Roth vs Traditional Calculator
Should you contribute to a Roth or Traditional retirement account? Compare the after-tax outcomes based on your current tax rate, expected retirement tax rate, contribution amount, and time horizon.
Roth and Traditional retirement accounts both offer tax advantages, but they apply the break at opposite ends of the timeline. With a Traditional 401(k) or IRA, you skip the tax now and pay it later, when you withdraw in retirement. With a Roth account, you pay the tax now and withdraw tax-free in retirement.
If your contribution amount is the same dollar figure in both accounts — say, $7,000 a year — and your tax rate never changes, the after-tax outcome is mathematically identical. The decision only matters because tax rates change: yours over your career, and federal brackets across decades of policy shifts.
This calculator compares the after-tax retirement balance from each strategy using your current marginal rate, the rate you expect in retirement, and a constant contribution. It assumes the Traditional tax savings are also invested in a taxable account — otherwise the comparison is unfair. Run the numbers, but also read the "when to use" section, because the decision often depends on factors that don't appear in the math.
Inputs
Results
Roth Balance (Tax-Free)
$473,735
Traditional (After Tax)
$369,514
Advantage
Roth by $104,222
Tax Savings Now (Traditional)
$42,000
After-Tax Balance Over Time
Final Comparison
Year-by-Year Comparison
| Year | Roth Balance | Traditional (Pre-Tax) | Traditional (After Tax) |
|---|---|---|---|
| 1 | $7,490.00 | $7,490.00 | $5,842.20 |
| 2 | $15,504.30 | $15,504.30 | $12,093.35 |
| 3 | $24,079.60 | $24,079.60 | $18,782.09 |
| 4 | $33,255.17 | $33,255.17 | $25,939.03 |
| 5 | $43,073.04 | $43,073.04 | $33,596.97 |
| 6 | $53,578.15 | $53,578.15 | $41,790.96 |
| 7 | $64,818.62 | $64,818.62 | $50,558.52 |
| 8 | $76,845.92 | $76,845.92 | $59,939.82 |
| 9 | $89,715.14 | $89,715.14 | $69,977.81 |
| 10 | $103,485.20 | $103,485.20 | $80,718.45 |
| 11 | $118,219.16 | $118,219.16 | $92,210.94 |
| 12 | $133,984.50 | $133,984.50 | $104,507.91 |
Formula
How to use this calculator
- Enter your planned annual contribution. The 2025 IRA limit is $7,000 ($8,000 if age 50+). The 2025 employee 401(k) limit is $23,500 ($31,000 if 50+, with extra "super catch-up" for ages 60–63).
- Enter the number of years until you plan to retire. Use your actual planned retirement age, not 65 by default — the time horizon dominates the result.
- Enter an expected annual return. 6–8% is a defensible long-term assumption for a diversified portfolio in real (inflation-adjusted) or modestly higher in nominal terms.
- Enter your current marginal tax rate — not your effective rate. The marginal rate is the federal bracket your last dollar falls into; add state income tax if applicable.
- Enter your estimated marginal tax rate in retirement. If you plan to live on much less than you earn today, your retirement rate will likely be lower; if you have a pension, large taxable accounts, or expect tax rates to rise, it may be higher.
- Compare the two after-tax balances. The larger number is the better choice given your assumptions.
- Re-run with a range of retirement tax rates. If both choices come out within a few percent, tax diversification (some Roth, some Traditional) is usually the better call than going all-in either direction.
Worked examples
Younger worker, lower current bracket
Age 28, 35 years to retirement, contributing $7,000/year, 7% return. Current marginal rate: 12% Expected retirement rate: 22% Roth IRA balance at 63: ≈ $968,000 (all tax-free) Traditional IRA balance at 63: ≈ $968,000, but withdrawn at 22% = ≈ $755,000 after tax Roth wins by $213,000. The early-career low bracket is exactly when Roth pays off.
Peak-earning worker, high current bracket
Age 45, 20 years to retirement, contributing $7,000/year, 7% return. Current marginal rate: 32% (federal) + 6% (state) = 38% Expected retirement rate: 22% Roth: $7,000/year compounded → ≈ $307,000 tax-free at 65. Traditional: contributing the same $7,000 pre-tax (which costs $4,340 out of pocket vs $7,000 for Roth) → $307,000 pre-tax × (1 − 0.22) = $239,500 after tax. If you compare equal out-of-pocket and invest the tax savings in a taxable account at the same return, Traditional comes out about $25,000–$35,000 ahead — assuming retirement rate is actually lower.
When tax-diversification beats picking one
Same worker, same income, but unsure whether retirement rate will be 18% (frugal lifestyle) or 28% (rising federal rates). 50% Roth / 50% Traditional gives you two buckets to draw from in retirement. In low-income years (early retirement, before Social Security), pull from Traditional and use the standard deduction to keep tax low. In high-income years (large RMDs, big purchases), pull tax-free from Roth. This is what financial planners mean by "tax diversification" — it hedges against the one variable you can't predict: future tax policy.
When to use this calculator
Use this calculator when you have a Roth and a Traditional option available — most modern 401(k) plans now offer both, and IRA contributions can be either type subject to income limits. The output is best understood as a directional answer rather than a precise dollar comparison, because the actual answer depends on tax rates 20+ years from now that no one knows.
Reach for Roth when: your current tax bracket is unusually low (early career, sabbatical year, large deductions), you expect to be in a higher bracket in retirement (large pension, big taxable balances, expected rate increases), or you value the optionality of tax-free withdrawals later.
Reach for Traditional when: you are in a peak-earning year and want to drop into a lower bracket, you expect to retire at a much lower income, or you want the immediate cash-flow benefit of a smaller tax bill now (which can be redirected to additional savings).
For most people in the middle of their career, the answer is "do some of each" — split contributions to build both buckets. Pair this calculator with the IRA, 401(k), and retirement savings calculators to model the full picture.
Common mistakes to avoid
- Comparing pre-tax Traditional balance to tax-free Roth balance. Apples to oranges — the Traditional balance still owes tax. Always compare after-tax dollars.
- Using the wrong tax rate. Use your marginal rate (the bracket your last dollar is in), not your effective rate (average across all dollars). The marginal rate is what changes when you contribute.
- Ignoring state income tax. State rates vary from 0% (TX, FL, WA) to 13%+ (CA top bracket). State tax matters as much as federal for the Roth-vs-Traditional decision.
- Forgetting Roth IRA income limits. In 2025, single filers with MAGI above $165,000 (married above $246,000) cannot contribute to a Roth IRA directly — though a backdoor Roth conversion is usually still possible.
- Treating the employer match as Roth. Employer matching contributions are always made pre-tax, regardless of whether your contribution is Roth or Traditional. The match grows tax-deferred and is taxed on withdrawal.
- Assuming today's tax rates last forever. The current federal brackets are scheduled to revert higher after 2025 under existing law unless extended. Tax policy uncertainty is a real reason to hold some of each type.
Frequently Asked Questions
Sources & further reading
- Roth IRAs — IRS Publication 590-A — U.S. Internal Revenue Service
- Retirement Topics — IRA Contribution Limits — U.S. Internal Revenue Service
- Designated Roth Accounts — U.S. Internal Revenue Service