Roth vs. Traditional IRA Calculator
A traditional IRA gives you a tax deduction now and taxes withdrawals later. A Roth is funded with money that has already been taxed and pays out tax-free. Which is better comes down to your tax rate now compared with your rate in retirement.
Enter your figures below. Results update as you type.
Traditional comes out aheadby $49,525.79in spendable money at retirement
- Roth, after tax
- $551,858.81
- Traditional, after tax
- $601,384.60
- Roth contribution after tax now
- $5,460.00 /yr
- Traditional balance before tax
- $707,511.29
With the same pre-tax dollars, the Roth wins when your tax rate will be higher in retirement and the traditional account wins when it will be lower. Contribution limits and income limits apply to both.
How the Roth vs. Traditional IRA calculation works
Roth = (amount x (1 - tax now)) grown; traditional = (amount grown) x (1 - tax in retirement)
Investing $7,000 of pre-tax income a year for 30 years at 7%: with 22% tax now and 15% in retirement, the traditional account leaves $601,385 and the Roth $551,859. Swap the two tax rates and the Roth wins by a similar margin.
Frequently asked questions
Is a Roth or traditional IRA better?
A Roth is better if you expect a higher tax rate in retirement than you pay now; a traditional IRA is better if you expect a lower one. If the two rates are equal, they come out the same.
Can I have both a Roth and a traditional IRA?
Yes. You can contribute to both in the same year, as long as the combined total stays within the annual IRA limit. Many people split contributions to spread their tax risk.
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