,500 cap is combined across every IRA you own. Opening a Traditional and a Roth doesn't double your room.
Missing a required minimum distribution comes with its own penalty. If you're rolling toward 73, that date needs to be on your radar well before it arrives.
Contribution limits, income phase-outs, and RMD ages are set by the IRS and adjusted annually for inflation. The figures above reflect 2026 amounts as best known at time of writing, confirm current-year numbers at irs.gov before filing.