Roth vs Traditional Calculator
It compares a Roth and a traditional retirement account on after-tax value at retirement, investing the up-front tax saving so both are measured on equal terms.
Roth comes out ahead
$3,020
Gross balance
$661,226
Roth after tax
$661,226
Traditional after tax
$515,756
Invested tax saving
$142,450
Traditional total
$658,206
Roth costs you
$210,000
The whole decision in one number
Ignoring the side account, the two break even when your retirement tax rate equals today's 24%. Expect a higher rate later and the Roth wins; expect a lower one and the traditional does.
A projection, not tax or investment advice. Roth IRAs have no required minimum distributions, which is worth weighing beyond the arithmetic here.
What it calculates
It compares a Roth and a traditional retirement account on after-tax value at retirement, investing the up-front tax saving so both are measured on equal terms.
Why it matters
The choice hinges on one question — whether your tax rate in retirement will be higher or lower than today — and the difference compounds over decades.
Who it's for
Anyone choosing between Roth and pre-tax contributions in a 401(k) or IRA, particularly early-career savers and those near retirement.
Formula
- C
- Annual contribution
- r
- Expected annual return
- t₁
- Marginal tax rate today
- t₂
- Expected marginal tax rate in retirement
Worked example
$7,000 a year for 30 years at 7%
- 1Both accounts reach the same gross balance
- 2Traditional is taxed at the retirement rate on withdrawal
- 3Roth is withdrawn tax free, but cost more to fund
Roth wins when the retirement rate exceeds today's rate
How the roth vs traditional calculator works
Mathematically the two are identical when your tax rate never changes — the same money is taxed once either way, and the order does not matter. The decision therefore turns entirely on whether your rate in retirement will be higher or lower than it is now. A traditional account deducts the contribution today and taxes the withdrawal; a Roth does the reverse. The comparison is only fair if the up-front tax saving from the traditional contribution is itself invested, which this calculator does in a taxable side account, since spending that saving is what quietly makes the traditional option lose.
Mathematically the two are identical when your tax rate never changes — the same money is taxed once either way and the order does not matter. The decision turns entirely on whether your rate in retirement will be higher or lower than today.
The comparison is only fair if the up-front tax saving from the traditional contribution is itself invested. Spending it is what quietly makes the traditional option lose.
Common mistakes
- Comparing gross balances rather than after-tax value, which flatters the traditional account.
- Forgetting to invest the tax saving the traditional contribution produces.
- Assuming today's tax rates persist for decades when tax law changes regularly.
- Ignoring required minimum distributions, which apply to traditional accounts but not Roth IRAs.
Tips and best practice
- Early career, when income and tax rate are low, generally favors the Roth.
- Peak earning years, at a high marginal rate, generally favor pre-tax contributions.
- Holding some of each gives flexibility to manage taxable income in retirement.
Frequently asked questions
Should I choose a Roth or a traditional account?
Choose Roth if you expect a higher tax rate in retirement than today, and traditional if you expect a lower one. At equal rates the two produce identical results.
What is the difference between Roth and traditional?
Traditional contributions are deducted now and the withdrawal is taxed. Roth contributions are made after tax and qualified withdrawals are entirely tax free.
Is a Roth better for young savers?
Often yes. Early-career income usually means a low marginal rate today, so paying tax now and never again on decades of growth tends to come out ahead.
Do Roth accounts have required minimum distributions?
Roth IRAs do not require withdrawals during the owner's lifetime, which makes them useful for estate planning as well as for retirement income.
Can I contribute to both?
Yes, subject to a combined annual limit. Splitting contributions gives flexibility to control taxable income in retirement rather than betting on one outcome.
Related calculators
Methodology & trust
- Formula source
- IRS Publication 590-A and 590-B on Roth and traditional account treatment
- Last updated
- 2026-07-28
- Privacy
- Every calculation runs in your browser. No inputs are sent to a server or stored.