Every dollar you save for retirement is taxed once. The question is when. A traditional IRA or 401(k) gives you a deduction now and taxes withdrawals later. A Roth taxes the money now and lets it come out tax-free. This Roth vs. traditional calculator puts both choices on an after-tax basis. You see which one actually leaves you more to spend, and the retirement tax rate at which the answer flips.
How to use the Roth vs. traditional calculator
- Choose what to compare:
- Same take-home cost assumes your paycheck is the same either way. A traditional contribution of $7,500 costs about as much take-home pay as a smaller Roth contribution.
- Same contribution assumes you put the same dollar amount in either account, as when you max out. The traditional saver invests the yearly tax savings in a taxable account.
- Enter the yearly contribution, the years until withdrawal and an annual return.
- Enter your tax rate now and the tax rate you expect in retirement, combining federal and state.
- In the second mode, set the tax on the side account’s returns: the share of each year’s gain lost to dividends and capital-gains tax.
The math behind the comparison
With the same take-home cost, a pre-tax amount C becomes C(1 − tnow) in a Roth. Both accounts grow by the same factor G:
Multiplication doesn’t care about order, so the growth factor drops out. The winner is simply whichever tax rate is lower, and the break-even retirement rate equals today’s rate. When you max out, the Roth holds more after-tax money inside the same limit. The traditional side then needs a taxable account to keep up, which moves the break-even rate below today’s rate.
Worked example
A saver in the 24% bracket expects 22% in retirement and invests for 30 years at 7%. One dollar deposited each January grows to 101.073.
Same take-home cost, $7,500 pre-tax:
- Roth: $7,500 × (1 − 0.24) = $5,700 a year, growing to $576,116, tax-free.
- Traditional: $7,500 a year grows to $758,048; after 22% tax, $591,277.
- Traditional wins by $15,161, because 22% later is lower than 24% now.
Same $7,500 contribution (maxing out):
- Roth: $758,048, tax-free.
- Traditional: $591,277 after tax, plus the $1,800 yearly tax savings invested at 7% less a 15% tax drag (5.95%), which grows to $149,452. Total $740,729.
- Roth wins by $17,319. The break-even retirement rate drops to 19.72%.
Rules of thumb that fall out of the math
| Situation | Usually favors |
|---|---|
| Low bracket now (10–12%), higher expected later | Roth |
| Peak earning years, lower expected rate later | Traditional |
| Already maxing out the contribution limit | Roth (more money sheltered) |
| Expect large RMDs, pensions or Social Security | Roth |
| Need the deduction to qualify for credits or lower AGI | Traditional |
What the calculator leaves out
It uses one flat rate for each period. Real withdrawals fill several brackets, and the first dollars may be taxed at 0% thanks to the standard deduction. A Roth also has advantages that don’t show up in this math. Roth IRAs have no required minimum distributions for the original owner. Your contributions can come out at any time. And Roth withdrawals don’t raise the income that decides how much of your Social Security is taxed or what you pay in Medicare premiums. Traditional contributions lower your AGI today, which can help you qualify for credits. Check your eligibility with the Roth IRA calculator and the deduction rules with the traditional IRA calculator. Your current marginal bracket is in the federal income tax calculator.
Estimates only, not tax or investment advice. Future tax rates, laws and returns are unknown; the comparison shows how the choice depends on them.
Frequently asked questions
Is a Roth or traditional account better?
If you spend the same take-home pay either way, the account taxed at the lower rate wins. A traditional account is better when your tax rate in retirement will be lower than it is now. A Roth is better when it will be higher. At equal rates they finish exactly even.
Why does maxing out favor the Roth?
Contribution limits are in dollars, not after-tax dollars. A $7,500 Roth contribution has already been taxed, while $7,500 in a traditional account still owes tax. To match the Roth, the traditional saver must invest the tax savings in a taxable account, and those returns are taxed every year.
What tax rate should I use for retirement?
Use the marginal rate you expect on the last dollars you withdraw, including state tax. Count Social Security, pensions and required minimum distributions, because together they often keep retirees in the same bracket they had while working.
Does this apply to a 401(k) too?
Yes. The math is the same for Roth and traditional 401(k), 403(b) and 457 contributions. Employer matching contributions were traditionally pre-tax; since 2023 some plans also let employers make matching contributions as Roth.
Can I do both?
Yes. Splitting contributions between Roth and pre-tax accounts is a common way to hedge against unknown future tax rates. It also gives you more control over your taxable income in retirement.