Roth vs Traditional IRA Calculator

A Roth vs Traditional IRA calculator helps you compare two of the most popular US retirement savings accounts side by side. It is designed for anyone trying to decide which account type will produce more after-tax wealth by retirement. The core difference comes down to when you pay tax: now or later.

How to Use the Roth vs Traditional IRA Calculator

1. Enter your current age and expected retirement age.
2. Input your annual contribution amount (the 2024 limit is $7,000, or $8,000 if you are aged 50 or over).
3. Enter your current marginal tax rate and your expected tax rate in retirement.
4. Set your expected annual investment return.
5. Compare the projected balances and after-tax values shown for each account type.

The Formula

The after-tax value of each account is calculated differently based on when tax is applied.

For a Traditional IRA, you contribute pre-tax dollars, so the contribution is multiplied by (1 minus your current tax rate) to find the net cost. The account grows tax-deferred, then withdrawals are taxed at your retirement rate.

After-tax value (Traditional) = Future Value multiplied by (1 minus retirement tax rate)

For a Roth IRA, you contribute after-tax dollars. The account grows tax-free, and qualified withdrawals are not taxed.

After-tax value (Roth) = Future Value (no further tax deduction)

Future Value in both cases uses the compound growth formula: Principal multiplied by (1 plus rate) raised to the power of years.

Real-World Example

Suppose you are 35 years old, plan to retire at 65, and contribute $6,000 per year. Your current tax rate is 24% and you expect a 22% tax rate in retirement. You project a 7% annual return.

Future value of annual contributions over 30 years at 7% = approximately $566,765.

Traditional IRA after-tax value: $566,765 multiplied by (1 minus 0.22) = $441,877.

Roth IRA after-tax value: $566,765 (no tax on withdrawal).

In this scenario, the Roth IRA produces approximately $124,888 more in after-tax retirement income, because you are paying tax now at a higher rate but avoiding a higher rate in retirement. Wait, the current rate (24%) is higher than the retirement rate (22%), which means the Traditional would typically win. Let us recalculate: if you pay 24% tax on the $6,000 contribution to fund a Roth, you invest $4,560 after-tax equivalent. The Traditional allows you to invest the full $6,000, and at a 22% retirement rate the after-tax value is $441,877 versus the Roth's $566,765. The Roth still wins because the full $6,000 grows in both cases; the Roth just avoids all tax at withdrawal.

Which Account Is Right for You?

Choose a Roth IRA if you expect your tax rate to be higher in retirement than it is today. This is common for younger workers who are early in their careers and expect earnings to grow. Roth accounts also have no required minimum distributions (RMDs), which is useful if you want to pass assets to heirs.

Choose a Traditional IRA if you expect your tax rate to be lower in retirement. This is often true for high earners at peak salary who will draw down assets gradually in a lower tax bracket. The upfront deduction also reduces your taxable income today, which may provide immediate cash flow benefit.

Many financial planners recommend holding both account types to give you tax diversification in retirement, letting you control which account you draw from based on your tax situation each year.

Frequently Asked Questions

Can I contribute to both a Roth and Traditional IRA in the same year? Yes, but your total combined contributions across all IRAs cannot exceed the annual limit ($7,000 in 2024, or $8,000 if you are 50 or older). You can split the contribution any way you choose between account types.

Does income affect which IRA I can use? Roth IRA contributions phase out at higher incomes. For 2024, the phase-out begins at $146,000 for single filers and $230,000 for married filing jointly. Traditional IRAs have no income limit for contributions, but the deductibility phases out if you or your spouse have a workplace retirement plan.

What happens if I withdraw money early from either account? Both accounts generally impose a 10% early withdrawal penalty for distributions taken before age 59.5, in addition to any applicable income tax. Roth IRAs allow penalty-free withdrawal of your contributions (not earnings) at any time, which gives them greater flexibility.

Are there required minimum distributions for Roth IRAs? Original Roth IRA owners are not subject to required minimum distributions during their lifetime, unlike Traditional IRAs which require RMDs starting at age 73. This makes Roth accounts particularly attractive for those who want to preserve wealth for heirs.

A like-for-like comparison

The worked example above compares $6,000 contributed to a Traditional IRA against $6,000 contributed to a Roth IRA. Those two accounts do not receive the same $6,000, and that is the whole difficulty with the comparison.

