Traditional IRA vs. Roth IRA: what’s the difference? 

M1 Team
M1 Team August 11, 2026
Two people writing on a document with their laptops open beside them.

The main difference between a Traditional IRA and a Roth IRA is when you get the tax break. A Traditional IRA may give you a tax deduction now and taxes your withdrawals in retirement; a Roth IRA gives no upfront deduction but makes qualified withdrawals tax-free later. Which one fits depends largely on whether you expect a higher or lower tax rate in retirement.

What is a Traditional IRA?

A Traditional IRA is a retirement account funded with pre-tax money. Your contributions may be tax-deductible the year you make them (if you qualify), and your investments grow tax-deferred — you generally pay ordinary income tax on withdrawals in retirement. 

Traditional IRAs require minimum distributions beginning at age 73 (75 if you were born in 1960 or later). Withdrawals before age 59½ may trigger income tax plus a 10% penalty, with some exceptions. 

Put your retirement investing on auto-pilot. You can open Traditional, Roth, and SEP IRAs on M1. Choose the one that fits your strategy.

See the differences

What is a Roth IRA?

A Roth IRA is a retirement account funded with post-tax money. You don’t get an upfront deduction, but in exchange, qualified withdrawals in retirement are generally tax-free — and you can withdraw your own contributions at any time without taxes or penalties. 

A withdrawal is qualified when the account has been open at least five years and you are 59½ or older. The IRS also treats some earlier withdrawals as qualified — including disability, death, or up to $10,000 toward a first-time home purchase. 

Roth IRAs have no required minimum distributions during the original owner’s lifetime. 

Traditional IRA vs. Roth IRA: side-by-side 

 Traditional IRA Roth IRA 
Funded with Pre-tax money — may be deductible now if you qualify Post-tax money — no upfront deduction; qualified withdrawals later are tax-free (account open 5+ years and age 59½ or older) 
2026 contribution limit $7,500 ($8,600 if 50+), total across all your IRAs $7,500 ($8,600 if 50+), total across all your IRAs 
Income rules No income limit to contribute; your deduction phases out if you’re covered by a workplace plan (2026: single $81,000–$91,000; MFJ-covered $129,000–$149,000; spouse-covered $242,000–$252,000) Contributions phase out by income (2026: single $153,000–$168,000; MFJ $242,000–$252,000) 
Growth Tax-deferred Tax-free on qualified withdrawals 
Withdrawals after 59½ Taxed as ordinary income Generally tax-free if qualified 
Early withdrawal (before 59½) Contributions and earnings may face income tax + a 10% penalty (exceptions apply) Contributions anytime penalty-free; earnings may face income tax + a 10% penalty (exceptions apply) 
Required minimum distributions Generally begin at age 73 (rising to 75 for those born in 1960 or later) None during the original owner’s lifetime 
May suit Someone expecting a lower tax rate in retirement Someone expecting a higher tax rate in retirement 

Figures are set by the IRS and change periodically — confirm the current numbers on the IRS contribution-limits page and Publication 590-A. 

Traditional IRA vs. Roth IRA: which is right for you? 

There’s no universally better choice — the right account depends on your situation. A few things people commonly weigh: 

  • Your tax rate now vs. later. One common approach is choosing a Traditional IRA if you expect a lower tax rate in retirement (take the deduction now), and a Roth IRA if you expect a higher one (lock in tax-free withdrawals later). 
  • Income limits — especially if you’re a higher earner. Higher earners covered by a workplace plan often can neither deduct a Traditional contribution nor contribute directly to a Roth. Those who can’t deduct or contribute directly sometimes consider other options, such as a backdoor Roth IRA or a taxable brokerage account. A backdoor Roth carries its own tax rules — notably the pro-rata rule, which can create a tax bill if you also hold pre-tax money in a Traditional or rollover IRA — so it’s worth understanding before you start. 
  • Flexibility. Roth contributions can be withdrawn anytime penalty-free and have no lifetime RMDs; Traditional IRAs require distributions starting at age 73. 
  • You don’t always have to pick one. You can contribute to both in the same tax year, as long as your combined contributions stay within the annual limit — so $7,500 total, split however you like (see how many IRAs you can have). 

Because the tradeoffs depend on your tax situation, it may help to consult a licensed tax professional. This is general educational information, not personalized advice. 

How to invest in a Traditional or Roth IRA 

Opening and funding an IRA is only the first step — funds remain uninvested until you choose investments. From there you decide what to buy: stocks, ETFs, index funds, or other securities aligned with your goals and risk tolerance. 

With M1, you can build a custom portfolio or start from a pre-built one, then set a recurring deposit schedule; M1 directs each contribution toward your target allocation. 

For retirement accounts, M1 charges a flat $3 monthly IRA fee — not a per-trade commission and not a percentage-of-assets management fee. The fee is waived if your total M1 assets reach $10,000 for at least one day during the billing cycle, and you are never charged more than $3 per month no matter how many accounts you hold. Other fees may apply; see the M1 Fee Schedule for current amounts. You can open a Traditional, Roth, or SEP IRA with M1, and if you’re weighing a retirement account against a taxable one, see brokerage account vs. IRA. 

The M1 bottom line 

Both a Traditional IRA and a Roth IRA can be useful long-term retirement accounts. As you decide which fits, weigh your current and expected future tax rate, income limits, and how much withdrawal flexibility you want. 

When you’re ready, you can open either with M1. 

Frequently asked questions about traditional and roth IRAs

Is a Roth IRA better than a Traditional IRA?

Neither is universally better. A Roth may fit if you expect a higher tax rate in retirement (tax-free qualified withdrawals); a Traditional may fit if you expect a lower one (a deduction now). Other factors — income limits, RMDs, and withdrawal flexibility — also matter.

Can I have both a Traditional and a Roth IRA?

Yes. You can contribute to both in the same year, but your combined contributions can’t exceed the annual limit ($7,500 in 2026, or $8,600 if 50+). See how many IRAs you can have.

Can I convert a Traditional IRA to a Roth IRA?

Yes — this is a Roth conversion. You’ll generally owe income tax on the converted amount in the year you convert, and the pro-rata rule may apply. Whether it makes sense depends on your situation.

What are the income limits for a Traditional vs. Roth IRA in 2026?

A Traditional IRA has no income limit to contribute, but your deduction phases out if you’re covered by a workplace plan (2026: single $81,000–$91,000; MFJ-covered $129,000–$149,000). Roth contributions phase out by income (2026: single $153,000–$168,000; MFJ $242,000–$252,000). Confirm current figures at IRS.gov.

Do I have to take required minimum distributions?

A Traditional IRA generally requires RMDs beginning at age 73 (age 75 for those born in 1960 or later). A Roth IRA has no RMDs during the original owner’s lifetime.

M1 and its affiliates do not provide tax, legal, or accounting advice. This material is for informational purposes only and is not personalized investment, tax, or legal advice; consult your own advisors before engaging in any transaction. Investing involves risk, including the possible loss of principal. Tax figures and rules referenced are set by the IRS and change periodically — verify current figures at IRS.gov. Brokerage products and IRAs are offered by M1 Finance LLC, member FINRA/SIPC.

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