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Roth vs Traditional IRA Calculator
Compare the potential growth and tax benefits of Roth and Traditional IRAs based on your contributions, tax rates, and investment returns to decide the best retirement savings plan for you.
IRA Comparison Calculator
Input your current age, retirement age, annual contribution, tax rates, and expected return to see the projected balances and tax savings for both IRA types.
Understanding Roth vs Traditional IRA
Individual Retirement Accounts (IRAs) are one of the most powerful tools available for building long-term retirement wealth. The two most common types, the Roth IRA and the Traditional IRA, offer distinctly different tax advantages that can significantly impact how much money you have available in retirement. Understanding these differences is essential for making informed decisions about your financial future.
Tax-Deferred vs Tax-Free Growth
A Traditional IRA operates on a tax-deferred basis. Contributions may be tax-deductible in the year they are made, reducing your current taxable income. Your investments then grow tax-deferred, meaning you pay no taxes on gains, dividends, or interest while the money remains in the account. However, when you withdraw funds in retirement, those distributions are taxed as ordinary income. This structure benefits individuals who expect to be in a lower tax bracket during retirement than they are today.
A Roth IRA, by contrast, is funded with after-tax dollars. You receive no upfront tax deduction, but your investments grow completely tax-free. Qualified withdrawals in retirement, including all accumulated gains, are entirely free from federal income tax. This makes the Roth IRA especially advantageous for those who anticipate being in the same or a higher tax bracket in retirement, or who value the certainty of tax-free income later in life.
2026 Contribution Limits
For the 2026 tax year, the IRA contribution limit is $7,000 for individuals under age 50. Those aged 50 and older can make an additional $1,000 catch-up contribution, bringing their total allowable contribution to $8,000. These limits apply to the combined total of all Traditional and Roth IRA contributions in a given year.
Income Limits
Roth IRA eligibility is subject to income phase-outs. For 2026, single filers with a modified adjusted gross income (MAGI) above approximately $150,000 to $165,000 will see reduced or eliminated Roth IRA contribution limits. Married couples filing jointly face phase-outs between roughly $236,000 and $246,000. Traditional IRA contributions have no income limits, though the tax deductibility of contributions may be limited if you or your spouse participate in an employer-sponsored retirement plan.
When Each Is Better
Choose a Roth IRA if you are early in your career, expect your income and tax rate to rise over time, or want maximum flexibility with tax-free withdrawals and no required minimum distributions. Choose a Traditional IRA if you need an immediate tax deduction, are currently in a high tax bracket but expect a lower rate in retirement, or want to reduce your current-year tax liability. Many financial advisors recommend maintaining both account types for tax diversification in retirement.
How to Use This Calculator
Follow these steps to compare Roth and Traditional IRA outcomes tailored to your financial situation:
- Enter your current age and expected retirement age. This determines your investment time horizon, which is one of the most important factors in retirement projections.
- Input your annual IRA contribution amount. Use the 2026 limit of $7,000 (or $8,000 if you are 50 or older) for maximum growth potential.
- Set your expected annual rate of return. A common assumption for a diversified portfolio is 6% to 8%. More conservative investors may use 5% to 6%, while aggressive growth investors may model 8% to 10%.
- Enter your current marginal tax rate. This is the tax rate that applies to your highest dollar of income today. Check your most recent tax return or use the federal income tax brackets for guidance.
- Estimate your expected retirement tax rate. Many retirees fall into a lower bracket, typically 10% to 22%, depending on their retirement income sources.
- Click Calculate to generate a side-by-side comparison of after-tax retirement values for both Roth and Traditional IRA scenarios, along with total contributions and tax savings analysis.
IRA Comparison Formula Explained
The core of this calculator uses future value of annuity formulas adjusted for the different tax treatments of each account type:
Traditional IRA After-Tax Value
After-Tax Value = FV x (1 - Retirement Tax Rate)
Where C is the annual contribution, r is the annual rate of return, and n is the number of years until retirement. Since Traditional IRA contributions are pre-tax, the full amount is invested, but all withdrawals are taxed at your retirement rate.
Roth IRA After-Tax Value
FV = Effective Contribution x [((1 + r)^n - 1) / r]
After-Tax Value = FV (no additional tax)
Since Roth contributions are made with after-tax dollars, the effective contribution is reduced by your current tax rate. However, all growth and withdrawals are completely tax-free.
Worked Example
Consider an investor contributing $7,000 per year for 30 years at a 7% annual return, with a 22% current tax rate and a 15% expected retirement tax rate:
FV = $7,000 x [((1.07)^30 - 1) / 0.07] = $7,000 x 94.461 = $661,226
After-Tax Value = $661,226 x (1 - 0.15) = $562,042
Roth IRA:
Effective Contribution = $7,000 x (1 - 0.22) = $5,460
FV = $5,460 x [((1.07)^30 - 1) / 0.07] = $5,460 x 94.461 = $515,756
After-Tax Value = $515,756 (tax-free)
In this scenario, the Traditional IRA yields a higher after-tax value because the retirement tax rate (15%) is lower than the current rate (22%). If both rates were equal at 22%, the outcomes would be identical, demonstrating that the choice ultimately hinges on your current vs. future tax rate differential.
