Roth vs. Traditional IRA Calculator

Compare Roth and Traditional IRA Growth

Roth vs. Traditional IRA Formula

Formula

\[ FV = P \times \frac{(1 + r)^n - 1}{r} \\\ \text{Traditional (after tax)} = FV \times (1 - t) \\\ \text{Roth} = FV \]

Where:

$P$ — annual contribution amount ($)
$r$ — expected annual return, as a decimal (7% = 0.07)
$n$ — number of years until retirement
$t$ — expected tax rate on withdrawals in retirement (decimal)
$FV$ — future value of the contributions at retirement, before any taxes

Both accounts grow to the same pre-tax value because the formula assumes identical contributions and returns. The difference comes entirely from taxes: the entire Traditional IRA balance is taxed at withdrawal, while qualified Roth withdrawals are tax-free.

Roth vs. Traditional IRA – Calculation Example

Example: you contribute $6,000 per year for 30 years, expect a 7% average annual return, and estimate a 20% tax rate in retirement.

\[ FV = 6{,}000 \times \frac{(1 + 0.07)^{30} - 1}{0.07} = 6{,}000 \times 94.4608 \approx 566{,}765 \]

\[ \text{Traditional (after tax)} = 566{,}765 \times (1 - 0.20) \approx 453{,}412 \]

Result: the Roth IRA is worth about $566,765 tax-free, while the Traditional IRA leaves about $453,412 after taxes. With these inputs, the Roth IRA yields more by roughly $113,353.

How to Use the Calculator

Enter your Annual Contribution — the amount you plan to put into the IRA each year (e.g. $6,000).
Enter the Number of Years until you retire and begin withdrawals.
Enter the Expected Annual Return as a percentage — a long-term average of 6–8% is common for diversified stock portfolios.
Enter the Tax Rate at Withdrawal (Traditional IRA) — your best estimate of the combined federal and state tax rate you will face on retirement withdrawals.
Read the results: the after-tax value of the Traditional IRA, the tax-free value of the Roth IRA, and a verdict on which option yields more.

Roth vs. Traditional IRA: What Is the Difference?

A Traditional IRA and a Roth IRA are both retirement accounts with tax advantages, but they tax your money at opposite ends. Traditional IRA contributions are often tax-deductible today, and growth is tax-deferred — but every withdrawal in retirement is taxed as ordinary income. Roth IRA contributions are made with after-tax dollars, and in exchange, qualified withdrawals in retirement, including all investment growth, are completely tax-free.

Because the two accounts grow at the same rate before taxes, the deciding factor is the comparison between your tax rate today and your expected tax rate in retirement. If you expect to be in a higher tax bracket when you withdraw the money, the Roth usually wins. If you expect a lower bracket in retirement — common for people near their peak earning years — the Traditional IRA often comes out ahead.

This calculator captures the retirement side of that trade-off directly. It grows both accounts to the same future value and then applies your estimated withdrawal tax rate only to the Traditional IRA, showing you the after-tax amount you would actually keep from each account. Note that it compares equal dollar contributions; it does not model the upfront deduction you get with a Traditional IRA, which is discussed under limitations below.

The result "Roth IRA yields more" or "Traditional IRA yields more" is a direct dollar comparison at the moment of withdrawal. A small difference (a few percent) should not drive your decision on its own, since actual tax rates and returns are never known in advance. For a broader picture, pair this tool with a full Retirement Planner or the dedicated Roth IRA calculator to see annual contribution limits and growth in detail.

Assumptions and Limitations

Equal contributions and returns. The calculator assumes you contribute the same dollar amount to either account and both earn the same average return. In reality, a Traditional IRA's tax deduction frees up cash you could also invest, which can narrow or reverse the gap.
Constant tax rate. One flat tax rate is applied to the entire Traditional IRA balance at withdrawal. Real retirement income is taxed progressively, and rates may change over time.
Contributions at year-end. The future value formula assumes one lump-sum contribution per year, compounded annually. Monthly contributions would produce a slightly different result.
No contribution limits, penalties, or RMDs. The tool ignores IRS annual contribution limits, early-withdrawal penalties, income limits for Roth eligibility, and required minimum distributions, which currently apply to Traditional IRAs but not to Roths.
Tax rules can change. Tax rates and retirement account rules are set by legislation and may differ by the time you retire.

