Roth vs Traditional IRA calculator

The whole decision comes down to one number: the break-even tax rate. It's your marginal rate today, and — unlike what the other calculators imply — the return and the time horizon don't enter into it.

How the math works

Start with the two after-tax balances. A Roth contribution is made with money you've already paid tax on, so a qualified withdrawal is tax-free — the balance is what you keep. A Traditional contribution is deductible now and taxed on the way out. To compare them fairly you hold the take-home cost equal: a C-dollar Roth contribution and a C / (1 − tnow) Traditional contribution cost the same out of pocket.

Look at the second line. The contribution C, the return r, and the years n all sit inside the shared Roth term, so they scale both accounts by the same factor. What decides which is larger is the ratio (1 − tret) / (1 − tnow) — nothing else. That ratio is above 1 when your retirement rate is lower than today's, which favors Traditional; below 1 when it's higher, which favors Roth; and exactly 1 when the two rates match.

So the break-even retirement tax rate — the rate at which the two accounts tie to the dollar — is simply tnow, your current marginal rate. That's the number the "which should I pick?" mode returns. The dollars mode just multiplies it back out so you can see the size of the gap, but the decision was already made by the two rates.

Worked example

Take a 30-year-old in the 22% marginal bracket putting $7,000 a year — the 2024 IRA contribution limit — into an IRA for 30 years, at the S&P 500 long-run real return of 7.0%. Assume a 15% effective rate in retirement, lower than today because retirement income usually is.

The break-even rate is 22%. This saver expects 15%, which is below it, so the Traditional wins. Here's the size of it. The Roth grows to about $661,226, all spendable, on $210,000 of contributions. Matching that take-home cost in a Traditional means contributing $8,974.36 a year before tax instead of $7,000 — the deduction pays for the difference — and after a 15% retirement tax it lands at $720,566. The Traditional comes out ahead by about $59,341.

Notice what didn't matter. Swap the 7.0% return for 5% or 9%, or the 30 years for 20 or 40, and the Traditional still wins by the same proportion, because the rates decide the winner and everything else just scales the pot. The bank calculators put those inputs front and center anyway, which is how a decision that turns on two tax rates ends up looking like it depends on your market forecast.

When this calculator is wrong

The break-even math is exact. The trouble is the one input it can't check for you: your tax rate in retirement is a forecast, and the number most people plug in is too low. Three forces push the real rate up, and none of the SERP calculators mention them:

• Required minimum distributions raise your own future rate. Starting at age 73, a Traditional IRA or 401(k) forces a taxable withdrawal every year whether you need the cash or not. Save aggressively into Traditional accounts and you're building the very balance that pushes your retirement bracket up — the assumption that your rate falls can undo itself. A Roth has no lifetime RMD.
• Social Security gets taxed based on your other income. Traditional withdrawals count toward the "provisional income" that decides how much of your Social Security benefit is taxable. Roth withdrawals don't. Two retirees with the same lifestyle can face different effective rates purely on account mix.
• Medicare premiums step up with income (IRMAA). Higher taxable income in retirement can lift your Medicare Part B and D premiums through income-related surcharges. It's not income tax, but it's a real marginal cost of a dollar of Traditional withdrawal that the headline rate ignores.
• The contribution limit quietly favors Roth for big savers. The honest comparison wanted $8,974.36 into the Traditional, but the 2024 IRA limit is $7,000 (plus a $1,000 catch-up at 50 and older). If you're already maxing out, you can't contribute the take-home equivalent, so a Roth shelters more real money and the gap narrows or flips.

Put those together and the break-even isn't wrong — but "my rate will be lower in retirement" is a shakier assumption than it sounds. When you can't call it, that uncertainty is itself a reason to look hard at Roth.

What to do with the result

Pin down the only input you actually know: your marginal rate today. If you're not sure of it, the federal tax bracket calculator gives you the marginal and effective rate from your taxable income. That's your break-even. Then decide whether you honestly expect to pay more or less than that in retirement — and factor in a large Traditional 401(k) already throwing off future RMDs, because that raises the rate you're comparing against.

When the two rates are a genuine toss-up, the tie-breakers are real but secondary, and they lean Roth: no required minimum distributions during your lifetime, contributions you can pull out anytime tax- and penalty-free, and withdrawals that don't inflate the income tests behind Social Security taxation and Medicare surcharges. If you can call the rate question, let the rates decide. If you can't, those features are a reasonable reason to lean Roth and move on.

Common questions

Is a Roth or Traditional IRA better?

It turns on your marginal tax rate now versus your expected rate in retirement, and almost nothing else. A higher rate later favors Roth; a lower rate later favors Traditional; equal rates make the two identical to the dollar. Return and time horizon, despite being the headline inputs on most calculators, cancel out of the decision.

What is the break-even tax rate for Roth vs Traditional?

It's your current marginal rate. Hold the take-home cost of the two contributions equal and the accounts tie exactly when your retirement tax rate equals today's. Above that rate, Roth wins; below it, Traditional wins. It doesn't move with the return you assume or the number of years you hold.

Why do other calculators show the Roth winning by so much?

Most compare the same nominal dollars into each account — say $7,000 into a Roth and $7,000 into a Traditional — and tax only the Traditional on the way out. That's not apples-to-apples: the Roth contribution cost more take-home pay, so the framing quietly lets the Roth saver shelter more real money. Match the take-home cost and the gap shrinks or reverses.

Can I contribute to both a Roth and a Traditional IRA?

Yes, but the $7,000 limit (plus the $1,000 catch-up at 50 and older) is a combined cap across all your IRAs, not per account. Roth contributions also phase out at higher incomes — $146,000 to $161,000 of MAGI for a single filer in 2024, and $230,000 to $240,000 for married filing jointly — while a Traditional IRA has no income cap on contributing.

Does my investment return change the Roth vs Traditional answer?

No. A higher return grows both accounts by the same factor, so it changes how big the gap is in dollars but not which account wins. The winner is set entirely by your two tax rates. That's why the decision mode above doesn't ask for a return at all.