Roth IRA vs Traditional IRA Key Differences
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Tax Treatment of Contributions | After-tax (no deduction) | Pre-tax (may be deductible) |
| Tax Treatment of Withdrawals | Tax-free (qualified) | Taxed as ordinary income |
| Investment Growth | Tax-free | Tax-deferred |
| 2026 Contribution Limit (Under 50) | $7,000 | $7,000 |
| 2026 Catch-Up Contribution (50+) | $8,000 total | $8,000 total |
| Income Limits (Single 2026) | Phase-out ~$150K–$165K | No limit (deductibility may be limited) |
| Income Limits (Married Filing Jointly) | Phase-out ~$236K–$246K | No limit (deductibility may be limited) |
| Required Minimum Distributions (RMDs) | None during owner's lifetime | Required starting at age 73 |
| Withdrawal Rules | Contributions anytime tax-free; earnings after 59½ and 5-year rule | Penalty-free after 59½; all withdrawals taxed |
| Early Withdrawal Penalty | 10% on earnings before 59½ (contributions exempt) | 10% on all withdrawals before 59½ (plus income tax) |
| Best For | Young investors, rising income, tax-free retirement income | High earners seeking current tax deduction, lower future tax rate |
5 Strategies for Choosing Between Roth and Traditional IRA
- 1. Compare Your Current and Future Tax Rates The single most important factor is whether you expect your tax rate to be higher or lower in retirement. If you believe your tax rate will increase due to career growth, rising federal rates, or large retirement income, a Roth IRA locks in today's lower rate. If you expect a significantly lower rate in retirement, a Traditional IRA lets you defer taxes to when they will cost less.
- 2. Maximize Tax Diversification Rather than choosing exclusively one account type, consider splitting contributions between Roth and Traditional IRAs. This provides flexibility in retirement to draw from tax-free and taxable sources strategically, helping manage your tax bracket year by year and reducing overall lifetime taxes.
- 3. Use Your Time Horizon to Your Advantage Younger investors with decades until retirement benefit enormously from the Roth IRA's tax-free growth. The longer your money compounds tax-free, the greater the advantage. A 25-year-old contributing to a Roth IRA has 40 years of compounding that will never be taxed, which can amount to hundreds of thousands of dollars in tax savings.
- 4. Consider the Backdoor Roth Strategy High-income earners who exceed Roth IRA income limits can use the "backdoor Roth" strategy: contribute to a non-deductible Traditional IRA, then convert it to a Roth IRA. This legally bypasses income restrictions, though you should be aware of the pro-rata rule if you hold other pre-tax IRA balances.
- 5. Factor In Required Minimum Distributions Roth IRAs have no required minimum distributions during the owner's lifetime, making them an excellent wealth-transfer and estate-planning tool. If you do not need all your retirement savings for living expenses, a Roth IRA allows your money to continue growing tax-free indefinitely and can be passed to heirs with favorable tax treatment.
Scenario Comparison: Roth vs Traditional IRA: After-Tax Value at Retirement
Comparing $6,500/year contributions over 30 years at 7% return for different tax situations.
| Scenario | Traditional IRA Value | After-Tax (25%) | Roth IRA Value | Better Choice |
|---|---|---|---|---|
| Same bracket (22%→22%) | $612,438 | $477,702 | $477,702 | Equal |
| Lower in retirement (22%→12%) | $612,438 | $538,945 | $477,702 | Traditional |
| Higher in retirement (22%→32%) | $612,438 | $416,458 | $477,702 | Roth |
| Tax-free state to tax state | $612,438 | $447,481 | $477,702 | Roth |
| Max bracket now (37%→22%) | $612,438 | $477,702 | $386,636 | Traditional |
Frequently Asked Questions
For most young investors, a Roth IRA is the stronger choice. Early-career professionals are typically in a lower tax bracket, meaning they pay less tax on contributions now. With decades of compounding ahead, all that growth will be entirely tax-free in retirement. Additionally, Roth IRAs offer more flexibility since contributions (not earnings) can be withdrawn anytime without penalty, providing an emergency safety net while you build wealth.
Yes, you can contribute to both a Roth IRA and a Traditional IRA in the same tax year. However, the combined total of your contributions across all IRAs cannot exceed the annual limit of $7,000 (or $8,000 if age 50 or older) for 2026. For example, you could contribute $4,000 to a Roth IRA and $3,000 to a Traditional IRA. This strategy provides tax diversification, giving you both taxable and tax-free income sources in retirement.
A backdoor Roth IRA is a legal strategy for high-income earners who exceed the Roth IRA income limits. The process involves making a non-deductible contribution to a Traditional IRA and then converting that amount to a Roth IRA. Since the contribution was non-deductible, you only owe taxes on any gains between contribution and conversion. Be aware of the pro-rata rule: if you have existing pre-tax IRA balances, the conversion will be partially taxable based on the ratio of pre-tax to after-tax funds across all your Traditional IRAs.
A Roth conversion, where you move funds from a Traditional IRA to a Roth IRA, makes the most sense during years when your income is unusually low, such as between jobs, early retirement before Social Security begins, or a sabbatical year. Converting in a low-income year means you pay taxes on the converted amount at a reduced rate. This strategy is also valuable if you expect tax rates to increase in the future or if you want to eliminate required minimum distributions on the converted funds.
While both offer tax-free growth and withdrawals, key differences exist. A Roth 401(k) is employer-sponsored with much higher contribution limits ($23,500 in 2026, plus $7,500 catch-up for those 50+), has no income limits for eligibility, but does require RMDs starting at age 73 unless rolled into a Roth IRA. A Roth IRA has lower contribution limits ($7,000/$8,000), income eligibility restrictions, but offers no RMDs during your lifetime and more investment flexibility. Many investors use both for maximum tax-free retirement savings.
A Traditional IRA is clearly preferable when you are in your peak earning years and in a high tax bracket (32% or above), when you expect your retirement income to be substantially lower, when you need to reduce your current adjusted gross income to qualify for other tax benefits, or when you are not eligible for a Roth IRA due to income limits and do not wish to use the backdoor strategy. The immediate tax deduction from a Traditional IRA can be reinvested for additional growth, amplifying the benefit.
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