Roth vs Traditional Calculator
Compare the after-tax retirement value of a Roth vs a Traditional (pre-tax) contribution based on your tax rates now and in retirement.
How to use this tool
- Enter the gross (pre-tax) amount you can contribute.
- Set your expected return and the number of years until withdrawal.
- Enter your marginal tax rate today and your expected rate in retirement.
- Compare the after-tax values and see which account wins.
Should you contribute to a Roth or a Traditional retirement account? It comes down to your tax rate now versus in retirement. Enter both to see the after-tax winner.
Formula
Traditional (pre-tax in, taxed at withdrawal): C × (1 + r)n × (1 − tretire).
Roth (taxed now, tax-free withdrawal): C × (1 − tnow) × (1 + r)n.
Because growth (1 + r)n multiplies both, the winner depends only on the tax rates: Roth wins when your rate today is lower than in retirement, Traditional wins when it's higher, and they tie when the two rates are equal.
How it works
The Roth-versus-Traditional decision is, at its core, a bet on tax rates. A Traditional (pre-tax) contribution skips tax today and is taxed when you withdraw; a Roth contribution is taxed today and grows tax-free. When the dollar amount invested and the growth rate are the same, the deciding factor is whether your marginal tax rate is higher now or in retirement.
This calculator holds the gross (pre-tax) contribution constant and applies each account's tax treatment, so the comparison is apples-to-apples on a single contribution. If your tax rate is lower now than later, Roth comes out ahead; if it's higher now, Traditional wins; if the rates match, the two are mathematically identical.
This is a simplified, single-contribution model. It does not capture annual contribution limits, employer matching (always pre-tax), Required Minimum Distributions, state taxes, or the value of tax diversification across both account types. Reviewed by the AbraCalc Retirement Desk; for personalized advice consult a tax professional.
Worked example
$10,000 contribution, 0% return, 20 years, 22% now vs 32% later
- Growth factor = (1 + 0)20 = 1.
- Traditional after tax = $10,000 × 1 × (1 − 0.32) = $10,000 × 0.68 = $6,800.
- Roth after tax = $10,000 × (1 − 0.22) × 1 = $10,000 × 0.78 = $7,800.
- Roth advantage = $7,800 − $6,800 = $1,000.
- Because today's 22% rate is below the future 32% rate, Roth is better.
Traditional $6,800 vs Roth $7,800 — Roth wins by $1,000.
Which account wins, by tax-rate comparison
| Tax rate now vs retirement | Winner | Why |
|---|---|---|
| Now lower than retirement | Roth | Lock in today's lower rate; withdraw tax-free later |
| Now equal to retirement | Equal | Identical after-tax outcome by the math |
| Now higher than retirement | Traditional | Defer tax to a lower future bracket |
Key terms
- Traditional account
- A 401(k) or IRA funded with pre-tax dollars; contributions reduce taxable income now and withdrawals are taxed as ordinary income later.
- Roth account
- A 401(k) or IRA funded with after-tax dollars; qualified withdrawals, including all growth, are completely tax-free.
- Marginal tax rate
- The tax rate applied to your next dollar of income — the relevant rate for deciding between pre-tax and Roth contributions.
- Tax diversification
- Holding both pre-tax and Roth balances so you can manage your taxable income flexibly in retirement.
Frequently asked questions
- Is Roth or Traditional better?
- Roth is better when your tax rate today is lower than it will be in retirement; Traditional is better when today's rate is higher. If the rates are equal, the after-tax result is identical.
- Why does the growth rate not change the winner?
- Growth (1 + r)^n multiplies both options equally, so it cancels out of the comparison. Only the two tax rates determine which account ends with more after tax.
- What about employer matching?
- Employer matches are always made pre-tax (Traditional-style), regardless of where you contribute. This calculator compares a single personal contribution and excludes matching.
- Should I just split between both?
- Many savers hold both for tax diversification, which hedges against uncertainty about future tax rates and gives flexibility to manage taxable income in retirement.