The question of whether Americans saving and investing for retirement should contribute to a Traditional IRA or a Roth IRA is one that is often discussed.
In my experience reporting on personal finance and retirement savings concerns for many years, I’ve found that numerous experts — including former NBC “Today” show financial editor and HerMoney cofounder Jean Chatzky — seem to favor the Roth option.
Chatzky reveals her preference when she offers readers an explanation about backdoor IRAs, which involve people with higher incomes (those whose income exceeds limits for Roth IRAs) who contribute to Traditional IRAs and then convert them to Roth IRAs.
Related: AARP sounds alarm for American workers on 401(k)s, IRAs
Chatzky offers her readers a word of warning about paying taxes during this process.
“The deal is, when you convert assets from a traditional IRA into a Roth IRA, you have to pay taxes on the amount that you convert at the time that you do it,” Chatzky wrote on HerMoney. “And so, generally, the advice is, don’t convert unless you have money from outside that IRA in order to pay those taxes.”
“What you don’t want to do is pull money out of a tax-advantaged haven and use that money to pay taxes,” she continued. “That could, depending on your tax bracket, cost you well over 30% of every dollar.”
“That’s not the way to go about it.”
Jean Chatzky explains role of tax rates for Roth IRAs
Chatzky mentions overall tax rates as another consideration when using a backdoor IRA.
“When we opt for a traditional IRA over a Roth IRA, it’s generally because we think that our tax rate is going to go down in the future,” Chatzky wrote. “When we go with a Roth, instead of a traditional, it’s generally because we think our tax rate is lower now and is going to go up in the future.”
“What we’re aiming to do is pay our taxes at the lowest rate possible.”
Chatzky further explores the impacts of taxes increasing in the future on Roth IRAs.
“If you are of the belief that taxes are overall going to go up in the future — and I’ve got to say, personally, I’m of that belief — then having at least some assets in a Roth is beneficial,” explained Chatzky. “The other thing that’s nice about a Roth, particularly for people who are significant earners, is that you never have to pull the money out.”
“You can pass it along to future generations in your family without that money being taxed,” she wrote. “And so, if that’s something that you’re thinking about doing, that indicates that a backdoor Roth IRA conversion would be a good idea as well.”
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Chatzky offers a simple step to take to begin planning a backdoor Roth IRA.
“What I would do is look at your menu of traditional IRAs and convert them strategically based on your financial situation and your ability to pay those taxes, at the time, out of proceeds that are not in retirement accounts,” she wrote.
2026 contribution limits for 401(k)s and IRAs
Because Social Security alone was never meant to cover the full amount of one’s retirement income, employer-sponsored 401(k) plans and IRAs are critically important tools for affording life after one’s career. That makes understanding contribution limits for each extremely important.
401(k) contribution limits for 2026
- The annual employee contribution limit for 2026 increases to $24,500, up from $23,500 for 2025, allowing workers to save more through their employer plans.
- The standard catch‑up contribution for employees aged 50 and over rises to $8,000 for 2026, an increase from $7,500 in 2025.
- Workers who are 50 or older can contribute a combined $32,500 in 2026 when adding the base limit and the catch‑up amount.
- Employees aged 60–63 continue to qualify for a higher catch‑up limit of $11,250 in 2026, which remains above the standard $8,000 catch‑up amount.
(Source:Internal Revenue Service)
IRA contribution limits for 2026
- The annual IRA contribution limit increases to $7,500 for 2026, up from $7,000, giving savers a slightly higher cap for tax‑advantaged retirement savings.
- The IRA catch‑up contribution for individuals aged 50 and over increases to $1,100 for 2026, up from $1,000, reflecting the cost‑of‑living adjustment added under the SECURE 2.0 Act.
(Source:Internal Revenue Service)
Related: Jean Chatzky sends blunt message to Americans on 401(k)s, IRAs
