Citigroup’s Roth IRA vs. Traditional IRA guide compares the two account types and how each handles taxes. The analysis arrives as the IRS lifted the annual IRA contribution ceiling to $7,500 for 2026, up from $7,000 the prior year.
For millions of workers still deciding where to direct their retirement dollars, the distinction between these two accounts extends well beyond labels. One offers an upfront tax deduction, while the other offers tax-free withdrawals in retirement.
Citi’s guide highlights that your expected tax bracket in retirement is a key factor when choosing between the two accounts.
How tax brackets determine the best IRA for your retirement
The central insight in Citi’s retirement guide is that a traditional IRA generally suits people who expect their tax rate to decline by the time they retire. A Roth IRA, in contrast, tends to favor those who expect to be in a higher bracket once they stop working, Citi noted.
“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,” HerMoney CEO Jean Chatzky explained further on her website.
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.
A traditional IRA lets you deduct contributions from your taxable income in the year you make them, which can shrink your current tax obligation.
The trade-off is that every dollar you withdraw in retirement gets counted as taxable income, so the IRS collects its share later.
A Roth IRA flips that entire sequence: You contribute money already taxed, but qualified withdrawals come out entirely tax-free, Citi said.
Citi’s IRA breakdown reveals contribution limits, income rules
Both traditional and Roth IRAs share a base annual contribution limit of $7,500 for 2026. Savers age 50 and older can contribute an additional $1,100 catch-up amount, bringing their total annual limit to $8,600.
The IRS confirmed these limits in Notice 2025-67, released in November 2025, marking a $500 increase over the prior limit, which had held flat from 2024.
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That combined ceiling applies across all of a person’s IRA accounts, so splitting contributions between both types still caps out at $7,500.
Anyone with earned income can contribute to a traditional IRA regardless of salary, though deductibility phases out at higher incomes when a workplace plan is available.
Roth IRAs impose far stricter thresholds. Single filers begin to lose Roth contribution eligibility once modified adjusted gross income exceeds $153,000 in 2026, with contributions fully phased out above $168,000, the IRS noted.
How RMD rules separate traditional IRAs from Roth IRAs in retirement
Required minimum distributions (RMDs) represent one of the sharpest differences between traditional and Roth IRAs, and Citi’s guide underscores that distinction.
Traditional IRA holders born between 1951 and 1959 must begin withdrawing a minimum amount each year once they reach age 73, while those born in 1960 or later have until age 75, under SECURE 2.0.
The withdrawal size is calculated using IRS life expectancy tables and the year-end account balance from the prior calendar year.
Roth IRA owners face no required minimum withdrawal during their lifetime. That exemption gives Roth holders meaningful flexibility in managing their year-to-year retirement tax liability and preserving their account balance for beneficiaries.
“The value of a Roth IRA is not found in the contribution itself, but in the tax-free compounding and the distribution flexibility it provides,” said Andrew Matz, financial planner at Oak Road Wealth Management.
Both IRAs impose a 10% additional tax on distributions taken before age 59-and-a-half, but Roth owners can pull out original contributions penalty-free.
Earnings withdrawn early from a Roth IRA generally trigger the 10% additional tax unless an IRS exception applies, including reaching age 59-and-a-half, becoming disabled, being terminally ill, or directing up to $10,000 toward a first home.
To withdraw earnings tax-free, the account must also have been open at least five years, Citi noted.
A mix of Roth and traditional IRAs could offer retirees more tax control
Holding both traditional and Roth IRAs is a strategy the industry calls “tax diversification in retirement.” The approach involves drawing from the traditional IRA up to the edge of a lower tax bracket, then tapping the Roth for tax-free income.
That combination gives retirees control over how much of their annual income is exposed to federal taxation each year, according to Fidelity’s tax saving strategies.
Jonathan Fishburn, TIAA wealth planning strategies director, told Moneywise that a move from the 22% to the 24% bracket may be tolerable, but a jump to 32% can be significant.
A saver in the 22% bracket could get an immediate tax break, which is the central advantage of the traditional IRA, but every dollar withdrawn in retirement will be taxed as ordinary income.
Citi’s guide notes that there is no universal best option and that the right choice changes over time as a saver’s career and tax situation shift.
Related: Citi has key message on annuities, retirement income
