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Roth vs. Traditional IRA Comparison

Determine whether a Roth or Traditional IRA leaves you with more after-tax money at retirement, given your current and expected future tax rates.

Inputs

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Annual IRA contribution in today's dollars

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Annual tax cost on taxable account gains (dividends + cap gains)

Results update as you type, and the address bar keeps your numbers so the link you share reopens this exact calculation.

Roth after-tax advantage

$1,456

Detailed results
Roth after-tax balance$442,743
Traditional total after-taxAfter withdrawal tax + reinvested tax savings$441,287
Roth balance at retirementTax-free at withdrawal$442,743
Traditional balance at retirementPre-tax; taxed at withdrawal$442,743
Taxable savings account (FV)Future value of annual tax savings invested in taxable account$95,948
Annual tax savings (Traditional)Traditional tax deduction invested each year$1,540

What this result means

Roth after-tax advantage: $1,456.

Roth comes out ahead by $1,456 after 25 years. The Roth account delivers $442,743 after tax versus $441,287 for the Traditional — a gap driven by your 22% current rate versus 22% expected retirement rate. Paying tax now at a lower rate locks in the savings for decades of tax-free growth.

Year-by-Year Roth vs. Traditional Breakdown

Shows each account's balance, the traditional after-tax figure (including reinvested tax savings), and the running Roth advantage for every year until retirement.

Year-by-Year Roth vs. Traditional Breakdown. 25 rows, first 12 shown.
YearRoth BalanceTraditional Balance (pre-tax)Traditional After-Tax TotalTaxable Savings AccountRoth Advantage
1$7,000$7,000$7,000$1,540-$0.00
2$14,490$14,490$14,488$3,186$2.00
3$22,504$22,504$22,499$4,946$5.00
4$31,080$31,080$31,069$6,827$11.00
5$40,255$40,255$40,237$8,838$19.00
6$50,073$50,073$50,044$10,987$29.00
7$60,578$60,578$60,535$13,285$43.00
8$71,819$71,819$71,759$15,740$60.00
9$83,846$83,846$83,766$18,366$80.00
10$96,715$96,715$96,610$21,172$105
11$110,485$110,485$110,350$24,172$135
12$125,219$125,219$125,050$27,379$170

How this is calculated

FV = contribution × ((1+r)^n − 1) / r
roth_after_tax = FV  [no withdrawal tax]
traditional_after_tax = FV × (1 − retirement_rate) + taxable_savings_FV
taxable_savings_FV = (contribution × current_rate) × ((1 + r×(1−tax_drag))^n − 1) / (r×(1−tax_drag))
advantage = roth_after_tax − traditional_after_tax

The core question: pay taxes now or later?

Every dollar you put in a Traditional IRA is deductible today — you get a check from the government in the form of a lower tax bill. That money grows untouched for decades, but the IRS collects its share when you withdraw in retirement. A Roth IRA flips the order: you contribute after-tax dollars, and every dollar that comes out in retirement — including every year of growth — is completely tax-free.

The math resolves to a single question: will your tax rate be higher now or in retirement? If your rate falls in retirement, the Traditional wins: you defer tax at 22% today and pay 12% on the way out. If your rate rises in retirement — or stays the same — the Roth wins, because you locked in the lower (or equal) current rate on every future dollar of growth.

The "equal rates" exception

When your current and retirement rates are identical, the two accounts are mathematically equivalent, provided you also invest the Traditional's annual tax savings. The reason is straightforward: the tax deduction you get today, reinvested and compounding, exactly offsets the tax you pay at withdrawal. This calculator models that reinvestment in a taxable account, reduced by a tax-drag rate that reflects dividends and realized capital gains along the way.

What shifts the balance

Three variables move the needle. First, the tax-rate gap: even a modest difference — say, 22% today versus 12% in retirement — can make the Traditional worth tens of thousands more over a 25-year horizon. Second, the tax-drag on the taxable savings account: index funds with low turnover keep drag near zero, while actively managed funds or bonds can push it higher, tilting toward Roth. Third, time horizon: the longer the runway, the more powerful the difference in after-tax compounding.

