Roth vs. Traditional Calculator
A Roth account and a traditional one (an IRA or a 401(k)) differ in when you pay income tax: a traditional account lowers your taxes now and is taxed when the money comes out in retirement, and a Roth is the other way around. Which leaves you more comes down to one thing: your tax rate now compared with your tax rate in retirement. Enter your numbers to see both. Roth vs. traditional IRA explains the choice with a seed-and-harvest picture, and traditional or Roth 401(k)? compares the two kinds of 401(k).
A tie
Both leave you $29,687.79 after tax. With the same rate now and later, it doesn't matter when you pay it.
What you keep after tax
| Step | Roth | Traditional |
|---|---|---|
| Goes in | $3,900.00 | $5,000.00 |
| Tax paid now | $1,100.00 | None |
| Grows to | $29,687.79 | $38,061.28 |
| Tax when you take it out | None | $8,373.49 |
| Yours after tax | $29,687.79 | $29,687.79 |
Both cost the same $3,900.00 of take-home pay: the traditional account gets $5,000.00 because putting it in cuts this year's tax by $1,100.00, the tax the Roth's money already paid.
Simplified: federal income tax at one rate now and one in retirement, with the same return every year. It leaves out state taxes, contribution limits, income limits, and early-withdrawal rules. The return is an example, not a promise.
How it works
The calculator puts the same take-home pay into each account, so the comparison is fair:
- Roth: the amount goes in as is. It's already been taxed, and it comes out tax-free.
- Traditional: more goes in, because putting money in lowers this year's income tax. At a 22% tax rate, $5,000 into a traditional account cuts your tax by $1,100, so it costs the same $3,900 of take-home pay. When it comes out, the whole balance is taxed at your retirement rate.
It starts with $3,900 set aside once, a 22% tax rate now and in retirement, and a 7% yearly return for 30 years. The Roth's $3,900 grows to $29,687.79, all yours. The traditional account's $5,000 grows to $38,061.28, and after $8,373.49 of tax you keep $29,687.79: exactly the same. When the two rates match, the two accounts always come out even. Change the retirement rate to 12% and the traditional account comes out $3,806.13 ahead; change it to 32% and the Roth comes out $3,806.12 ahead.
Not sure what your rate will be in retirement? Nobody knows for sure, and tax laws change. Try a few rates with the bracket buttons, or check Compare a 50/50 split to see half your take-home pay in each account. A split always lands exactly halfway between the two: in the example with a 12% retirement rate, it leaves you $31,590.86. It's never the best result and never the worst, which is why some people keep money in both kinds.
Choose Every year under "How often" to put the same amount in each year instead of once. Growth works like the compound interest calculator with interest added once a year, so each year's money starts earning the following year.
What it leaves out
This is a simplified comparison for learning, not a tax plan or financial advice:
- One flat federal rate now and one later. Your real tax depends on your brackets: the rate that matters now is your top (marginal) rate, and in retirement it's the rate on the money you take out. State income tax isn't included.
- No limits. Real accounts have yearly contribution limits, Roth IRAs have income limits, and a traditional IRA's tax break can shrink if you have a plan at work. The IRS explains traditional and Roth IRAs (opens in a new tab) and Roth vs. traditional 401(k)s (opens in a new tab).
- The same return every year. Real markets go up and down. See what rate will you actually get?
- The tax break is assumed to be saved too. The traditional account only comes out even because the bigger amount goes in. If you'd spend the tax savings instead, a Roth comes out ahead at equal rates.
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