Roth vs traditional IRA calculator

Roth or traditional comes down to one bet: is your tax rate higher now or in retirement? Compared honestly — equal out-of-pocket, with the traditional deduction's savings invested — the default scenario ($7,000 a year at 24% now, 22% later) leaves roth wins by $21,524. The formula, every assumption and a worked example are below the worksheet.

Worksheet

Annual contribution $

Current age yrs

Retirement age yrs

Expected annual return %

Current marginal tax rate %

Retirement marginal tax rate %

Invest the tax savings? ▾

Roth wins $1,050,615

Roth, after tax: $1,050,615
Traditional, after tax: $1,029,091
Difference (Roth − Traditional): $21,524
Break-even retirement tax rate: 20.3%
Pre-tax balance at retirement: $1,050,615

How the formula works

Both accounts hold the same contribution, grow it at the same return, and arrive at the same pre-tax balance. What differs is when the tax is paid. Contributions land at the end of each month and compound at the effective monthly rate $i$, so over $t$ years the pre-tax balance of either account is the familiar contribution annuity:

\[ B \;=\; \frac{C}{12}\cdot\frac{(1+i)^{12t}-1}{i}, \qquad i=\frac{r}{12} \]

where $C$ is the annual contribution and $r$ the annual return as a decimal. A Roth dollar was taxed on the way in, so the whole balance is yours — the after-tax value is simply $B$. A traditional dollar was deducted on the way in and is taxed on the way out at your retirement rate $t_r$:

\[ A_{\text{Roth}} = B, \qquad A_{\text{Trad}}^{\;\text{(bare)}} = B\,(1-t_r) \]

But that bare comparison is not apples-to-apples, and this is where most calculators go wrong. The traditional contribution was cheaper: deducting it at your current rate $t_n$ hands back a refund of $C\,t_n$ every year. Spend that refund and you never really put in the same money. Hold the out-of-pocket cost equal and the refund has to go somewhere — into a taxable side account, growing at the same $r$. Its contributions are already taxed, so only its gains are taxed at retirement:

\[ A_{\text{Trad}} \;=\; \underbrace{B\,(1-t_r)}_{\text{IRA, taxed at withdrawal}} \;+\; \underbrace{C_s + (t_n B - C_s)(1-t_r)}_{\text{side account, gains taxed once}}, \qquad C_s = t_n\,C\,t \]

The side account's balance is exactly $t_n B$ — it is the main balance scaled by the refund rate — and $C_s$ is the total refund invested. Setting $A_{\text{Roth}} = A_{\text{Trad}}$ and solving for the retirement rate gives the break-even, the rate at which the two accounts tie:

\[ t_r^{\,*} \;=\; 1 - \frac{B - t_n D}{B + t_n\,(B-D)}, \qquad D = C\,t \]

where $D$ is everything contributed. Below the break-even rate the traditional account wins; above it, Roth wins. If you switch the side account off, the comparison collapses to the textbook identity: to spend the same after-tax dollars you would gross the traditional contribution up by $1/(1-t_n)$, and

\[ A_{\text{Trad}}^{\;\text{(no side)}} = B\cdot\frac{1-t_r}{1-t_n}, \qquad t_r^{\,*} = t_n \]

Here the break-even is simply your current rate: with equal out-of-pocket cost and equal tax rates, Roth and traditional are mathematically identical. The entire difference is current-rate versus future-rate. What tips the realistic default toward Roth is the drag on that taxable side account — its gains are taxed, and a small tax every year is a cost the Roth never pays.

What each input means

Annual contribution — $C$: What you put in each year, assumed the same for both accounts and constant until retirement. The 2026 IRA limit is $7,500, or $8,600 if you are 50 or older. The comparison is about the tax treatment, so the same dollar figure goes into each account.
Current age and retirement age: Their difference $t$ is the years of compounding. More years means a bigger balance — and, for the traditional case, a bigger taxable side account whose drag grows with it, which is part of why a long horizon leans Roth.
Expected annual return — $r$: The nominal yearly growth assumption, compounded monthly, applied equally to both accounts and to the side account. A long-run figure like 6–7% is a common starting point; nothing guarantees it. Because both accounts share $r$, the comparison barely moves as you change it — it is the tax rates that decide.
Current marginal tax rate — $t_n$: The rate on your next dollar of income today — the rate the traditional deduction saves you, and the rate that fills the side account. Use your federal bracket, plus state income tax if it deducts the contribution too.
Retirement marginal tax rate — $t_r$: The rate you expect the traditional withdrawals to be taxed at. This is a forecast, not a fact: it depends on future brackets, your retirement income, and where you live. Its gap from $t_n$ is the whole game.
Invest the tax savings?: Yes models the honest, equal-out-of-pocket case: the traditional refund goes into a taxable side account. No switches the side account off and compares the two accounts purely on the rate difference (the gross-up identity above), which is the cleanest way to see when each one wins.

