Every January, the same question floods financial forums: “Should I contribute to a Roth IRA or Traditional IRA?”

The standard advice is useless: “Roth if you think taxes will be higher in retirement, Traditional if you think they’ll be lower.” Thanks for nothing—nobody knows future tax rates.

Here’s what actually matters: the math for your specific situation right now. If you’re making $150,000+, the Traditional vs Roth decision isn’t philosophical. It’s pure arbitrage. And in most cases for high earners, the answer surprises people.

Let me show you the framework that turns this from guesswork into a spreadsheet problem.

The Core Difference (What Actually Happens to Your Money)

Forget the IRS jargon. Here’s what each account does:

Traditional IRA:

• You contribute $7,000 pre-tax (reduces 2026 taxable income)
• Money grows tax-deferred
• You pay taxes when you withdraw in retirement
• The bet: Your tax rate in retirement will be lower than today

Roth IRA:

• You contribute $7,000 after-tax (no deduction today)
• Money grows tax-free
• You pay zero taxes on withdrawals in retirement
• The bet: Your tax rate today is lower than it will be in retirement

The real question isn’t “which is better.” It’s “which tax rate is lower—mine today or mine at 65?”

The High Earner’s Dilemma (Why This Gets Complicated)

If you’re making $150K+ in 2026, you’re already facing a problem: you might not be eligible for either account in the traditional way.

2026 income limits:

Translation for high earners:

If you make $150K+ single or $200K+ married:

• You cannot deduct Traditional IRA contributions (if you have a 401k at work)
• You cannot contribute directly to a Roth IRA (above the limits)

But there’s a workaround: The backdoor Roth IRA lets you contribute regardless of income. You make a non-deductible Traditional IRA contribution, then immediately convert it to Roth.

This changes the entire analysis. Let’s break it down by income level.

Scenario 1: You Make $80K-145K Single (Can Choose Freely)

Your situation:

• You can deduct Traditional IRA contributions
• You can contribute directly to a Roth IRA
• You have a real choice

The math:

Let’s say you’re in the 24% federal tax bracket today and expect to be in the 12% bracket in retirement (likely if you’re not a super-saver).

Traditional IRA contribution:

• Contribute $7,000
• Tax savings today: $7,000 × 24% = $1,680 saved
• In 30 years at 8% growth: $70,245
• Taxes owed at withdrawal (12% rate): $8,429
• Net after taxes: $61,816

Roth IRA contribution:

• Contribute $7,000 (after-tax, so you pay $1,680 in taxes upfront)
• In 30 years at 8% growth: $70,245
• Taxes owed at withdrawal: $0
• Net after taxes: $70,245

Traditional IRA wins by $8,429 in this scenario.

Why? You arbitraged the tax rate difference. You avoided 24% taxes today and paid only 12% in retirement. That 12-point spread compounded over 30 years.

Scenario 2: You Make $150K-240K (Backdoor Roth Territory)

Your situation:

• You cannot deduct Traditional IRA contributions
• You cannot contribute directly to Roth
• Your only path: backdoor Roth

The math changes completely:

Non-deductible Traditional IRA (not converted):

• Contribute $7,000 after-tax
• No tax benefit today
• Growth is tax-deferred (not tax-free)
• In 30 years at 8%: $70,245
• At withdrawal: $7,000 is tax-free (already paid taxes), $63,245 is taxable
• Taxes on gains (12% rate): $7,589
• Net after taxes: $62,656

Backdoor Roth IRA:

• Contribute $7,000 after-tax to Traditional
• Immediately convert to Roth (no taxes due if done quickly)
• In 30 years at 8%: $70,245
• Taxes at withdrawal: $0
• Net after taxes: $70,245

Backdoor Roth wins by $7,589.

This is why every high earner should do the backdoor Roth. There’s zero downside. You’re paying taxes either way (since you can’t deduct), so you might as well get tax-free growth forever.

