Roth IRA Calculator

How the Roth vs traditional comparison works

The two IRA types are mirror images. With a Roth IRA you pay tax on the money now and never again: contributions go in after tax, then the balance grows and comes out completely tax-free in retirement. With a traditional IRA you get the tax break now: contributions are usually deductible, the balance grows tax-deferred, and you pay income tax on every dollar you withdraw. This calculator grows the same annual contribution at the same return for both, then applies your expected retirement tax rate to the traditional balance so you compare spendable dollars, not headline balances.

The math is the future value of a yearly deposit: contribution × [((1 + return)^years − 1) ÷ return]. The Roth result is that figure untouched. The traditional result is that figure × (1 − retirement tax rate). The rule of thumb falls straight out of the formula: if your tax rate will be lower in retirement, traditional usually wins; if it will be the same or higher, Roth usually wins. Young earners in lower brackets often favor Roth because they pay tax at today's low rate to avoid tomorrow's higher one, while peak earners often favor traditional for the immediate deduction. Either way, the biggest driver is not the account type but contributing consistently for decades.

Practical tips for IRA savers

First, you can hold both types at once; the annual limit applies to combined IRA contributions, so some savers split for tax diversification. Second, Roth IRAs have no required minimum distributions in your lifetime, which makes them flexible for estate planning. Third, high earners who cannot contribute to a Roth directly sometimes use the backdoor Roth strategy, converting traditional contributions each year. Finally, remember the contribution limit is per person across all IRAs, and you need earned income at least equal to what you contribute.