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 Expect a higher tax rate in retirement → Roth wins · expect lower → Traditional wins · same rate → mathematically a tie
IRA limit $7,000/yr 401(k) limit $23,500/yr What can they hold?
$
yrs
yrs
%
%
%
Results
Roth (after tax)
$0
Traditional (after tax)
$0
Winner
-
Total contributed
$0
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 contribute the same dollar amount each year from your current age to your retirement age. Roth is funded with after-tax dollars and withdrawn tax-free; Traditional is contributed pre-tax (so it costs less take-home today), grows tax-deferred, and is taxed as ordinary income on withdrawal. We show the actual after-tax balance each leaves you at retirement - no hypothetical side account. Ignores income limits, employer match, required minimum distributions, state taxes and future tax-law changes. An employer match (free money) makes capturing the 401(k) match worth it regardless of which type you choose.