Roth IRA vs Traditional IRA

{{whyLabel}}: Your MAGI determines whether you can deduct Traditional IRA contributions or if you are even allowed to contribute to a Roth IRA.

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• Take your gross income and subtract specific deductions like student loan interest and half of self-employment tax.
• For 2026, note that the standard deduction is expected to drop significantly (roughly half of 2025 levels) due to the TCJA sunset.
• Use your 2025 tax return as a baseline and adjust for expected 2026 raises or bonuses.

{{doneWhenLabel}}: You have a specific dollar amount for your projected 2026 MAGI.

{{whyLabel}}: The Tax Cuts and Jobs Act (TCJA) is scheduled to expire on Dec 31, 2025, meaning 2026 tax rates will likely revert to higher 2017 levels.

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• Anticipate the 22% bracket rising to 25% and the 24% bracket rising to 28%.
• If you expect to be in a higher bracket in 2026 than in retirement, Traditional may save you more now.
• If you expect your retirement bracket to be higher (likely for many due to the sunset), Roth is mathematically superior.

{{doneWhenLabel}}: You have identified your projected 2026 marginal tax rate.

{{whyLabel}}: You cannot contribute directly to a Roth IRA if your income exceeds specific limits.

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• For Single filers, the 2026 phase-out starts at $153,000 and ends at $168,000.
• For Married Filing Jointly, the range is $242,000 to $252,000.
• If you are above these limits, you must use a 'Backdoor Roth' strategy (nondeductible Traditional contribution followed by a conversion).

{{doneWhenLabel}}: You know if you qualify for a direct Roth contribution or need a Backdoor strategy.

{{whyLabel}}: If you or your spouse have a retirement plan at work (like a 401k), your Traditional IRA deduction may be limited.

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• For 2026, the Single phase-out for those with a workplace plan is $81,000–$91,000.
• For Married Filing Jointly (contributor covered), it is $129,000–$149,000.
• If you cannot deduct the contribution, a Roth IRA is almost always better than a nondeductible Traditional IRA.

{{doneWhenLabel}}: You have confirmed whether your Traditional contribution would be tax-deductible.

{{whyLabel}}: Choosing the wrong account can lead to thousands in unnecessary future taxes.

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• Choose Roth IRA if: You want tax-free growth, no RMDs, and expect tax rates to stay high or rise.
• Choose Traditional IRA if: You need the immediate tax break to lower your 2026 bill and expect to be in a lower bracket during retirement.
• Note: With the 2026 tax hike, Roth is the 'hedge' against rising national tax rates.

{{doneWhenLabel}}: A final decision is made between Roth and Traditional.

{{whyLabel}}: You need a platform to hold your IRA assets with minimal fees.

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• Choose a provider known for zero-commission trades and low expense ratio index funds.
• Select the specific account type (Roth or Traditional) decided in the previous phase.
• Ensure the account is designated for the 2026 tax year if opening early.

{{doneWhenLabel}}: Account is open and login credentials are secured.

{{whyLabel}}: Automation ensures you hit the maximum contribution without manual effort.

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• The 2026 limit is $7,500 ($8,600 if age 50+).
• Set up a monthly transfer of $625 ($7,500 / 12) to reach the cap by year-end.
• Link your checking account to the brokerage for seamless ACH transfers.

{{doneWhenLabel}}: Automated transfer is active and scheduled.

{{whyLabel}}: Cash sitting in an IRA does not grow; it must be invested to benefit from compounding.

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• Select a 'Total Stock Market' or 'S&P 500' index fund for growth.
• Look for expense ratios below 0.10% to keep costs low.
• Set the account to 'Auto-Invest' new deposits into your chosen funds.

{{doneWhenLabel}}: Funds are invested and auto-investment is enabled.

{{whyLabel}}: Unexpected income increases could push you out of Roth eligibility or Traditional deductibility.

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• Review year-to-date earnings and project the second half of 2026.
• If income is higher than expected, consider 'recharacterizing' contributions to avoid IRS penalties.
• Adjust automated transfers if you are on track to exceed the $7,500 limit.

{{doneWhenLabel}}: Mid-year projection matches actual earnings trend.

{{whyLabel}}: Congress may pass new laws in late 2025 or 2026 that extend or modify the tax sunset.

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• Check for news on 'Tax Cut Extensions' or new 'Standard Deduction' levels.
• If the sunset is delayed, the Traditional IRA may become more attractive for immediate savings.
• If the sunset proceeds, prioritize the Roth IRA to lock in current rates.

{{doneWhenLabel}}: You have reviewed the latest tax law status for the 2026 filing year.