How to Decide if a Roth IRA or Roth Conversion is Right for You (Updated for 2026)

July 29, 2026

Key Takeaways

  • Roth IRAs can complement a 401(k), 403(b), or SEP IRA, helping investors diversify their retirement savings and tax strategies for withdrawals.
  • A Roth IRA may be particularly beneficial for individuals who expect to be in a higher marginal tax bracket during retirement than they are today.
  • Roth conversions can create long-term tax savings by moving retirement assets from tax-deferred accounts to tax-free accounts.
  • Roth IRA assets can be passed to heirs income tax-free, making them valuable estate planning tools. Non-spouse beneficiaries must withdraw the funds within 10 years (spouses can treat it as their own).

What are the benefits of a Roth IRA and how do these accounts work?

A Roth IRA is an Individual Retirement Account to which you contribute after-tax dollars. With a Roth IRA account, you won’t pay taxes as your money potentially grows, and you can make tax-free withdrawals during retirement. These plans are important because they combine the power of compounding with the benefit of tax-free growth. Roth IRAs aren’t offered through employers but can be set up fairly easily. Generally speaking, you can fund a Roth IRA account in addition to a 401(k) or SEP IRA retirement plan. The contribution limits for a Roth IRA are separate from the contribution limits for a 401(k) or SEP IRA.  However, the contribution limits for a Roth IRA are not separate from those for a traditional IRA. For example, you can contribute to both your Roth IRA and traditional IRA in the same year, but the combined contributions can’t exceed the annual contribution limit.

Deciding when and how to use Roth accounts and the size of your Roth accounts relative to your pre-tax retirement accounts is a balancing act for most. Factors that may influence this decision include your age, life expectancy, the size of your assets, tax bracket (today and projected for future), income level, anticipated retirement income needs, and a host of other circumstances. We don’t always know what the future holds, and having both types of retirement accounts can help you increase your savings over time and provide a lot of additional flexibility. Because everyone has a different situation and there are many strategies to choose from, there are many areas of opportunity where a Roth account may be beneficial.

You have until the federal tax filing deadline in April 2027 to make a 2026 Roth IRA contribution. For 2026, the annual IRA contribution limit is $7,500, and individuals age 50 or older can contribute up to $8,600, which includes a $1,100 catch-up contribution. The Roth IRA contribution limit is shared between Traditional IRAs and Roth IRAs, meaning your combined contributions cannot exceed the annual maximum.

The value of your contribution limit is calculated using a formula based on your MAGI and filing status.

Married Filing Jointly or Qualifying Surviving Spouse

  • MAGI less than $242,000: Full contribution allowed.
  • MAGI between $242,000 and $252,000: Reduced contribution allowed.
  • MAGI of $252,000 or more: Direct Roth IRA contributions are not permitted.

Single, Head of Household, or Married Filing Separately (not living with spouse)

  • MAGI less than $153,000: Full contribution allowed.
  • MAGI between $153,000 and $168,000: Reduced contribution allowed.
  • MAGI of $168,000 or more: Direct Roth IRA contributions are not permitted.

If your income exceeds the applicable limits, a Backdoor Roth IRA strategy may still allow you to move money into a Roth account by making a non-deductible Traditional IRA contribution and then converting those funds to a Roth IRA. However, investors should first consider the pro-rata rule, which can make part of the conversion taxable if they own other pre-tax IRA assets.

The Backdoor Roth IRA process involves making non-deductible traditional IRA contributions and then converting them to a Roth IRA. That’s why they are called “backdoor IRAs,” because your entry point is not through the normal “front door.” Roth strategies can potentially help you reduce Medicare costs / premium surcharges in the future, which is known as the income-related monthly adjustment amount (IRMAA).

Who are Roth IRAs best for? What type of consumers should consider them over other options?

A Roth IRA can be a good savings option for those who expect to be in a higher tax bracket in the future, making tax-free withdrawals even more advantageous. You can contribute to a Roth IRA at any age as long as you have a qualifying earned income. It’s also worth noting that if you pass your Roth IRA onto your heirs, their withdrawals will be income tax-free. Non-spouse beneficiaries, however, are still subject to the 10-year drawdown rule (SECURE Act), which requires the account to be fully withdrawn within 10 years.

Probably the best way to accumulate funds for retirement is to take advantage of IRAs and employer retirement plans. The reason these plans are so important is that they combine the power of compounding with the benefit of tax-free growth. For most people, maximizing contributions to these plans makes sense, whether on a pre-tax or after-tax (Roth) basis. A key part of a tax planning strategy is reducing taxes from withdrawn funds from tax-deferred accounts, such as 401(k)s or IRAs.

