The Same Question, Asked a Thousand Different Ways
Traditional IRA vs. Roth IRA, which one should I go with? This might be the single most common question I get, in self-directed circles or otherwise. And here’s the honest answer nobody likes hearing at first: it depends on a number nobody can give you with certainty, your future tax bracket.
So then, rather than give you a vague “it depends,” let’s actually run the numbers, look at what a recent survey found about how people are choosing, and give you a framework that holds up regardless of which way rates move.
I’m Dan Anderson, and I’ve worked for over two decades with self-directed investors weighing this exact decision regularly, often with real estate or precious metals already in mind for the account.
Key Takeaways
- Traditional IRA distributions are taxed later. Income taxes on a Roth IRA are paid upfront in the form of after-tax contributions. Everything else follows from that single distinction between the two types of IRAs.
- Both share the same contribution limits combined across both account types.
- Roth IRAs have income limits on who can contribute directly. Traditional IRAs don’t, though deductibility can be limited.
- Unlike a Traditional IRA, Roth IRAs never require RMDs for the original owner.
- A recent Mutual of Omaha survey found 44% of adults over 40 own a Traditional IRA, 38% own a Roth, and people are nearly split on which tax timing they prefer.
The Core Mechanic: Pay Now or Pay Later
A Traditional IRA lets you contribute pre-tax dollars, lowering your taxable income in the year you contribute. The trade-off: every withdrawal in retirement, contributions and growth alike, gets taxed as ordinary income.
A Roth IRA flips the order. You contribute after-tax dollars, so there’s no deduction today. In exchange, qualified withdrawals in retirement, both your original contributions and every dollar of growth, come out completely tax-free.
That’s the entire mechanic. Everything else — who can contribute, what happens at withdrawal, required distributions — flows directly from that one timing decision.
Running the Actual Numbers
Here’s where most comparisons stop short. They’ll tell you “choose Roth if you expect a higher bracket later,” without ever showing what that actually looks like in dollars. Let’s fix that.
Say you contribute $7,500 this year and you’re currently in the 22 percent federal tax bracket. Assume that money grows to $15,000 by the time you retire, an oversimplified but illustrative doubling.
Scenario A: Traditional IRA, Same Bracket in Retirement
- Today: you deduct the $7,500, saving roughly $1,650 in current-year taxes (22% of $7,500)
- At retirement: you withdraw $15,000, taxed at 22%, owing about $3,300
- Net tax paid across both years: roughly $3,300 minus the $1,650 saved today, a net cost of about $1,650
Scenario B: Roth IRA, Same Bracket in Retirement
- Today: you pay tax on the $7,500 upfront, costing about $1,650 (22% of $7,500), with no deduction
- At retirement: you withdraw the full $15,000 completely tax-free
- Net tax paid across both years: the same roughly $1,650, paid today instead of later
Notice something important: if your tax bracket stays exactly the same, the two accounts cost you the identical amount in taxes overall. The Roth and Traditional only diverge when your bracket actually changes between now and retirement.
Scenario C: Where the Outcomes Actually Split
Now assume your bracket rises to 32 percent in retirement, perhaps from a pension, rental income, or required distributions pushing you into a higher bracket than expected.
- Traditional IRA: you still saved $1,650 today, but now owe 32% of $15,000 at withdrawal, about $4,800. Net cost: roughly $3,150
- Roth IRA: you still paid $1,650 today at your original bracket, and the $15,000 withdrawal remains entirely tax-free regardless of your retirement bracket. Net cost: still $1,650
That gap, $3,150 versus $1,650 in this example, is the entire case for choosing Roth when you expect rates to rise. Reverse the assumption, a lower bracket in retirement, and the math favors Traditional instead. The account doesn’t change.
Your future bracket is what decides the winner.
And that is why nobody can exactly promise you a universal answer.
