You'll be taxed accordingly, bottom to top just like ordinary income.
That statement is true - we agree.
That statement is also irrelevant to the "traditional vs. Roth" question - can you see why that is true?
Here is a specific example. Assume you
- are a single person paying 15% marginal rate now.
- have saved and invested well, and if you never make another contribution your traditional accounts will contain $1,250,000 at retirement.
- will withdraw 4% ($50K for a $1250K balance) per year, and that will be your only income.
Under those conditions your withdrawal tax rates are
Effective = 10.8%
Marginal = 25.0%
You decide to keep working and contributing to your retirement accounts (thus the nest egg will be larger than $1250K), and get to choose whether to put this year's $18K into traditional or Roth. Do you
1) put it into traditional because 10.8% is less than 15%, or
2) put it into Roth because 25% is greater than 15%?
For your sake, given the assumptions, I hope you would choose option #2 because that will give you more spendable income in retirement. This is the point we are trying to illustrate - is it clear, or clear as mud?