Roth vs Traditional IRA Calculator
Compare what each account actually leaves in your pocket after tax, and find the retirement tax rate where the winner flips.
Same Money, Two Tax Bills
A Traditional IRA cuts your tax bill today and taxes the whole balance later. A Roth IRA does the opposite. The only question that matters is which tax rate is higher.
Understanding Roth vs Traditional IRAs
The One Rule That Decides It
Both accounts shelter growth from tax entirely. The only real difference is when the government takes its cut, so once both routes cost you the same today the winner is decided by which tax rate is higher.
- Retirement rate higher than today: Roth wins — pay tax now while it is cheap
- Retirement rate lower than today: Traditional wins — deduct high, withdraw low
- Rates identical: a dead heat, the maths is symmetric
- Return and time horizon scale both sides equally, so on their own they cannot flip the answer — but any money forced into a taxable side account carries a capital gains drag that compounds, which is why a long horizon can nudge the break-even rate below your current rate
Why a Fair Comparison Is Tricky
Putting the same amount into each account is not an even contest. A Traditional contribution is deductible, so it costs you less after tax than an identical Roth contribution.
- Equal contribution: the Roth quietly costs more, so it usually looks better
- Fix one: invest the Traditional refund in a taxable account each year
- Fix two: gross up the Traditional contribution so both cost the same today
- The side account drags on returns because its gains face capital gains tax
Things the Formula Leaves Out
The maths above is the core of the decision, but a handful of rules can tip a close call in either direction.
- Required minimum distributions: Traditional accounts force withdrawals in later life; Roth accounts do not for the original owner
- Bracket effects: a large Traditional withdrawal can push you into a higher band than your average rate
- Income limits: Roth contributions phase out at higher incomes, and the deduction can be limited by a workplace plan
- Heirs: a Roth passes on money that has already been taxed
Hedging When You Cannot Guess
Nobody knows future tax law or their own retirement income. Splitting contributions is a legitimate answer rather than a cop-out.
- Split contributions across both account types to diversify tax exposure
- Lean Traditional in your peak earning years, when the deduction is worth most
- Lean Roth early in a career or in a low-income year
- Roth conversions in a low-income gap year can move money across at a cheap rate