Calculator
401(k) / IRA / Roth IRA Calculator
401(k) / IRA / Roth IRA Calculator
Winner After Tax: Traditional
$1,240,406.5
Account Analysis
On equal $12,000 annual contributions over 30 years, both accounts grow to $1,590,264.74 before tax. Because your 22% expected retirement rate is below your 24% rate today, the Traditional account wins: after taxes you keep $1,240,406.5 versus $1,208,601.2 for Roth — a $31,805.29 edge for deferring tax now.
*Assumes a constant annual return, fixed tax rates, and equal-dollar contributions across account types. 2025 contribution limits are $23,500 for a 401(k) ($31,250 with catch-up at 50+) and $7,000 for an IRA ($8,000 at 50+). Real outcomes depend on returns, tax law changes, and contribution behavior. Not tax or investment advice.
Traditional vs. Roth: When Do You Want to Pay the Taxman?
America's retirement system rests on three tax-advantaged pillars: the 401(k), the traditional IRA, and the Roth IRA. The first two are 'traditional' accounts — you contribute pre-tax dollars, the money grows untaxed, and withdrawals in retirement are taxed as ordinary income. The Roth flips the script: you pay income tax on contributions today, then everything — growth and withdrawals — comes out tax-free after 59½. Choosing between them is really one decision about timing: do you prefer a tax bill you know today, or one of unknown size decades from now? Most Americans have never run the comparison, and it costs them. The answer usually traces your tax arc across a career: workers in low brackets early on are better served by Roth because they are paying tax at bargain rates and locking in decades of tax-free growth. Peak earners in the 24-37% brackets get more value from traditional pre-tax money because deferral converts an immediate 35-cent tax into a likely 22-cent tax later. Many planners split the difference for 'tax diversification.' This calculator runs both outcomes side by side on equal-dollar contributions and shows which route leaves you more after-tax money.
Equal-Dollar Comparison Across the Tax Arc
Both account types grow with the identical future-value math: the current balance compounds forward, and annual contributions compound as an annuity — FV = balance × (1+r)^years + contribution × [((1+r)^years − 1) ÷ r]. That identical growth is the whole point of the comparison: the split happens only at each end, where taxes attach. The traditional side pays nothing today and taxes every withdrawal at the retirement rate: after-tax value = gross FV × (1 − retirement tax rate). The Roth side taxes every contribution up front at today's marginal rate, so on an equal out-of-pocket basis the seeded amount is smaller — after-tax value = gross FV × (1 − current tax rate) — but withdrawals are tax-free. Compare the two after-tax values and one truth emerges: whichever side has the lower tax rate at its taxable moment wins. If the current rate exceeds the retirement rate, traditional wins; if the retirement rate exceeds the current one, Roth wins; if they are equal, the values are mathematically identical and the Roth's non-tax perks tip the scale.
Expert Insights
Tax Diversification Is Real Insurance
Nobody knows the 2055 tax code. Holding both traditional and Roth money gives you a 'tax dial' in retirement — spend Roth in high-income years to stay under bracket thresholds, draw traditional money in low-income years. A 60/40 split between pre-tax and Roth is a reasonable default for mid-career savers who can't predict which rate they will face.
The Match Changes a 401(k)'s Math
If your employer matches 50 cents per dollar up to 6% of salary, that is an instant 50% return that dwarfs any Roth-versus-traditional difference. Always take the 401(k) match first, whatever its tax flavor. The Roth question then applies mainly to IRA dollars and to any 401(k) contributions above the match.
Roth Has Structural Perks Beyond the Tax Rate
Roth IRAs have no required minimum distributions during the owner's life, so the money can compound untouched into your 70s and 80s. Roth dollars also protect you against future tax-rate increases and pass to heirs income-tax-free. In a close rate comparison these structural benefits — not just the tax math — usually tip the decision toward Roth.
Actionable Tips
- 1
Run the Order-of-Operations Waterfall
The consensus sequence: contribute enough to your 401(k) to capture the full employer match; then max a Roth IRA (tax-free forever, $7,000 for 2025); then return to the 401(k) up to the $23,500 limit. Each tier uses the account whose tax treatment best fits where you are in your income arc.
- 2
Use Low-Income Years to Convert to Roth
Job loss, sabbaticals, or early-retirement gaps put you in a temporarily low bracket. Convert some traditional IRA or 401(k) money to Roth in those years to pay the conversion tax cheaply. The calculator shows exactly how much the bracket gap is worth per dollar moved.
- 3
Update the Inputs With Every Raise
Your current tax bracket is the swing input. When a raise pushes you into a higher bracket, revisit the comparison — traditional contributions become more valuable as your rate rises. A once-a-year re-run during 401(k) open enrollment keeps your election aligned with reality.
Real-World Examples
Maya Locked in a 12% Tax Rate at 26
Maya, a physical therapist in Raleigh earning $62,000, was in the 12% bracket. The calculator showed that contributing Roth at that rate and letting it compound 39 years would leave her more after-tax than traditional contributions taxed later in retirement at an expected 22%. She directed her full 401(k) contribution to the Roth option and opened a Roth IRA on top.
David Deferred at a 35% Peak, Will Collect at 24%
David, a partner at a law firm earning $410,000, faced a 35% marginal rate. The calculator showed that each traditional 401(k) dollar saved 35 cents of tax today versus paying just 24 cents in retirement — more than $25,000 of advantage over a decade of maxed contributions. He maxed his 401(k) pre-tax and saved Roth contributions for the charitable and conversion strategies.
The Alvarez Family Split the Difference
Rosa and Miguel Alvarez, both 45, couldn't agree on future tax rates, so they diversified intentionally: max pre-tax 401(k) contributions to bring their taxable income below the 24% threshold, then each contributed $7,000 to a Roth IRA with after-tax dollars. The equalization gave them a tax-free bucket for high-expense years and a pre-tax bucket that keeps them under Medicare and bracket cliffs in retirement.
Glossary of Terms
- Traditional (Pre-Tax) Account
- A retirement account, such as a 401(k) or traditional IRA, funded with pre-tax dollars; withdrawals in retirement are taxed as ordinary income.
- Roth (After-Tax) Account
- A Roth 401(k) or Roth IRA funded with after-tax dollars; both growth and qualified withdrawals come out free of federal income tax.
- Tax Diversification
- Holding retirement assets across pre-tax, Roth, and taxable buckets so future spending can be shifted between them to manage tax brackets.
Frequently Asked Questions
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Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the US tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.