Vanguard debunks a deep-rooted retirement belief | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Most people approach retirement savings with a binary mindset: either a Roth IRA or a traditional IRA, never both at once. That either-or framework has shaped how millions of Americans save, and for many, it has left real money on the table.

Vanguard, the firm managing more than $11.9 trillion in global assets, is pushing back on that entrenched assumption in a recent analysis. The conclusion is direct: you can contribute to both account types in the same year, and doing so may be smarter than choosing one.

Your choice of IRA structure could determine how much of your retirement income survives taxation over a 20- or 30-year withdrawal period. Here is what Vanguard’s guidance reveals and how you can apply it to your own retirement plan before making your next contribution.

Vanguard says choosing one IRA over the other is a false choice

The investment giant’s latest educational resource makes a direct case that eligible investors can hold both a traditional and a Roth IRA simultaneously. That runs counter to the widespread belief that the IRS forces you to pick one, a misconception Vanguard explicitly labels a myth.

The core idea is what professionals call tax diversification: spreading your retirement savings across accounts with different tax treatments. A traditional IRA offers a potential deduction now and taxes withdrawals later; a Roth IRA accepts after-tax dollars and delivers tax-free withdrawals.

“Tax diversification gives you the flexibility to choose where to pull income from each year based on current tax rates,” Adam Olson, CFP, financial advisor, Mutual of Omaha.

The IRS rules that make dual contributions possible

The IRS does not prohibit you from owning both a Roth IRA and a traditional IRA, but there is a critical catch to understand. Your combined contributions across all IRA accounts cannot exceed a single annual limit, not a per-account limit as many people assume.

For 2026, that combined limit is $7,500 for individuals under age 50 and $8,600 for those aged 50 and older, according to IRS Notice 2025-67. That is a $500 increase from the 2025 limit of $7,000, with the catch-up rising $100 to $1,100.

“We don’t know where taxes will be in the future, but many experts suggest that with current deficits, tax rates may have nowhere to go but up.,” said Mark Zagurski, (Director of Strategy & Communications, Mutual of Omaha Advisors.)

You could put $4,000 in a traditional IRA and $3,500 in a Roth IRA for 2026, as long as the total stays within the limit. Both spouses in a married couple can each maintain both IRA types, further expanding the household’s planning options.

Income limits could restrict your Roth contributions but not your options

Contributing to a traditional IRA has no income restrictions; anyone with earned income can open and fund one regardless of how much they earn. Roth IRAs impose income-based phase-outs that reduce or eliminate your ability to contribute directly based on your modified adjusted gross income.

For 2026, single filers can make a full Roth contribution if their MAGI falls below $153,000, with a phase-out ending at $168,000. Married couples filing jointly face a phase-out between $242,000 and $252,000, according to IRS Publication 590-A.

If your income exceeds those thresholds, a backdoor Roth conversion remains a path to funding a Roth IRA through indirect contributions. You make a nondeductible contribution to a traditional IRA and then convert that amount, paying taxes only on any pre-tax earnings accumulated.

Roth income limits may block direct contributions, but strategies like backdoor conversions keep high earners in the game.

Maskot/Gettyimages

How splitting contributions between both accounts builds long-term flexibility

Your future tax bracket is the single biggest variable in this decision, and the honest truth is that no one can predict it with certainty. Tax laws change, your income shifts, and your filing status may evolve with marriage, divorce, or the death of a spouse.

Vanguard frames the dual-account approach as a hedge against that uncertainty, giving you both a tax-free and a tax-deferred bucket.

A traditional IRA may benefit you most during your peak earning years, when your marginal tax rate is highest and the deduction saves the most. Roth contributions tend to make the most sense earlier in your career when your income and corresponding tax rate are typically lower.

More Dividend stocks:

Splitting your contributions between both account types throughout your working years creates a diversified tax profile you can manage in retirement. “A balanced retirement strategy often involves splitting contributions between traditional and Roth accounts to help create maximum flexibility,” a Mutual of Omaha financial advisor noted in the firm’s IRA comparison.

That flexibility becomes especially valuable when you need to manage taxable income around Social Security thresholds or Medicare premium surcharges. Roth withdrawals do not count as taxable income, so pulling from your Roth in years when you need to keep adjusted gross income low is strategic.

Traditional IRA withdrawals are taxed as ordinary income, meaning every dollar you pull out could push you into a higher federal bracket. Having both accounts in place lets you toggle between the two depending on what each specific tax year demands from your household finances.

Required minimum distributions is another reason to hold both account types

Traditional IRAs require you to start taking required minimum distributions once you reach age 73, rising to 75 for those born in 1960 or later. RMDs force taxable withdrawals whether you need the income or not, and the amounts grow larger as your account balance increases over time.

Roth IRAs carry no RMD requirement during the original owner’s lifetime, according to IRS guidance. Your Roth balance can continue compounding tax-free for as long as you live, and your heirs receive those assets with continued tax-free treatment.

If your traditional IRA balance grows large enough, RMDs alone could push you into a higher bracket and raise your Medicare premium costs. Building a Roth alongside your traditional IRA reduces the total amount subject to RMDs and gives you a practical lever to manage taxable income.

Common missteps that could cost you when using both IRA types

To make the most of both IRA types, it’s important to steer clear of common errors.

Key mistakes to avoid:

Exceeding the combined contribution limit across all IRA accounts triggers a 6% annual penalty on the excess amount until corrected, per IRS rules.
Assuming each IRA has its own separate contribution limit is the most common misconception Vanguard’s analysis directly addresses in its guidance.
Ignoring the pro-rata rule on backdoor Roth conversions can create unexpected tax bills if you hold pre-tax money in any traditional IRA account.
Failing to file Form 8606 when making nondeductible traditional IRA contributions can lead to double taxation on those funds when you eventually withdraw.

These are not edge cases; they are mistakes that cost real money for people who opened both accounts without fully understanding IRS regulations. A qualified tax professional can help you model the right contribution split based on your income, filing status, and expected retirement timeline.

What this means for your retirement plan going forward

Vanguard’s analysis does not declare one IRA type superior to the other, and that is precisely the point worth paying close attention to here. Both accounts serve different purposes at different stages of your financial life, and using them together can be more effective than choosing one.

The April 15, 2026 deadline to make 2025 IRA contributions is days away, and the 2026 contribution window is already open with higher limits. Before making your next move, talk to a qualified tax advisor who can model both accounts against your specific income projections and retirement timeline.