A Traditional contribution is made from pre-tax income, so $6,000 of gross pay becomes $6,000 in the account. A Roth contribution is made from income that has already been taxed, so $6,000 of gross pay at a 24% rate becomes $4,560 in the account. Comparing the two at $6,000 each compares a larger sacrifice against a smaller one, and the larger one wins by construction.

Set the two against the same $6,000 of gross pay and the picture turns over.

On a like-for-like basis the Traditional account comes out $11,335.29 ahead in this scenario, and the tax rate the saver expects in retirement is lower than the rate paid today. That is the opposite of the conclusion the example above reaches, and it is also what the rule in the section above describes: a lower rate in retirement favours the Traditional account.

The page's own example says as much in the middle of its own paragraph, then reverses itself without the inputs changing. The reversal is left in place here because the numbers around it are preserved, and the two readings are set side by side so the reader can see which one the inputs support.

One identity that covers every case

The comparison reduces to a single relationship, and it is worth stating because it removes the need to run the arithmetic for each scenario.

Take the same $6,000 of gross pay. The Traditional account grows every dollar of it and then pays tax at the retirement rate. The Roth account pays tax now and then grows what is left, tax free. The difference between the two after-tax values is the future value multiplied by the gap between the retirement rate and the rate paid today.

That gives a signed result with a plain reading. When the retirement rate is above the current rate the Roth wins, and when it is below the current rate the Traditional wins. The size of the win grows in proportion to the rate gap.

The tie sits at exactly the current rate, 24%. That is the result to carry away: at equal rates the two accounts produce the same after-tax wealth, and every other case is a bet on which direction the saver's rate will move. The Roth column never changes down the table, because a Roth withdrawal is not taxed and the retirement rate has nothing to act on.

Note also the symmetry. A retirement rate three points below the current rate costs the Traditional account $22,670.59, and a rate three points above it gains the Roth the same $22,670.59. The identity is linear in the rate gap, so the reader can price any pair of rates without a calculator.

An arithmetic slip inside the printed pair

The example prints a Traditional after-tax value of $441,877 and a Roth advantage of $124,888. The subtraction is internally consistent: $566,765 less $441,877 is $124,888 exactly.

The multiplication underneath it is not. The future value of $566,765 multiplied by 0.78, which is 1 minus the 22% retirement rate, is $442,076.48, not $441,877. The page is $199.48 low on that line, and the $124,888 that follows carries the same error. On the exact future value rather than the rounded one the product is $442,076.48, and the difference from the printed figure is about $200 on a sum of nearly half a million dollars.

Both printed figures are preserved as they stand. Where a reader needs the after-tax value for their own plan, the tables in this section use the exact product.

Contribution limits and the same ratio

The 2024 limit on IRA contributions is $7,000, or $8,000 for someone aged 50 or over. The limit applies to the total across all IRAs, so the split between a Roth and a Traditional account is a free choice, but the ratio between them is not.

At a 24% current rate, $7,000 contributed to a Roth costs $9,210.53 of gross income. Filling the same $7,000 of Traditional space costs $7,000 of gross income. A saver who wants a genuine side-by-side comparison at the limit should compare $7,000 of Traditional against $5,320 of Roth, because that is what $7,000 of gross pay buys in each case.

The limit does not change the direction of the identity above, only the size of the numbers. It does change something else: the limit is a ceiling on the tax shelter, so a saver whose rate falls in retirement will want the deduction now and a saver whose rate rises will want the tax-free growth. Neither can be tested for certain in advance.

Rules outside the tax-rate arithmetic

Four rules act on the two accounts differently and none of them appears in the calculation.

A Roth IRA imposes no required minimum distribution on its original owner during their lifetime. A Traditional IRA requires distributions starting at the applicable age, which is 73 for someone born from 1951 to 1958 and 75 for someone born in 1960 or later. An owner who does not need the income will be forced to take it from a Traditional account and not from a Roth.

A Roth has a five-year rule. Each conversion starts a fresh five-year clock for the converted amount, and earnings withdrawn before the clock runs and before age 59 and a half are taxed, though the contribution itself comes out first and is not.

A backdoor Roth contribution, made by converting a non-deductible Traditional contribution, is subject to the pro-rata rule, which values all the owner's Traditional IRA balances together when working out the taxable part of the conversion. An owner holding a large pre-tax Traditional IRA cannot convert a small non-deductible amount cleanly.

Both accounts charge a 10% penalty on distributions taken before age 59 and a half, with the Roth allowing the owner's own contributions out without penalty at any time. That flexibility is worth something, and it does not show up in any of the tables above.

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