Scenario 3: You’re Absolutely Crushing It ($300K+)

Your situation:

• Way above income limits for everything
• In the 35% or 37% federal bracket
• Probably have a 401k you’re maxing

Here’s where it gets interesting:

If you’re making $300K+ today and expect to have a lower income in early retirement (say, age 55-65 before RMDs and Social Security kick in), the Traditional IRA deduction—if you could get it—would be gold.

But you can’t get the deduction.

So your decision is: backdoor Roth or taxable brokerage account?

Backdoor Roth ($7,000/year for 30 years):

• Total contributions: $210,000
• Value at 8% growth: $863,018
• Taxes owed: $0
• You keep: $863,018

Taxable brokerage ($7,000/year for 30 years):

• Total contributions: $210,000
• Value at 8% growth: $863,018
• Long-term capital gains on $653,018 at 20% (high earner rate): $130,604
• You keep: $732,414

Backdoor Roth wins by $130,604.

The decision is obvious: do the backdoor Roth. The only reason not to is if you have pro-rata rule issues (more on this in a minute).

The RMD Factor Nobody Talks About

Here’s a massive difference that doesn’t show up in basic comparisons:

Traditional IRAs have Required Minimum Distributions (RMDs) starting at age 73 (as of 2026).

Roth IRAs have NO RMDs during your lifetime.

Why this matters:

Let’s say you retire at 60 with $2 million across various accounts. You plan to live on $100K/year.

At age 73, the IRS forces you to withdraw 3.77% of your Traditional IRA balance annually (based on the Uniform Lifetime Table).

If you have $500,000 in a Traditional IRA at 73:

• RMD year 1: $18,850 (taxable income you didn’t want)
• This pushes you into a higher tax bracket
• You pay taxes on money you weren’t planning to spend
• It might trigger Medicare IRMAA surcharges (higher premiums)
• It could make more of your Social Security taxable

With a Roth IRA: None of this happens. The money grows tax-free forever. You can pass it to heirs who get tax-free withdrawals for 10 years (under current rules).

This is why financial advisors say “Roth IRAs are the ultimate wealth transfer vehicle.”

The Tax Bracket Prediction Problem

The Traditional vs Roth debate assumes you can predict your future tax bracket. You can’t. But you can make educated guesses.

You’ll likely be in a LOWER bracket in retirement if:

• You’re a high earner now (35%+ bracket) but won’t have that income forever
• You plan to live modestly in retirement (your expenses will drop)
• You’re maxing out 401k contributions now but won’t have that income later
• You’ll move to a no-income-tax state in retirement (Texas, Florida, etc.)

You’ll likely be in a HIGHER bracket in retirement if:

• You’re in a relatively low bracket now (22-24%) but building significant wealth
• You expect pension income, rental income, or continued business income
• Required Minimum Distributions will push you up
• You plan to maintain a high lifestyle (spending isn’t dropping)
• Congress raises tax rates (the 2017 tax cuts expire in 2025, rates could jump)

The safest bet for most high earners: Hedge your bets. If you’re maxing your 401k with pre-tax contributions, add Roth IRA contributions on top. You end up with both tax-deferred and tax-free money in retirement.

The Pro-Rata Rule Trap (Why Some High Earners Can’t Do Backdoor Roth Cleanly)

If you have existing Traditional IRA, SEP IRA, or SIMPLE IRA balances with pre-tax money, the backdoor Roth gets messy.

The pro-rata rule says: When you convert Traditional IRA dollars to Roth, the IRS looks at ALL your IRA balances combined and taxes you proportionally.

Example:

You have $93,000 in a rollover Traditional IRA from an old 401k. You want to do a backdoor Roth:

• Contribute $7,000 to Traditional IRA (total balance now: $100,000)
• Of that $100,000, only $7,000 is after-tax
• You convert $7,000 to Roth
• IRS says: “93% of your conversion is pre-tax, so you owe taxes on $6,510”

This ruins the backdoor Roth strategy.

