Roth vs Traditional IRA/401(k) Calculator
Should you pay taxes now (Roth) or later (Traditional)? Compare both strategies side by side, see the break-even retirement tax rate, and visualize how the deferred tax liability grows on Traditional accounts over time.
Contribution Details
Tax Rates & Growth
Traditional
Roth
Bottom Line
Growth Comparison
The shaded area on the Traditional line represents deferred taxes owed at withdrawal
Year-by-Year Comparison
| Year | Traditional Balance | Trad. After-Tax | Roth Balance | Advantage |
|---|---|---|---|---|
| 1 | $24,610 | $19,196 | $18,704 | Trad +$492 |
| 5 | $141,526 | $110,390 | $107,560 | Trad +$2,831 |
| 10 | $340,023 | $265,218 | $258,417 | Trad +$6,800 |
| 15 | $618,425 | $482,372 | $470,003 | Trad +$12,369 |
| 20 | $1,008,899 | $786,941 | $766,763 | Trad +$20,178 |
| 25 | $1,556,559 | $1,214,116 | $1,182,985 | Trad +$31,131 |
| 30 | $2,324,680 | $1,813,250 | $1,766,757 | Trad +$46,494 |
Assumes 7% annual return, 24% current tax rate, and 22% retirement tax rate applied to all Traditional withdrawals. Roth contribution is the after-tax equivalent of the Traditional contribution.
How Roth vs Traditional Works
The core difference is when you pay taxes. Traditional contributions are tax-deductible today — you get an upfront tax break and your money grows tax-deferred. But every dollar you withdraw in retirement is taxed as ordinary income. Rothcontributions are made with after-tax dollars — no deduction today, but withdrawals in retirement are completely tax-free.
The Break-Even Tax Rate
If your tax rate in retirement is exactly the sameas your current rate, Roth and Traditional produce identical after-tax outcomes. This is the mathematical equivalence: paying 24% on $23,000 now vs. paying 24% on a much larger withdrawal later yields the same after-tax value. The decision hinges entirely on whether your future rate will be higher or lower than today's.
When Roth Wins
Roth wins when your retirement tax rate is higherthan your current rate. This is common for younger workers early in their careers, high earners who expect future tax increases, and anyone with large Traditional balances that will generate substantial RMDs. Roth also wins if you value the flexibility of tax-free withdrawals — Roth IRAs have no RMDs during the owner's lifetime.
When Traditional Wins
Traditional wins when your retirement tax rate is lower than your current rate. This is typical for high earners near peak income who expect to drop brackets in retirement, those retiring in no-income-tax states, or anyone who will have modest retirement spending. The immediate tax deduction is also valuable if you invest the tax savings.
2026 Contribution Limits
For 2026, the 401(k) employee deferral limit is $23,500 ($31,000 if age 50+). The IRA contribution limit is $7,000 ($8,000 if age 50+). Roth IRA contributions phase out at higher incomes, but Roth 401(k) contributions have no income limit. The backdoor Roth IRA strategy can bypass the income limits for IRA contributions.
Frequently Asked Questions
Can I contribute to both Roth and Traditional?
Yes. You can split your 401(k) contributions between Roth and Traditional (the combined limit still applies). You can also have both a Traditional IRA and a Roth IRA, though the combined IRA contribution limit is shared.
Does this calculator account for investing the tax savings?
Yes. When you make a Traditional contribution, you receive a tax deduction. This calculator assumes you invest those tax savings at the same expected return, which is the apples-to-apples comparison. Without reinvesting the tax savings, Traditional would appear worse than it actually is.
What about state taxes?
This calculator uses your total marginal tax rate (federal + state combined). If you plan to move to a different state in retirement, adjust the retirement tax rate accordingly. Moving from a high-tax to a no-income-tax state tilts the math toward Traditional.