A worked example

The worksheet's defaults: $7,000 a year from age 30 to 65 — 35 years — at a 7% return, a 24% rate now and a 22% rate in retirement, investing the tax savings.

The effective monthly rate is $i = 0.07/12 = 0.005833$, and $7,000 a year ($$583$ a month) for 35 years compounds to a pre-tax balance of $1,050,615 in either account. From there the two part ways:

Roth. The contributions were already taxed, so the whole $1,050,615 is yours: after-tax value $1,050,615.
Traditional, the IRA itself. Taxed at the 22% retirement rate: $1,050,615 × (1 − 22%) = $819,480.
Traditional, the side account. Each year the deduction freed $7,000 × 24% = $1,680 of refund; invested at 7% it grows to $252,148, of which $58,800 was contributed and $193,348 is gains. Taxing only the gains at 22%: $58,800 + $193,348 × (1 − 22%) = $209,611.
Traditional total. $819,480 + $209,611 = $1,029,091.

So Roth comes out $21,524 ahead — even though you deduct at 24% now and pay only 22% later, which sounds like a win for traditional. The catch is the side account: its gains are taxed every step of the way, and that drag — worth $49,172 to traditional here — slightly outweighs the 2-point rate edge. Turn the side account off — the pure rate comparison — and traditional wins by $27,648 instead, exactly as the 24%-versus-22% gap suggests. The break-even retirement rate is 20.3%: below it traditional wins, above it Roth does.

Fig. 1 — After-tax value against the retirement tax rate, with today's rate held at 24%. Roth (red) is flat — it does not care what happens to future brackets. Traditional (dashed) falls as the retirement rate rises, and the two cross at the break-even rate, about 20%.

Assumptions and limits

Marginal rates are treated as flat — one rate now, one in retirement. Real brackets are progressive, so a large traditional withdrawal can span several rates; use your expected effective retirement rate for a closer read.
The side account is simplified: its gains are taxed once, at retirement, at the retirement rate. A real taxable account is drag-taxed along the way on dividends and any turnover, which would make traditional look slightly worse still — this is the defensible, favourable-to-traditional version.
It ignores required minimum distributions, the five-year Roth rule, and the early-withdrawal penalty — all of which affect the timing and taxation of real withdrawals.
It ignores income limits, which are real: Roth contributions phase out at higher incomes, and the traditional deduction phases out if you (or a spouse) are covered by a workplace plan. The questions below give the 2026 figures.
State taxes and the contribution amount are held constant, and the return is the same smooth line for both accounts and the side account.
This is arithmetic, not advice. It shows what your rate assumptions imply; it cannot know your future bracket.

Questions people ask

What is the core difference between a Roth and a traditional IRA?

When you pay the tax. A traditional IRA deducts the contribution now and taxes the withdrawal later — pay tax at your retirement rate. A Roth takes no deduction now but the withdrawal is tax-free — pay tax at today's rate. Same account, same growth; the only question is whether your tax rate is higher now or later.

When does the Roth win?

When your tax rate is lower now than it will be later — or when the traditional refund has to sit in a taxable account, whose drag quietly favours the Roth. That is why the young often lean Roth: early in a career the current rate is usually low, and a long horizon gives the side account's tax drag decades to compound. On the defaults, Roth wins whenever the retirement rate is above the 20.3% break-even; below that, traditional wins.

What if my tax rate is the same in retirement?

With equal out-of-pocket cost and equal rates, the two are mathematically identical — they tie. Run the defaults with a 24% retirement rate and the side account switched off: both land on exactly $1,050,615. That is the heart of the decision. The choice is never really Roth versus traditional in the abstract; it is a bet on whether your future rate is higher or lower than today's.

What are the 2026 IRA contribution and income limits?

You can contribute up to $7,500 in 2026, or $8,600 if you are 50 or older, across all your IRAs combined. Roth eligibility phases out by income — in 2026 roughly $153,000–$168,000 of modified AGI for single filers and $242,000–$252,000 for married filing jointly. The traditional deduction phases out at lower incomes if you or your spouse are covered by a workplace plan; without such coverage the deduction is not income-limited.

Can I have both a Roth and a traditional IRA?

Yes. Many people do, and splitting contributions is a way to hedge an uncertain future tax rate. The catch is the shared limit: the $7,000 (or $8,000) cap is the total across both, not each. You choose how to divide one contribution between them, not double up.