Whether you can contribute to a Roth IRA depends on your tax filing status and your modified adjusted gross income (MAGI). High-income professionals who exceed certain MAGI thresholds do not qualify to make Roth contributions. Backdoor Roth IRAs allow you to make non-deductible traditional IRA contributions and then convert them to a Roth IRA.

Don’t Forget to Also Consider a Roth Conversion Strategy

One effective strategy many overlook is converting previously funded tax-deferred funds to a Roth IRA or 401(k). While the conversion amount is taxable in the year it is converted, the upside is these Roth accounts let your retirement savings grow tax-free and are not taxable when withdrawn (as long as you’re 59.5 or older and have owned a Roth for at least five years).  Working with your accountant on this will be necessary to ensure that the conversions do not inadvertently move you up to the higher tax bracket.

You also want to ensure that your Roth conversions don’t result in higher Medicare premiums. IRMAA stands for “income-related monthly adjustment amount.” It’s an add-on cost that Medicare Part B and Part D beneficiaries must pay based on their modified adjusted gross income, or MAGI. The increase in taxable income resulting from a Roth IRA conversion could cause the Medicare Part B beneficiary to be pushed into a higher “a higher IRMAA bracket.” Note that the Center for Medicare and Medicaid Services (CMS) determines IRMAA charges for a particular year based on the MAGI reported on the Medicare Part B beneficiary’s federal income tax return from two years ago.

For example, 2026 Medicare Part B premiums are generally based on a beneficiary’s 2024 MAGI because Medicare uses income information from two years prior when calculating IRMAA surcharges.

Also, if you are converting from an IRA, all your aggregate IRA RMDs for the year must be taken first; 401(k)/403(b) RMDs are calculated and satisfied separately. Failing to follow this sequence could result in penalties or the automatic removal of the unfulfilled RMD from the Roth IRA after conversion.

Since a Roth IRA conversion is taxable, federal and state income taxes must be paid in full in the year of conversion on the amount converted. The IRA custodian does not withhold federal and state income taxes when a Roth conversion is completed. The Traditional IRA owner is responsible for paying the federal and state income taxes due on conversions. The payment of the taxes due is usually made through quarterly federal and state estimated tax payments. If the Traditional IRA owner does not have sufficient liquid assets to pay the taxes due, then they are advised not to perform a Roth IRA conversion.

How do Roth IRA withdrawals work? Can you pull money out at any time?

There are no required minimum distributions (RMDs) for Roth IRAs during the original owner’s lifetime, unlike Traditional IRAs. Your original Roth IRA contributions can generally be withdrawn at any time tax-free and penalty-free. Different rules apply to investment earnings and converted amounts. Investment earnings can generally be withdrawn tax-free and penalty-free once you are age 59½ or older and have satisfied the five-year holding requirement. If these requirements are not met, taxes and/or a 10% early withdrawal penalty may apply, although there are exceptions, such as for certain first-time home purchases, qualified higher education expenses, and qualified birth or adoption expenses.

Are there any downsides to Roth IRAs?

Unlike deductible Traditional IRA contributions, Roth IRA contributions are made with after-tax dollars and generally do not reduce your current taxable income. As a result, Roth IRAs do not provide an upfront tax deduction like many other retirement accounts. However, it’s important not to let today’s tax bill overshadow the potential long-term benefits. Depending on your tax situation, paying taxes now may help reduce future taxes and provide greater flexibility when managing retirement income.

FAQS

What happens to a Roth IRA when I leave it to my kids?

Your children can generally continue to benefit from the Roth IRA’s tax-free growth and tax-free qualified withdrawals. However, most non-spouse beneficiaries must fully distribute the account within 10 years of the original owner’s death, while a surviving spouse can typically treat the Roth IRA as their own.

Can I contribute to both a Traditional IRA and a Roth IRA?

Yes, but the combined total contributed to both accounts cannot exceed the annual IRA contribution limit for the year.

Are Roth IRAs a good option for high-income professionals?

Often, yes. Although high-income earners may not qualify for direct Roth IRA contributions, they can frequently take advantage of Roth benefits through a backdoor Roth IRA or by converting eligible retirement accounts to Roth accounts (Roth conversion strategy).

When does a Roth conversion make sense?

A Roth conversion may be beneficial when:

  • You expect higher tax rates in the future
  • You are temporarily in a lower tax bracket
  • You want to reduce future required minimum distributions
  • You are focused on estate planning
  • You want more tax-free income during retirement

What are the disadvantages of a Roth IRA?

Potential drawbacks include:

  • Potential impact on Medicare premiums and tax brackets when converting large amounts
  • No upfront tax deduction
  • Income limits for direct contributions
  • Taxes owed on Roth conversions