The tax rate cuts under the Tax Cuts and Jobs Act, in effect since 2018, mean that for some people contributions to traditional IRAs become less worthwhile and contributions to Roth IRAs more so, especially for people nearing retirement age. Here is why.
Advantages of a Roth IRA
The Roth IRA retirement plan was named after the person who came up with the idea – Senator William V. Roth. It is similar to a regular IRA, but contributions to a Roth are not tax-deductible, and the rules on contributions and withdrawals are more favorable.
Read the IRS publications: Publication 590-A (contributions to IRAs) and Publication 590-B (distributions from IRAs), which can be ordered at 1-800-TAX-FORM (1-800-829-3676) or downloaded online at www.irs.gov/publications/p590a and www.irs.gov/publications/p590b. You can also find information in Polish about the Roth IRA and other individual retirement plans in the book “Amerykańskie emerytury” (“American Pensions”).
IRA or Roth IRA
Basically, the choice between a traditional IRA and a Roth comes down to whether you will be in a lower tax bracket in the future than you are now. If you now pay a higher tax rate than you will when you are making withdrawals from the account, it is worth putting money into an IRA and taking the tax deduction now. But if you expect a generous employer pension or rent from an apartment building in the future, your taxes will not go down in retirement, so consider a Roth.
A Roth IRA is useful at any age: when you want to avoid taxes on investments, when you earn too much to deduct a contribution to a traditional IRA, or when you are worried about tying up your money for a long time. Remember, however, that a Roth IRA also has income limits: in 2026 the allowable contribution begins to phase out at income (MAGI) above $153,000 for a single person and $242,000 for a married couple. A Roth comes in handy as an account for trading securities on which you don’t have to report taxes.
You contribute for as long as you want
Active seniors used to be surprised that after reaching age 70½ they were no longer allowed to contribute to a traditional IRA. Since 2020 that ban has been lifted, and the Roth IRA never had such restrictions – you can contribute to it for as long as you like, provided you have earned income. You may deposit up to $7,500 a year per person, plus $1,100 for people over fifty (the 2026 limits).
Roth IRA withdrawals without taxes or penalties
A Roth account offers much more flexibility than a traditional IRA. Money can be taken out of a Roth IRA at any time, without taxes or penalties. The first in, first out rule applies here, meaning that we withdraw our own contributions first. The earnings in a Roth IRA (interest, dividends, capital gains), however, should stay in the account until you reach age 59.5 and until the account has existed for at least 5 years. Note: a given amount does not have to sit in the Roth for 5 years; only the first contribution has to have been made at least five years earlier. Conclusion: it pays to open a Roth as soon as possible.
If you want to close out a Roth account before age 59.5, you will have to pay a 10% penalty on the earnings in the account (not on the amount withdrawn). The exceptions (as with a traditional IRA) are special circumstances: the taxpayer’s disability or death, using the money to buy a first home, paying for education or large medical bills, etc.
No obligation to empty a Roth IRA
After you reach age 73 (75 for those born in 1960 and later), annual minimum withdrawals from a traditional IRA are required, even if you don’t need the money right now. Failing to take a required minimum distribution from an IRA carries a penalty of 25% of the amount that should have been withdrawn (10% if you correct the oversight in time). Your first RMD must be taken by April 1 of the year following the year in which you reach that age. After that, RMDs must be taken by December 31 of each year.
The obligation to empty the account does not apply to Roth accounts. During the owner’s lifetime they can be kept for as long as we want, while continuing to be sheltered from taxes.
Roth withdrawals don’t affect the taxation of Social Security
For retirees who have other income (including withdrawals from traditional retirement accounts), part of their Social Security benefits may be taxable. This happens when half of the Social Security benefit plus all other income exceeds $25,000 for a single person and $32,000 for a married couple in a given year.
Amounts withdrawn from a Roth account, by contrast, are not added to income and do not affect the taxation of Social Security benefits.
Roth and Medicare
Withdrawals from traditional retirement accounts (or a profitable sale of real estate) increase your annual income. People with high incomes pay more for Medicare Part B and Part D premiums, which is called the Medicare surcharge for high-income beneficiaries. In 2026, single people with income above $109,000 and married couples with income above $218,000 will pay an additional $81.20 to $487.00 a month for Medicare Part B (on top of the standard premium of $202.90).
Note: Withdrawals from Roth IRA retirement accounts do not count as income, so they do not raise the cost of health insurance.
A Roth passes to heirs tax-free
An important advantage of a Roth account is easy and cost-free succession. The beneficiary of a Roth account will take it over without any taxes, regardless of whether he or she lives in the States or in Poland (most heirs other than a spouse must, however, withdraw the money from the inherited account within 10 years).
By contrast, a withdrawal from an inherited traditional IRA is fully taxable to the heir according to his or her tax bracket. An heir who is a foreigner will pay even more – a flat 30% tax (non-resident tax).
As you can see, a Roth IRA has many advantages for people of any age.
Updated October 2026.
