Published: Wednesday, April 22, 2026 Series: The Blueprint | Practical Investing Guides
Marcus opened his IRA last week. You told him to (Issue #5). He found the account type selector: Traditional or Roth. He vaguely remembered something about Traditional lowering his taxes now. He clicked it. He confirmed. He moved on.
He has no idea if that was right.
This week, we find out.
What each one actually does
Both accounts hold the same investments. Both have the same contribution limit: $7,500 per year in 2026 (the catch-up limit for anyone 50 or older).
The only difference is when the IRS takes its cut.
Traditional IRA: You contribute pre-tax dollars. The money grows tax-deferred. When you withdraw in retirement, you pay income tax on every dollar you pull out, at whatever rate applies then.
Roth IRA: You contribute after-tax dollars. The money grows tax-free. When you withdraw in retirement, you pay nothing.
Same contribution. Same investments. Different tax timing.
The actual question
This is not a form question. It is one question: will your tax rate be higher in retirement than it is today?
- Tax rate goes up: Roth wins. You locked in today's cheaper rate.
- Tax rate goes down: Traditional wins. You deferred tax to a cheaper future rate.
- Tax rates stay flat: Roth still wins. No required minimum distributions, more flexibility, same math.
Everything else follows from that one bet.
The numbers
Marcus is 48. He puts in $7,500 per year. He earns 7% annually. He has 20 years until retirement.
Both paths grow to the same balance: $307,466.
The divergence happens when he withdraws.
| Traditional | Roth | |
|---|---|---|
| Balance at 68 | $307,466 | $307,466 |
| Tax on withdrawal (22%) | $67,643 | $0 |
| In-pocket | $239,823 | $307,466 |
| Difference | +$67,643 |
The gap is $67,643. That is not a rounding error. That is a car. That is two years of IRA contributions.
The honest caveat: if Marcus takes the $1,650 per year he saves on taxes with Traditional and invests every dollar of it in a taxable brokerage account for 20 years, the gap narrows to $5,197. Roth still wins, but barely.
In practice, most people spend the tax savings. They do not invest them. If Marcus does what most people do, Roth wins by the full $67,643.
"But I'll be in a lower bracket in retirement"
This is the most common argument for Traditional. It is worth taking seriously, because sometimes it is right.
But three forces push retirement income higher than most people expect:
1. Social Security is taxable. Once your combined income (Social Security plus other sources) exceeds roughly $25,000 as a single filer, up to 85% of your Social Security benefit becomes taxable. Most middle-class retirees cross that threshold.
2. Required minimum distributions force withdrawals. Traditional IRA and 401(k) accounts require you to start taking money out at age 73, whether you need it or not. If you have spent 20 years building a large Traditional balance, those RMDs can push you into a higher bracket than you planned. A Roth account has no RMDs. Ever.
3. Tax rates have nowhere to go but up. Federal debt is at levels that historically require resolution through higher taxes or inflation. Assuming your future tax rate will be lower than today's is a bet on fiscal restraint. It is not an unreasonable bet, but it should be made consciously.
A WSJ study (Derek Horstmeyer, April 2026) ran tens of thousands of simulations across different retirement ages, withdrawal ages, and tax scenarios. Their finding: overweighting Traditional accounts was never optimal. Not once.
The default rule by income
Not everyone is Marcus. Here is where the default lands by income:
| Household income | Recommendation |
|---|---|
| Under $100K | Roth IRA |
| $100K–$168K | Roth IRA (sweet spot: earns enough to benefit, under income limit) |
| $168K–$252K | Roth 401(k) yes; Roth IRA requires backdoor conversion (separate conversation) |
| Above $252K | Traditional likely right; advisor conversation warranted |
Marcus earns somewhere in the $90K–$180K range. He is in the sweet spot. Default: Roth.
He should log back in and change it.
What if you already have a Traditional IRA?
Do not panic. You are not locked in forever. Roth conversions let you move money from a Traditional account into a Roth, pay the tax now, and let the balance grow tax-free from that point forward. The math and timing on conversions deserve their own issue. For now: the rule is simple. Default Roth going forward, and note your Traditional balance for a future conversion conversation.
Action: under 15 minutes
Step 1. Log into your 401(k). Does your employer offer a Roth 401(k) option? If yes, and your income is under $168K, consider switching future contributions to Roth.
Step 2. Log into your IRA. Is it labeled Roth or Traditional? If you set it up as Traditional by default (like Marcus), note it. You now have the information to make a conscious choice.
Step 3. No IRA yet? Open a Roth IRA today at Fidelity, Vanguard, or Schwab. The 2026 contribution limit is $7,500 if you are 50 or older, $7,000 if you are under 50.
None of this requires a financial adviser. It requires fifteen minutes and a login.
Next week
You have built the structure now. You know which accounts to use (Issue #5). You know which tax treatment to choose (this issue). You know the fees to avoid (Issue #4).
But what happens when a large sum lands in your account all at once? A bonus. An inheritance. A severance check. $30,000, sitting there, waiting for a decision.
The answer is probably not what you think. That is Issue #7.
Issue #6 | The Blueprint | Published April 22, 2026