Roth IRA vs Traditional IRA: Growth, Taxes, and the Income Limit

A Roth IRA and a traditional IRA grow your money using the exact same math. What actually separates them, and what trips people up when they earn more, is tax treatment and an income-based eligibility limit that a traditional IRA doesn’t have.

The growth math is identical

Whichever type of IRA you have, the future value of your balance comes from the same compounding formula: your current balance grows at your expected return, and each year’s contribution grows for the years remaining until you withdraw it.

Projected Balance = Current Balance x (1 + r)^n + Annual Contribution x [((1 + r)^n - 1) / r]

A $10,000 balance with $7,000 added every year at a 7% return for 20 years reaches the same $325,665.29 whether it’s sitting in a Roth or a traditional account. The dollar figure on the growth chart doesn’t know or care which type of IRA it’s in.

Where they actually differ: taxes

• Traditional IRA: contributions are often tax-deductible in the year you make them, lowering your taxable income now. Withdrawals in retirement are taxed as ordinary income.
• Roth IRA: contributions are made with money you’ve already paid tax on. Qualified withdrawals in retirement, including all the growth, are completely tax-free.

That means the $325,665.29 projected balance above is worth more in a Roth than in a traditional account, because in a traditional IRA a chunk of that number is really the government’s money, waiting to be taxed on the way out.

The income limit only applies to Roth

Here’s the part that catches higher earners off guard: a traditional IRA has no income limit on who can contribute (though the tax deduction can phase out if you’re covered by a workplace plan). A Roth IRA does. Once your modified adjusted gross income (MAGI) crosses into the IRS’s phase-out range for your filing status, the amount you’re allowed to contribute directly starts shrinking, and eventually hits zero.

For 2026, the phase-out ranges are:

Filing status	Phase-out range
Single or head of household	$153,000 to $168,000
Married filing jointly	$242,000 to $252,000
Married filing separately	$0 to $10,000

Inside the range, your allowed contribution shrinks roughly in proportion to how far through the range your MAGI falls. At $160,000 MAGI as a single filer, for example, you’re about a third of the way into the $153,000-$168,000 range, which works out to roughly $4,000 of the full $7,500 limit still being allowed, not the full amount and not zero.

What happens above the limit

Contributing more than your MAGI allows creates an “excess contribution,” and the IRS charges a 6% excise tax on it for every year it isn’t corrected. If your income puts you above the range entirely, a “backdoor Roth IRA,” contributing to a traditional IRA (which has no income limit) and then converting it to a Roth, is the common workaround, though it has its own tax considerations if you hold other traditional IRA balances.

FAQ

If the growth math is the same, why does it matter which one I pick? Because the tax treatment changes what that final balance is actually worth to you. Many people split the difference: contribute to a traditional account while in a high tax bracket for the upfront deduction, or a Roth while in a lower bracket to lock in tax-free growth while your tax rate is still low.

Does the phase-out reduce my balance, or just what I’m allowed to contribute going forward? Just what you’re allowed to contribute. Money already in your Roth IRA keeps growing and stays eligible for tax-free qualified withdrawals regardless of your income in a later year; the phase-out only limits new contributions in years your MAGI is in or above the range.

Use the Roth IRA Calculator to project your own balance and check your contribution limit.