How to use this calculator
Enter your planned annual IRA contribution (up to the 2025 limit of $7,000, or $8,000 if you're 50 or older), your current age, and when you plan to retire. Then set your current marginal tax rate and your best estimate of your retirement tax rate. Finally, enter the annual investment return you expect.
The calculator shows you the final balance for both account types, the Traditional IRA's after-tax value, and which option gives you more spendable money in retirement. The year-by-year table lets you see how both accounts grow over time and diverge based on the tax treatment.
Roth vs Traditional IRA explained
Both Roth and Traditional IRAs are tax-advantaged retirement accounts that let your investments grow without being taxed each year. The difference is when you pay taxes. A Traditional IRA gives you a tax deduction now, you contribute pre-tax dollars and reduce your taxable income today. But when you withdraw in retirement, every dollar is taxed as ordinary income.
A Roth IRA works the opposite way. You contribute money you've already paid taxes on, no deduction today. But in retirement, your withdrawals are completely tax-free, including all the investment gains. This can be enormously valuable if your account has grown substantially over decades.
Here's the mathematical insight that surprises most people: if your tax rate is the same now and in retirement, both accounts produce the exact same after-tax result. The Roth vs Traditional decision is really a bet on whether your future tax rate will be higher or lower than your current one.
When each type wins
Roth wins when your retirement tax rate is higher than your current rate. This is common for younger workers early in their careers who are in lower tax brackets now but expect higher earnings (and higher brackets) later. It also applies if you believe overall tax rates will increase in the future due to government policy.
Traditional wins when your retirement tax rate is lowerthan your current rate. This is typical for high-income earners in their peak earning years who expect to live on less taxable income in retirement. If you're currently in the 32% or 35% bracket but expect to drop to 22% or 24% in retirement, the Traditional IRA saves you significant money.
Many financial advisors recommend having both types of accounts for tax diversification. This gives you flexibility to draw from the optimal account each year based on your actual income and tax situation in retirement.
Frequently asked questions
What is the difference between a Roth IRA and a Traditional IRA?
The key difference is when you pay taxes. With a Traditional IRA, you contribute pre-tax dollars (getting a tax deduction now) and pay income taxes when you withdraw in retirement. With a Roth IRA, you contribute after-tax dollars (no deduction now) but all withdrawals in retirement are completely tax-free, including investment gains.
Which is better, a Roth IRA or Traditional IRA?
It depends on your current tax rate versus your expected retirement tax rate. If you expect to be in a higher tax bracket in retirement, a Roth IRA is better because you pay the lower rate now. If you expect a lower bracket in retirement, a Traditional IRA wins. If the rates are the same, both produce identical after-tax results.
What are the IRA contribution limits for 2025?
For 2025, the IRA contribution limit is $7,000 per year if you're under 50, and $8,000 if you're 50 or older. This limit applies to your total contributions across all Traditional and Roth IRAs combined, not per account.
What are the income limits for Roth IRA contributions?
In 2025, single filers can contribute the full amount if their MAGI is below $150,000. Contributions phase out between $150,000 and $165,000. For married filing jointly, the phase-out range is $236,000 to $246,000. High earners can use the backdoor Roth strategy to work around these limits.