If you've ever wondered whetheryou should pay taxes now or later on your retirement savings, you're not alone.It's one of the most common questions we hear from clients for good reason! Thechoice between a Traditional IRA and a Roth IRA can have a significant impacton your financial future.

The short answer? It depends onyour unique situation. Let me walk you through the key differences.

What is an IRA?

An Individual Retirement Account(IRA) is a tax-advantaged savings vehicle that allows individuals with earnedincome to invest for retirement. You can invest in stocks, bonds, ETFs, and/ormutual funds within your IRA. There are two primary types: Traditional IRAs andRoth IRAs.

While both help you build wealthfor retirement, they work in fundamentally different ways when it comes totaxes.

Traditional IRA: Pay Taxes Later

How It Works: Traditional IRA contributions are made withpre-tax dollars, which means you may receive a tax deduction in the year youcontribute, potentially reducing your current tax bill. (IRS, 2026)

Your money grows tax-deferred,meaning you won't pay taxes on investment gains until you withdraw the funds inretirement. At that point, withdrawals are taxed as ordinary income, similar tohow your paycheck is taxed. (IRS, 2026)

Key Considerations: (IRS, 2026)

•  Earlywithdrawals before age 59½ typically incur a 10% penalty plus ordinary incometax (some exceptions apply)

•  Taxdeductibility depends on your income and whether you (or your spouse) haveaccess to a workplace retirement plan

•  If yourincome exceeds certain limits, you can still contribute but won't receive a taxdeduction, making other account types potentially more advantageous

Best For: Those who expect to be in a lower taxbracket in retirement, or those who want to reduce their taxable income today.

Roth IRA: Pay Taxes Now

How It Works: Roth IRA contributions are made withafter-tax dollars, so you don't receive a tax deduction when you contribute. However,any qualified withdraws are completely tax free in retirement. (IRS, 2026)

Key Considerations: (IRS, 2026)

•  You canwithdraw your contributions (not earnings) at any time, penalty and tax-free

•  To withdrawearnings tax-free, the account must be at least 5 years old, and you must be atleast 59½ (some exceptions apply)

•  Incomelimits restrict who can contribute directly to a Roth IRA, but high earners canuse a "backdoor Roth IRA" strategy (stay tuned for a future blog poston this!)

Best For: Those who expect to be in a higher taxbracket in retirement, younger investors with decades of tax-free growth ahead,or anyone who values tax diversification.

Annual Contribution Limits

Regardless of whether you choosea Traditional or Roth IRA or split contributions between both the annualcontribution limit applies across all your IRAs combined. (IRS, 2026)

For 2025: (Educo TaxGuide, 2026)

•   Under 50:$7,000 per year

•   Age 50 andover: $8,000 per year (includes $1,000 "catch-up" contribution)

For 2026: (Educo TaxGuide, 2026)

•   Under 50:$7,500 per year

•   Age 50 andover: $8,600 per year (includes $1,100 "catch-up" contribution)

Spousal IRA: A Smart Option for Non-Working Spouses

If you're married and one spousedoesn't work or earns minimal income, a Spousal IRA allows the working spouseto contribute to an IRA on behalf of their non-working spouse. This is apowerful way to double your household's retirement savings. (Fidelity, 2026)

Requirements: (Fidelity, 2026)

•   You must bemarried and file a joint tax return

•   The workingspouse must have enough earned income to cover contributions to both IRAs andmust follow contribution & income limitation rules

•   The SpousalIRA can be either Traditional or Roth

Example: If onespouse earns $80,000 and the other stays home with children, the working spousecan contribute $7,000 to their own IRA and $7,000 to a Spousal IRA, for a totalof $14,000 in annual retirement savings for 2025 if you’re both under the ageof 50.

How to Decide: A Simple Framework

Still not sure which IRA is rightfor you? Ask yourself these questions:

1. What's your current taxbracket vs. your expected retirement tax bracket?

•  If youexpect to be in a higher tax bracket later, lean toward Roth

•  If youexpect to be in a lower tax bracket later, Traditional may make more sense

2. Do you want tax savings now ortax-free income later? (IRS, 2026)

•  TraditionalIRA = potential immediate tax deduction

•  Roth IRA =tax-free withdrawals in retirement

3. How far are you from retirement?

•  Younger investors often benefit more from Roth IRAs because they have more time fortax-free compounding

4. Do you value flexibility?

•  Roth IRAsallow you to withdraw contributions at any time without penalty, offering moreflexibility in emergencies

The Bottom Line

Choosing between a TraditionalIRA and a Roth IRA isn't a one-size-fits-all decision. It depends on yourcurrent income, future tax expectations, retirement timeline, and personalfinancial goals.

Tip: You have until April 15th of the followingyear to make IRA contributions for the previous tax year. This means if you'rereading this in early 2026, you still have time to contribute to your 2025 IRA/ Roth IRA. This extended deadline gives you flexibility to maximize yourcontributions even after the calendar year has ended! (IRS, 2026)

Need help deciding which strategyis right for you? Let's talk!

Disclaimer: This blog post is foreducational purposes only and should not be construed as personalized financialadvice. Please consult with a qualified financial professional before makinginvestment decisions. Contributions to a traditional IRA may be tax deductiblein the contribution year, with current income tax due at withdrawal.Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in additionto current income tax. TraditionalIRA account owners have considerations to make before performing a Roth IRAconversion. These primarily include income tax consequences on the convertedamount in the year of conversion, withdrawal limitations from a Roth IRA, andincome limitations for future contributions to a Roth IRA. In addition, if youare required to take a required minimum distribution (RMD) in the year youconvert, you must do so before converting to a Roth IRA.