Roth vs. Traditional IRA Calculator
Example: Annual retirement contribution: 7000 $ · Your current marginal tax rate: 22 % · Expected retirement tax rate: 22 % · Expected annual return: 7 % · Years until retirement: 25 years
| Roth advantage (+) or Traditional advantage (−) | $-0 |
| Roth — after-tax retirement value | $345,340 |
| Traditional — after-tax retirement value | $345,340 |
| Break-even retirement tax rate | 22.00% |
Worked example
Contributing $7,000 per year for 25 years at 7% return: with a 22% current tax rate, the Roth after-tax value is $384,451 (growing on $5,460 after-tax contributions). The Traditional after-tax value at 22% retirement rate is also $384,451 — they tie exactly. If you expect to be in a higher bracket in retirement (say 32%), Roth wins; if lower (12%), Traditional wins. The break-even is your current rate.
Frequently asked questions
What if I expect tax rates to rise overall?
If you believe tax rates will be higher in the future — either because of your income growth or policy changes — Roth wins. The Roth locks in today's rates on your contributions. This is a common argument for Roth especially among younger investors who have decades ahead of them and who expect income to grow. Neither outcome is guaranteed, which is why many advisors suggest splitting between Roth and Traditional for tax diversification.
Can I contribute to both Roth and Traditional?
Yes — you can split your IRA contribution between a Roth and Traditional IRA, as long as total contributions do not exceed the annual limit ($7,000 in 2024, or $8,000 if age 50+). Many investors maintain both account types to create tax flexibility in retirement: withdrawals can be managed to stay below certain tax thresholds.
Does the Roth vs. Traditional decision apply to 401ks too?
Yes — most modern 401k plans offer both a traditional (pre-tax) and Roth (after-tax) contribution option. The same math applies, with the same break-even analysis. 401k contribution limits are $23,500 in 2024 (plus $7,500 catch-up if age 50+), per IRS guidelines. High earners may face income limits on Roth IRA contributions but not on Roth 401k contributions.