Roth vs. Traditional IRA/401k Calculator
Roth wins if your tax rate is higher in retirement than it is today. Traditional wins if your rate is lower in retirement. If rates are equal, the after-tax result is mathematically identical. This calculator shows you the dollar difference based on your specific rates.
Enter your contribution, years to retirement, return, and current vs. future tax rates to see which account type leaves you with more money after taxes.
The Core Logic: It's All About Tax Rate Timing
Both Roth and traditional accounts invest the same dollars and earn the same returns. The only difference is when you pay taxes. Traditional: pay taxes later (at your retirement rate). Roth: pay taxes now (at your current rate). Mathematically, if the tax rate is identical in both periods, the after-tax result is exactly equal. The choice only matters when tax rates differ between now and retirement.
The math: $7,000 Roth contribution (after-tax) grows to $37,700 in 25 years at 7%. All $37,700 is yours — no future tax. For traditional, $7,000 pre-tax grows to the same $37,700, but you'll owe taxes at your retirement rate on withdrawal. At 22% retirement rate: $37,700 × (1 − 0.22) = $29,406 after-tax. At 12% retirement rate: $37,700 × (1 − 0.12) = $33,176 after-tax. Lower retirement rate → traditional wins. Higher retirement rate → Roth wins.
Why Roth Is Often Favored for Younger Workers
Early-career workers typically have lower income and thus lower marginal tax rates than they'll have at peak earning years and retirement. A 25-year-old in the 22% bracket today contributing to Roth locks in the 22% rate permanently. If they end up in the 24% or 32% bracket at retirement, the Roth was the better choice — and all the compound growth on 40 years of contributions is completely tax-free.
Additionally, Roth IRAs have no required minimum distributions (unlike traditional IRAs/401ks which require withdrawals starting at age 73 under current law). This makes Roth superior for estate planning and for people who don't need the money in early retirement.
When Traditional Is Better
Traditional accounts shine when you're in a high tax bracket now and expect significantly lower income in retirement. A physician at 37% marginal rate today who expects 22% in retirement saves 15 cents per dollar contributed today — real money on large contributions. Additionally, traditional 401k contributions reduce your current adjusted gross income, which can affect eligibility for other tax credits and deductions.
| Current Rate → Retirement Rate | Roth After-Tax | Traditional After-Tax | Winner |
|---|---|---|---|
| 22% → 10% | $293,800 | $339,200 | Traditional +$45,400 |
| 22% → 22% | $293,800 | $293,800 | Tie |
| 22% → 32% | $293,800 | $255,500 | Roth +$38,300 |
| 12% → 22% | $331,700 | $293,800 | Roth +$37,900 |
For a deeper exploration of the Roth vs. traditional decision across different life situations, read our guide on Roth vs. traditional IRA. For strategies on placing specific investments in the most tax-efficient accounts, see tax-efficient investing.
Frequently Asked Questions
Should I choose Roth or traditional?
Choose Roth if you expect to be in a higher tax bracket in retirement than now. Choose traditional if you expect a lower bracket in retirement. If you're early-career with low income (12%–22% bracket), Roth is usually favored — lock in low rates now, get tax-free growth for decades. If you're in a high bracket (32%–37%) and expect lower retirement income, traditional saves more today.
What are the 2026 IRA contribution limits?
$7,000 for all IRAs combined ($8,000 if age 50+). Roth IRA phases out at $150,000–$165,000 MAGI (single) and $236,000–$246,000 (married). Above those limits, use backdoor Roth conversion. Traditional IRA deductibility phases out if you have a workplace plan, but you can always make non-deductible traditional IRA contributions.
What if my tax rate stays the same?
If your tax rate in retirement is identical to your current rate, Roth and traditional produce exactly the same after-tax result. The mathematical proof: traditional gives a deduction now but taxes later; Roth taxes now but not later. At equal rates, these perfectly offset each other.
Can I have both Roth and traditional accounts?
Yes — you can contribute to both in the same year as long as the total is within the annual limit. Many people use both for tax diversification: traditional for current-year tax deductions, Roth for tax-free income in retirement. Having both account types gives flexibility to manage taxable income strategically in retirement.
What is a backdoor Roth IRA?
If your income exceeds the Roth IRA direct contribution limit, you can make a non-deductible traditional IRA contribution (always allowed) and then convert it to a Roth IRA — the "backdoor" conversion. Since non-deductible contributions have no tax benefit, the conversion is largely tax-free (except on any small amount of growth before conversion). This is legal and widely used by high earners.
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