Roth or Traditional?
Pay taxes now or later? Enter your numbers and see which account type leaves you with more money in retirement.
Traditional's deduction invested in taxable account
Roth: You contribute after-tax dollars. The money grows tax-free and you pay zero tax on withdrawals in retirement. What you see is what you get.
Traditional: You contribute pre-tax dollars (getting a tax deduction today). The money grows tax-deferred, but you pay income tax on every dollar you withdraw in retirement. To make the comparison fair, we assume you invest the annual tax savings ($1,680/yr) in a regular taxable brokerage account.
The key variable is your tax rate now vs. in retirement. If you expect to be in a lower bracket in retirement, Traditional usually wins. If your rate stays the same or goes up, Roth wins. Adjust the sliders to model your specific situation.
Roth vs Traditional: The Tax Timing Question
The Roth vs Traditional decision boils down to one question: will you pay less in taxes today or in retirement? Every other detail — contribution limits, required minimum distributions, estate planning — is secondary to this core tradeoff.
How Roth Accounts Work
With a Roth IRA or Roth 401(k), you contribute money you've already paid taxes on. It grows tax-free, and qualified withdrawals in retirement are completely tax-free. You'll never owe the IRS another dime on that money.
The tradeoff: you get no tax deduction today. If you're in the 24% bracket and contribute $7,000, that's $1,680 in tax savings you're giving up right now.
How Traditional Accounts Work
With a Traditional IRA or Traditional 401(k), your contributions are tax-deductible (subject to income limits for IRAs). The money grows tax-deferred, meaning you don't pay taxes on gains each year. But when you withdraw in retirement, every dollar is taxed as ordinary income.
The benefit: you get an immediate tax break. That $1,680 you saved in taxes? In our model, we assume you invest it in a taxable brokerage account so the comparison is apples-to-apples.
When Roth Wins
Roth comes out ahead when your retirement tax rate is equal to or higher than your current rate. This is common for younger workers early in their careers who expect their income to grow, people who believe tax rates will rise in the future, and high earners who want to reduce their taxable income in retirement.
Roth also has structural advantages: no required minimum distributions (for Roth IRAs), tax-free inheritance for beneficiaries, and the flexibility to withdraw contributions anytime without penalty.
When Traditional Wins
Traditional wins when your retirement tax rate is significantly lower than your current rate. This is typical for peak earners in their 40s and 50s who will drop to a lower bracket in retirement, people in high-tax states who plan to retire in low-tax states, and anyone in the 32%+ bracket today who expects to withdraw at 22% or less.
The bigger the gap between your current and retirement tax rates, the more Traditional pulls ahead — because you're deferring taxes from a high rate to a low rate.
The Equal Rate Myth
You may have heard that "if your tax rate is the same now and in retirement, Roth and Traditional are identical." That's mathematically true in a simplified model. But in practice, Roth often has a slight edge at equal rates because of how we treat the tax savings.
With Traditional, the tax savings get invested in a taxable account, where gains are subject to capital gains tax. With Roth, all growth is completely tax-free. This drag on the taxable account gives Roth a small advantage even when the income tax rates match.
What About a Mix?
Many financial planners recommend contributing to both Roth and Traditional accounts. This gives you tax diversification — the ability to pull from different buckets in retirement to manage your taxable income. In years where you need more income, you can withdraw from Roth (tax-free) to stay in a lower bracket.
2025 Contribution Limits
IRA (Roth or Traditional): $7,000 per year ($8,000 if age 50+). Roth IRA has income limits: single filers phase out between $150,000–$165,000 MAGI; married filing jointly phase out between $236,000–$246,000.
401(k) (Roth or Traditional): $23,500 per year ($31,000 if age 50+). No income limits for Roth 401(k) contributions. Many employers now offer both options.
Frequently Asked Questions
How do I know my retirement tax rate?
You don't — it's a guess. That's what makes this decision hard. Estimate based on your expected retirement income sources (Social Security, pensions, withdrawals) and likely tax brackets. Use the slider to test different scenarios and see how sensitive the result is.
Can I contribute to both Roth and Traditional?
Yes. For IRAs, the $7,000 limit is combined — you can split it however you want. For 401(k)s, the $23,500 limit is also combined across Roth and Traditional contributions within the same plan.
What if I make too much for a Roth IRA?
You can do a "backdoor Roth" — contribute to a Traditional IRA (non-deductible) and convert to Roth. This is legal and widely used by high earners. Consult a tax professional if you have existing Traditional IRA balances, as the pro-rata rule can complicate things.
Does this calculator account for state taxes?
Not separately. You should factor state income taxes into your "current" and "retirement" tax rate estimates. If you live in a high-tax state now and plan to retire in a no-income-tax state (like Florida or Texas), that widens the gap in Traditional's favor.
What about Required Minimum Distributions (RMDs)?
Traditional IRAs and 401(k)s require you to start withdrawing (and paying taxes) at age 73. Roth IRAs have no RMDs during the owner's lifetime. This is a significant advantage for Roth if you don't need the money right away — your investments can keep compounding tax-free longer.