Practical Tips

Run the calculator several times with different retirement tax rates to see how sensitive the outcome is — the breakeven point is where the retirement tax rate roughly equals your current marginal rate. If your future rate is lower, the Traditional IRA tends to win; if it is higher, the Roth does.

Many savers hedge uncertainty by holding both account types, giving themselves flexibility to control their taxable income in retirement. You can also estimate how your investments themselves will perform with the Return on Investment calculator or plan recurring deposits with the Monthly Investment Savings calculator. For major tax or retirement decisions, confirm the numbers with a qualified financial advisor or tax professional.

Frequently Asked Questions

How do I calculate Roth vs. Traditional IRA by hand without a calculator?

First find the future value of your contributions using the annuity formula $ FV = P \times \frac{(1+r)^n - 1}{r} $. Then multiply that figure by $ (1 - t) $, where $ t $ is your expected tax rate in retirement, to get the Traditional IRA's after-tax value. The Roth IRA is worth the full $ FV $ because qualified withdrawals are tax-free. Compare the two numbers directly.

At what tax rate does the Traditional IRA beat the Roth?

The breakeven point is when your retirement tax rate roughly equals your current marginal tax rate. If you expect to pay a lower rate in retirement than you pay today, the Traditional IRA usually comes out ahead because the upfront deduction is worth more than the tax you later owe. If you expect a higher future rate, the Roth wins. Run the calculator with several tax rates to see how quickly the verdict flips.

What tax rate should I enter for retirement withdrawals?

Use your best estimate of the combined federal and state rate you'll pay on Traditional IRA withdrawals, treating them as ordinary income. If you plan modest retirement spending, effective rates of 10–22% are common; high spending or high-tax states can push this higher. Remember that withdrawals stack on top of other retirement income, which can raise your bracket. This is an estimate only — tax law and your situation will change, so consider consulting a tax professional.

Why does the Traditional IRA sometimes win in real life even when this calculator favors the Roth?

This tool compares equal dollar contributions, but a Traditional IRA contribution is often tax-deductible today. That deduction refunds cash you could invest in a taxable account, partially offsetting the future tax bill. In effect, the same out-of-pocket cost buys a larger pre-tax contribution. When your current rate exceeds your retirement rate, this advantage typically makes the Traditional IRA the better real-world choice.

What is a realistic expected annual return to enter?

For a diversified stock-heavy portfolio, long-run averages of roughly 6–8% per year are commonly assumed. More conservative mixes with bonds typically justify 4–6%. Use a long-term average, not a single good year, and consider testing lower and higher values to see how sensitive the result is. Returns are never guaranteed, and past performance does not predict future results.

Does this calculator account for IRS contribution limits or Roth income limits?

No. The tool ignores annual contribution caps, Roth eligibility income limits, early-withdrawal penalties, and required minimum distributions (RMDs), which currently apply to Traditional IRAs but not to Roth IRAs. RMDs can force taxable withdrawals you may not need, which is a practical point in the Roth's favor that the math here does not capture. Check current IRS limits before finalizing a contribution strategy.

What's a common mistake when comparing Roth and Traditional IRAs?

The most frequent error is comparing a pre-tax contribution to a Roth with an after-tax contribution to a Traditional account — apples to oranges. Another is assuming one flat tax rate on the entire balance; real withdrawals are taxed progressively, so your effective rate is usually lower than your top bracket. Finally, don't let a small projected difference drive the decision; returns and future tax rates are uncertain, so holding both account types is often the wiser hedge.