Solutions:

1. Roll your Traditional IRA into your current 401k (most plans allow this). This clears out your IRA balance.
2. Convert everything to Roth in one year (pay the tax bill now, future backdoor Roths are clean).
3. Just use a taxable brokerage account instead of fighting the pro-rata rule.

I’ve seen people with $200K in Traditional IRAs try to do backdoor Roths and end up with surprise $20K tax bills. Don’t be that person.

State Tax Considerations (Another 5-10% on Top)

Federal taxes are only part of the equation. State taxes can swing the decision.

If you live in California, New York, New Jersey, Oregon: You’re paying 9-13% state income tax today.

If you plan to retire in Florida, Texas, Nevada, Washington: You’ll pay 0% state income tax.

This changes the math dramatically:

Traditional IRA for California resident retiring to Florida:

• Tax savings today: 24% federal + 9.3% CA state = 33.3%
• Tax rate in retirement: 12% federal + 0% FL state = 12%
• Spread: 21.3 percentage points

That’s massive arbitrage. Traditional IRA wins big in this scenario.

Check your relocation plans before deciding.

The Roth Conversion Ladder Strategy (Advanced Play)

Here’s a strategy for people who want to retire early (before 59.5):

The problem: Roth IRA contributions can be withdrawn anytime tax-free, but earnings can’t be touched until 59.5 without penalty.

The strategy:

1. Max out Traditional 401k contributions during your working years (35%+ bracket)
2. Retire early (say, age 50)
3. Roll 401k to Traditional IRA
4. Convert $50-60K per year from Traditional IRA to Roth IRA
5. Pay taxes at the 12-22% bracket (you have no other income)
6. Wait 5 years
7. Withdraw those conversions tax-free and penalty-free

You’ve arbitraged: 35% bracket during working years → 12-22% bracket during early retirement.

This is how people retire at 50 with $2M and pay minimal taxes. They’re not touching Roth contributions, they’re accessing Roth conversions.

The catch: You need 5 years of expenses in taxable accounts or Roth contributions to bridge the gap.

When Traditional IRA Actually Wins for High Earners

Scenario 1: You’re a high earner now but expect a career change

If you’re a Big Tech engineer making $350K who plans to become a teacher at 45, Traditional wins. Your income will drop dramatically.

Scenario 2: You’re maxing every tax-advantaged account

If you’re doing:

• 401k: $23,500 (pre-tax)
• Mega backdoor Roth: $46,000
• HSA: $4,300

Adding $7,000 to a Roth IRA on top might push your savings rate so high that you’ll actually spend less in retirement than you earn now. Traditional might make sense to smooth out the tax brackets.

Scenario 3: You’re close to a phase-out threshold

If you’re at $144K single and a $7,000 Traditional IRA deduction drops you to $137K (avoiding Roth phase-out), you get the best of both worlds: deduction now + ability to contribute to Roth separately.

The Simple Decision Tree

Step 1: Can you deduct Traditional IRA contributions?

• No (income too high + have 401k): Do backdoor Roth. Game over.
• Yes: Continue to Step 2.

Step 2: Do you expect your tax rate to be higher or lower in retirement?

• Lower: Traditional IRA (get the deduction now)
• Higher or same: Roth IRA (pay taxes now at lower rate)
• No idea: Split the difference or default to Roth

Step 3: Do you have existing IRA balances that trigger pro-rata rule?

• Yes: Either roll into 401k or skip backdoor Roth
• No: You’re clear to do backdoor Roth

Step 4: Are you planning geographic arbitrage?

