Roth vs Traditional IRA / 401(k)

One question decides this: pay tax now, or pay tax later? This tool puts the same dollars into each and shows what you actually keep.

ROTH · tax now, never again

−Paycheck is taxed first: you contribute after-tax dollars

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◈Grows tax-free for decades: no tax on dividends or gains, ever

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✓Withdraw 100% tax-free in retirement (59½+)

TRADITIONAL · tax later

✓Contribute pre-tax: the contribution is deducted, cutting this year's tax bill

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◈Grows tax-deferred: nothing taxed while it compounds

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−Every withdrawal is taxed as ordinary income in retirement

Rule of thumb Higher retirement tax rates favor Roth; lower rates favor Traditional. The break-even rate below also accounts for tax on the invested deduction’s gains.

2026 IRA limit $7,500/yr 2026 401(k) limit $24,500/yr · IRS rules What can they hold?

Inputs

Annual contribution

Current age

yrs

Retirement age

yrs

Expected return

Tax rate now

Tax rate in retirement

Results

Roth (after tax)

Traditional (after tax)

Winner

Total contributed

After-tax value in retirement

Roth advantage vs your retirement tax rate

The higher your retirement tax rate, the more Roth's tax-free withdrawals are worth versus Traditional. The dot marks your assumption.

Both paths use the same annual take-home budget. Each retirement account receives the entered contribution; Traditional also invests its tax deduction in a taxable side account. Full deductibility is assumed, the Traditional withdrawal is taxed at your retirement rate, and positive side-account gains are taxed once at 15% at retirement. No annual side-account tax drag, income limits, employer match, required distributions, state taxes or future tax-law changes are modeled. Check eligibility and contribution limits separately.

About this tool

Roth or Traditional? This calculator compares the two honestly: the Traditional path invests the up-front tax deduction in a side account instead of ignoring it, then compares after-tax outcomes at retirement and finds the break-even tax rate where the answer flips.

The whole decision compresses to one comparison: your marginal tax rate today versus your expected rate in retirement. Pay tax now if you expect higher rates later (Roth); defer if you expect lower rates later (Traditional). Everything else is detail, which is exactly what makes the honest side-account math worth running.

Frequently asked questions

Roth or Traditional, which wins?

Higher retirement tax rates favor Roth and lower rates favor Traditional. This model also taxes gains on the invested Traditional deduction, so its break-even retirement rate can be below your current rate. Use the calculated break-even instead of assuming equal rates always tie.

What if tax rates rise for everyone?

Broad rate increases favor the Roth, since its withdrawals are tax-free regardless. That uncertainty is a real argument for holding some of each, which also buys flexibility to manage taxable income in retirement.

Can I contribute to both?

Yes, subject to IRS annual limits across the accounts and income limits on Roth IRA contributions. Splitting contributions is a legitimate hedge on future tax rates, not indecision.