When Roth wins even at equal rates

Two structural features favor the Roth regardless of pure math. Traditional IRAs are subject to required minimum distributions starting at age 73, forcing taxable income whether you need it or not — and potentially pushing you into a higher bracket. Roth IRAs have no lifetime RMDs, giving you more control over taxable income in retirement. Additionally, Roth withdrawals do not count toward the income thresholds that trigger taxation of Social Security benefits or higher Medicare premiums.

A practical framework

If you are early in your career and expect your income to rise substantially, Roth is usually right: your current rate is lower than it will ever be again. If you are at peak earnings and expect a significant income drop in retirement, Traditional is likely better. If you genuinely do not know, splitting contributions between both — often called "tax diversification" — is a defensible hedge.

Assumptions

  • Both accounts receive the same nominal annual contribution each year for the full investment horizon.
  • The annual tax savings from the Traditional deduction are fully reinvested in a taxable account at the same gross return, reduced by the tax-drag rate.
  • Returns are assumed constant throughout the accumulation period.
  • All Traditional IRA assets are withdrawn in a single lump sum at retirement; the effective tax rate is the retirement marginal rate entered by the user.
  • State income taxes are not modelled.
  • No contribution limits are enforced; the calculator reflects pure scenario math.
  • Roth conversion strategies, backdoor contributions, and inherited IRA rules are not modelled.
  • Required minimum distribution rules and their impact on taxable income in retirement are not modelled numerically, though the explainer discusses them qualitatively.

Frequently asked questions

›Who can contribute to a Roth IRA?

Roth IRA eligibility phases out at higher incomes. For 2025, single filers begin to phase out at $150,000 of modified adjusted gross income (MAGI) and are ineligible above $165,000; married filing jointly phases out between $236,000 and $246,000. Traditional IRA contributions are available to anyone with earned income, though the deductibility phases out if you or your spouse are covered by a workplace plan.

›What is the backdoor Roth, and when does it make sense?

If your income exceeds the Roth contribution limit, you can contribute to a non-deductible Traditional IRA and then convert it to a Roth — a two-step process often called the backdoor Roth. The conversion is tax-free as long as you have no other pre-tax IRA balances; if you do, the pro-rata rule requires you to pay tax on a proportionate share of any pre-tax dollars. High earners with no existing IRA balances are the ideal candidates.

›Are Traditional IRA withdrawals always fully taxable?

Withdrawals from a deductible Traditional IRA are taxed as ordinary income. If you ever made non-deductible contributions, the after-tax portion comes out tax-free — but you must track this on Form 8606. Failing to track it means paying tax twice on the same dollars.

›What are required minimum distributions (RMDs)?

Traditional IRAs require you to begin withdrawals — called required minimum distributions — by April 1 of the year after you turn 73 (under current law). Each year's RMD is based on your account balance and IRS life-expectancy tables. Roth IRAs have no RMDs during the owner's lifetime, allowing the account to continue growing tax-free indefinitely and giving you more control over your taxable income in retirement.

›Can I contribute to both a Roth and a Traditional IRA in the same year?

Yes. You can split contributions between a Roth and a Traditional IRA in the same year, as long as the combined amount does not exceed the annual contribution limit. This is a common strategy for tax diversification — it reduces the risk of guessing wrong about your future tax rate.

›Does the annual return assumption matter as much as the tax rate?

When comparing Roth and Traditional IRAs funded with equal dollar amounts (as this calculator does), the same return applies to both accounts before tax. This means the return rate primarily affects the total balances but does not dramatically change which account wins — that decision is dominated by the difference between your current and retirement tax rates.

›How does this calculator handle the tax savings from a Traditional IRA?

For a fair comparison, the calculator assumes you invest the Traditional's annual tax deduction in a taxable brokerage account earning the same gross return, reduced by the tax-drag rate you enter. At retirement, that account is added to the Traditional's after-tax balance. If you would spend the tax savings rather than invest them, the Traditional's advantage shrinks significantly.

›Is Roth always better if I expect my retirement tax rate to be higher?

In the pure math model used here, yes — if your retirement rate exceeds your current rate, Roth wins by the magnitude of that gap times the account value. In practice, other factors matter: whether you will use the funds before 59½ (Roth contributions — not earnings — can be withdrawn penalty-free), estate planning goals (Roth balances pass tax-free to heirs), and state income tax, which this calculator does not model.

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