Where They’re Identical
- Annual contribution limits are shared across both account types combined
- Both require earned income to contribute, capped at 100% of that income if it’s lower than the limit
- Both can hold the same self-directed alternative assets, real estate, precious metals, private lending, once self-directed
- Both impose a 10% early withdrawal penalty before age 59½, with similar narrow exceptions
Where They Genuinely Differ
Income Eligibility
Anyone with earned income can contribute to a Traditional IRA, regardless of income level, though high earners with a workplace plan may lose the deduction. Roth IRA contributions phase out entirely for single filers earning between $153,000 and $168,000, and for married couples filing jointly between $242,000 and $252,000 for 2026.
Required Minimum Distributions
Traditional IRAs require RMDs starting at age 73 (75 if born in 1960 or later), whether you need the money or not. Roth IRAs never require distributions during the original owner’s lifetime, letting the account keep growing tax-free indefinitely if you don’t need to draw on it.
Withdrawal Flexibility Before Retirement
Roth IRAs let you withdraw your original contributions, though not the earnings, at any time, for any reason, without tax or penalty, since you already paid tax on that money. Traditional IRAs offer no equivalent flexibility; nearly any withdrawal before 59½ triggers both tax and penalty.
Why This Decision Matters Even More for Self-Directed Investors
If you’re planning to hold real estate or another illiquid alternative asset, the Roth-versus-Traditional decision interacts with that illiquidity in a way that’s easy to overlook. A Traditional IRA’s RMD doesn’t pause because your account happens to be sitting on a piece of property mid-sale. A Roth IRA sidesteps that pressure entirely, since no RMD ever forces a sale on a timeline you didn’t choose.
That’s not a reason to default to Roth automatically, since the tax-bracket math above still applies regardless of what’s inside the account. But it’s a real factor worth weighing if illiquid assets are central to your self-directed strategy.
Where IRA Express Fits In
At IRA Express, we administer both Traditional and Roth self-directed IRAs, and many of our clients hold both, splitting contributions strategically rather than picking one exclusively. We don’t provide tax advice on which bracket assumption fits your situation, but we can make sure whichever structure you choose is set up correctly from day one.
If you want to talk through how this decision intersects with a specific asset you’re considering, contact me, Dan Anderson, directly. I am happy to take your call and have a short conversation now. That beats guessing at a number nobody can promise you anyway!
Ready to open an account? You can open an account directly, or compare structures further on our Self-Directed Plan Types page.
Frequently Asked Questions
Can I contribute to both a Traditional and a Roth IRA in the same year?
Yes, as long as your combined contributions across both don’t exceed the annual combined limit.
Refer to the Contributions Page on our website for current year contribution limits and income phase-out-ranges.
If I’m not sure which bracket I’ll be in later, is there a safe default?
Many investors split contributions between both account types specifically to hedge against that uncertainty, rather than betting entirely on one outcome.
Does a self-directed IRA change any of this math?
No. The tax treatment is identical whether your IRA holds index funds or real estate. What changes is the menu of available investments, not the underlying Traditional-versus-Roth tax mechanics.
What if my income is too high to contribute to a Roth directly?
A backdoor Roth strategy, contributing to a Traditional IRA and then converting it, remains available regardless of income, though it’s worth discussing the pro-rata rule with a tax professional if you hold other pre-tax IRA balances.
Is it ever a mistake to choose Traditional over Roth, or vice versa?
Not inherently. Both are sound retirement tools. The “mistake” risk is smaller than people assume, since the math only meaningfully diverges if your tax bracket changes significantly between now and retirement.
The Bottom Line
If your tax bracket stays the same from contribution to withdrawal, Traditional and Roth cost you exactly the same in taxes, just at different times. The decision only really matters once you have a genuine view on whether your bracket will rise or fall, and even then, splitting contributions between both is a reasonable way to hedge that uncertainty rather than betting everything on a guess.
If you’d like help thinking through which structure fits your specific plans, contact me directly. I’ll walk through the actual numbers with you, not just the rule of thumb.
Sources: Internal Revenue Service, Traditional and Roth IRAs and Retirement Topics – IRA Contribution Limits; Mutual of Omaha Advisors, proprietary survey, February 2026.