• High-tax state now → low-tax state in retirement: Traditional wins big
• Low-tax state now → staying put: Roth is safer

My Personal Framework (What I Actually Do)

Since you can’t predict future tax rates and Congress could change everything tomorrow, here’s the strategy I use:

1. Max out 401k with Traditional (pre-tax) contributions

• This gives me the tax deduction in my highest earning years
• I’m in the 32% bracket now, likely 12-22% in early retirement

2. Do backdoor Roth IRA every January

• I have no IRA balance (rolled everything into my 401k)
• This gives me tax-free money growing in parallel

3. Max out HSA as a “super Roth”

• Triple tax advantage: deduction now, tax-free growth, tax-free withdrawals for medical

4. Everything else goes to taxable brokerage

• I buy index funds and hold forever (15% long-term cap gains rate)

Result: I have three tax buckets in retirement:

• Tax-deferred (401k/Traditional IRA) – I can control withdrawals to stay in low brackets
• Tax-free (Roth IRA, HSA) – I can tap these without increasing taxable income
• Taxable (brokerage) – I can harvest losses, donate appreciated shares, use for early retirement

This gives me maximum flexibility. I’m not betting everything on one tax treatment.

The Behavioral Factor Nobody Mentions

Here’s an argument for Roth IRAs that has nothing to do with tax rates:

Roth contributions can be withdrawn anytime, for any reason, tax-free and penalty-free.

Traditional IRA withdrawals before 59.5 trigger:

• Income taxes
• 10% early withdrawal penalty
• Exceptions exist (first home, education, disability) but they’re narrow

Why this matters:

If you lose your job at 45, your Roth IRA contributions are an emergency fund. You contributed $7,000/year for 15 years = $105,000 available immediately with zero penalty.

Try that with a Traditional IRA and you’re paying 32% income tax + 10% penalty = 42% to access your own money.

Roth IRAs give you optionality. That’s worth something, even if it’s hard to quantify.

The Estate Planning Angle (If You’re Wealth-Building, Not Wealth-Spending)

If you’re reading this blog, you’re probably building wealth faster than you’ll spend it. You’ll likely die with money left over.

Traditional IRA inheritance:

• Heirs must withdraw entire balance within 10 years (SECURE Act 2.0)
• They pay income taxes at their rate on every withdrawal
• If your kid is in the 35% bracket, they lose 35% of the IRA

Roth IRA inheritance:

• Heirs must withdraw within 10 years (same rule)
• But withdrawals are 100% tax-free
• Your kid gets the full balance, no taxes

If you’re building generational wealth, Roth IRAs are the clear winner. You’re essentially pre-paying taxes at your rate (24-32%) so your heirs don’t pay at their rate (potentially higher).

What About the 2025 Tax Law Changes?

The 2017 Tax Cuts and Jobs Act (TCJA) is set to expire at the end of 2025. If Congress doesn’t extend it:

What happens:

• 22% bracket becomes 25%
• 24% bracket becomes 28%
• Standard deduction gets cut in half
• Many tax credits and deductions shrink

If this happens, 2026-forward tax rates will be higher than 2024-2025.

This makes Roth contributions in 2026 more valuable because you’re locking in today’s rates before they jump.

But: Congress could extend the tax cuts. Or modify them. Or do nothing and let them expire.

Nobody knows. This is why diversifying across tax treatments makes sense.

The Bottom Line Decision

For most high earners ($150K+), the answer is simple:

Do the backdoor Roth IRA every year. You’re not getting a Traditional IRA deduction anyway (income too high + have a 401k), so you might as well get tax-free growth.

Exceptions:

1. You have large pre-tax IRA balances and can’t/won’t move them → skip backdoor Roth, use taxable accounts
2. You’re convinced you’ll be in a dramatically lower tax bracket in retirement → Traditional might win, but you can’t deduct it anyway
3. You’re doing mega backdoor Roth contributions of $46,000/year → maybe skip the regular backdoor Roth for simplicity

For everyone else:

If you can deduct Traditional IRA contributions and you genuinely believe your retirement tax rate will be lower, Traditional wins on pure math.

But most people underestimate their retirement spending and overestimate how much their tax rate will drop. When in doubt, Roth is the safer bet.

Remember: The best IRA is the one you actually fund. Don’t let analysis paralysis stop you from contributing.

Pick one, max it out, and move on to optimizing your tax deductions elsewhere.