Roth vs Traditional IRA Calculator

A deductible Traditional IRA contribution reduces taxable income now and is taxed when withdrawn; a Roth IRA is funded with already-taxed money and qualified withdrawals come out tax-free. Which one leaves you with more depends on your tax rates and what you do with the Traditional IRA's tax saving. This calculator compares equal yearly contributions, assuming full deductibility and eligibility to contribute.

How to use this tool

1. Enter how much you plan to contribute each year and how many years until you retire.
2. Enter an expected annual return.
3. Enter your tax rate now and the rate you expect to pay on withdrawals in retirement.
4. Decide whether you would invest the yearly tax saving from a Traditional IRA, and the tax rate on its gains.

Formula

Roth = C × A Traditional = C × A × (1 − t_retire) + invested tax savings

C is the yearly contribution and A = (1 + R) × ((1 + R)^n − 1) ÷ R is the growth factor for n deposits made at the start of each year at return R. At 0% return, A = n. A Traditional IRA saves C × t_now in tax each year; if you invest it, it grows in a taxable account and its gains are taxed at your capital-gains rate when you sell.

Example

Contributing $7,500 a year for 30 years at a 7% return builds $758,047.81 in either account. The Roth is yours tax-free. The Traditional IRA leaves $644,340.64 after a 15% tax on withdrawals, but its yearly $1,650 tax saving, invested and taxed at 15% on gains, adds $149,179.94 — a total of $793,520.58, so here the Traditional IRA comes out about $35,473 ahead. Untick "invest the tax savings" and the Roth wins instead.