Roth and Traditional accounts are both valuable tools — the choice isn't about which is "better" in the abstract, it's a bet on whether your tax rate will be higher now or in retirement, and the numbers determine whether you're even eligible for one of them.

The 2026 Numbers

The 2026 401(k) contribution limit is $24,500; the IRA limit is $7,500 ($8,600 with the 50+ catch-up). Traditional contributions reduce your taxable income now, with withdrawals taxed in retirement. Roth contributions use after-tax dollars now, with tax-free withdrawals in retirement — but Roth IRA has a income phase-out: $153,000-$168,000 for single filers, $242,000-$252,000 for married filing jointly in 2026. Above those thresholds, direct Roth IRA contributions aren't allowed (though a "backdoor Roth" conversion strategy exists for high earners).

A Roth 401(k) — offered by many employers alongside Traditional — has no income limit, unlike a Roth IRA. If you're above the Roth IRA income phase-out but want Roth's tax-free-withdrawal structure, check whether your employer offers a Roth 401(k) option before assuming you're locked out of Roth entirely.

The Early-Career Earner in a Lower Tax Bracket Now: Roth often makes more sense — you pay tax at your current (likely lower) rate, and withdrawals in retirement (likely a higher bracket, or just a larger balance) come out tax-free.

The High-Earner Expecting a Lower Retirement Tax Bracket: Traditional's upfront deduction is worth more now, and you'll pay tax on withdrawals at what's likely to be a lower rate in retirement.

Decide Based on Your Numbers

  1. Check your income against the 2026 Roth IRA phase-out range before assuming you're eligible.
  2. If phased out of Roth IRA, ask your employer whether a Roth 401(k) option exists.
  3. Honestly estimate whether your tax rate is likely higher now or in retirement — that's the deciding factor.

See how much money you need to retire for how these accounts fit into your broader retirement number.