Finance
Roth vs Traditional Calculator
Should you contribute to a Roth or a traditional 401(k)/IRA? Enter your contribution, time horizon, return, and tax rates now and in retirement to compare the after-tax value of each.
Quick answer: Roth contributions are taxed now and grow tax-free; traditional contributions are deducted now and taxed at withdrawal. Roth wins when your tax rate in retirement is higher than today's; traditional wins when it's lower.
How it works
1. Same pre-tax dollars
The comparison assumes the same pre-tax contribution. Traditional invests the full amount; Roth invests what's left after paying today's tax, since Roth uses after-tax money.
2. Grow both balances
Each balance grows at your assumed return over the years to retirement. The traditional balance is larger along the way because more went in untaxed.
3. Apply tax at the end
The traditional balance is taxed at your retirement rate on withdrawal; the Roth is tax-free. Whichever has the higher after-tax value wins for your rate assumptions.
Frequently asked questions
Should I choose Roth or traditional?
Choose Roth if you expect a higher tax rate in retirement than today — common for younger or lower-income savers. Choose traditional if you're in a high bracket now and expect a lower one later.
Is Roth better than traditional?
Neither is universally better; it depends on your tax rate now versus in retirement. If the rates are equal, the after-tax results are identical. Roth also avoids required minimum distributions and gives tax-free flexibility.
What if my tax rate is the same now and in retirement?
If your tax rate doesn't change, Roth and traditional produce the same after-tax balance — the math is symmetric. The tiebreakers become RMD rules, contribution limits, and how much you can afford to set aside.