Pay tax now or later? Compare both accounts on the same out-of-pocket cost.
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A traditional account gives a tax deduction today and you pay tax on withdrawals. A Roth gives no deduction but withdrawals are tax-free. If your tax rate is the same then as now, both end up equal; a lower rate in retirement favours traditional, a higher one favours Roth.
For a fair comparison the calculator assumes you invest the tax saving from a traditional contribution, so both cost you the same each year.
| Yearly contribution (out of pocket) | 7,500 $ |
| Years until retirement | 30 years |
| Expected yearly return | 7% |
| Your tax rate now (federal + state) | 22% |
| Expected tax rate in retirement | 12% |
| Better choice for you | Traditional ($97,186 more after tax) |
| Roth: after-tax value | $758,048 |
| Traditional: after-tax value | $855,233 ($971,856 before tax) |
| Same out-of-pocket cost | $7,500 a year (traditional invests the tax saving too: $9,615) |
Traditional ($97,186 more after tax).
| Yearly contribution (out of pocket) | 7,500 $ |
| Years until retirement | 30 years |
| Expected yearly return | 7% |
| Your tax rate now (federal + state) | 12% |
| Expected tax rate in retirement | 22% |
| Better choice for you | Roth ($86,142 more after tax) |
| Roth: after-tax value | $758,048 |
| Traditional: after-tax value | $671,906 ($861,418 before tax) |
| Same out-of-pocket cost | $7,500 a year (traditional invests the tax saving too: $8,523) |
Roth ($86,142 more after tax).
Roth is better if you expect a higher tax rate in retirement; traditional is better if you expect a lower one. Many people split contributions to hedge.
Younger workers in the 10–12% brackets, people expecting large pensions or RMDs, and anyone wanting tax-free money for heirs.
People in the 24% bracket or higher who expect lower income in retirement, and those who need the deduction to qualify for credits.
Roth IRAs and (since 2024) Roth 401(k)s have no required minimum distributions for the original owner.