Traditional IRA vs. Roth IRA Calculator

Equal ending account balances do not necessarily have equal spending value in retirement. A Traditional IRA balance may include future tax obligations — when you withdraw money, the taxable portion is treated as ordinary income and taxed at your rate at the time of withdrawal. A qualified Roth IRA balance, in contrast, may be available without additional federal income tax.

To compare the two strategies on equal terms, this calculator estimates each account's after-tax value:

The comparison also includes any current tax savings from a deductible Traditional contribution, because those savings represent real after-tax cash that can be invested. Ignoring them would make the Traditional IRA look less valuable than it may actually be.

When part or all of a Traditional IRA contribution is deductible, it may reduce your current taxable income. The simplified estimate used here is:

Actual tax savings can differ because a marginal rate estimate does not model bracket spillover, phaseouts, or other adjustments that a full tax return would capture.

The three comparison methods:

• Same contribution — tax savings invested (default): The same dollar amount is contributed to both accounts. Current tax savings from a deductible Traditional contribution are assumed to be invested in a separate taxable side account. This is the default because it captures the full economic value of the deduction.
• Same out-of-pocket cost: The Roth contribution is used as the after-tax out-of-pocket cost. The Traditional contribution is grossed up so that the deduction makes its after-tax cost equal to the Roth cost.
• Same contribution — tax savings spent: The same amount is contributed to both accounts, but the Traditional tax savings are assumed to be spent rather than invested. This method does not preserve equal economic value.

Traditional IRA contributions may be fully deductible, partially deductible, or nondeductible, depending on your modified adjusted gross income (MAGI), filing status, and whether you or your spouse are covered by a workplace retirement plan.

• If neither you nor your spouse is covered by a workplace plan, a Traditional IRA contribution is generally fully deductible regardless of income.
• If you are covered by a workplace plan, deductibility phases out within an income range that depends on filing status.
• If you are not covered but your spouse is covered by a workplace plan (and you file jointly), a separate — generally wider — phaseout range applies to your deduction.

Losing the deduction does not prohibit you from making a Traditional IRA contribution. A nondeductible contribution is still permitted; you simply do not receive a current-year federal income-tax deduction for the nondeductible portion.

Direct Roth IRA contributions may be fully permitted, partially permitted, or not permitted at all, based on your MAGI and filing status for the tax year.

Your direct Roth contribution limit phases out within the income range for your filing status. Once your MAGI exceeds the top of the phaseout range, no direct Roth contribution is permitted for that year.

Being covered by a workplace retirement plan does not by itself prohibit a Roth IRA contribution. The direct-contribution phaseout is income-based only.

The annual IRA contribution limit applies to all your Traditional and Roth IRAs combined for the same tax year. For example, a person cannot contribute the full annual limit to a Traditional IRA and then contribute the full limit again to a Roth IRA for the same year. The combined total across both account types cannot exceed the applicable annual limit.

Contributions are also limited by your eligible taxable compensation for the year. If your eligible compensation is less than the annual limit, your maximum contribution cannot exceed your compensation.

When part or all of a Traditional IRA contribution is nondeductible, those nondeductible dollars become your IRA basis — the portion that was already taxed and should not be taxed again upon distribution. Basis is generally tracked on IRS Form 8606, which must be filed in any year you make a nondeductible contribution.

The IRS pro-rata rule determines what portion of each distribution is taxable when you have a combination of pre-tax (deductible) and after-tax (basis) amounts. This rule aggregates all your Traditional, SEP, and SIMPLE IRA balances — you cannot choose to withdraw only basis from a single account. This calculator provides a simplified estimate and does not reproduce a complete Form 8606 calculation when other IRA balances exist.

This calculator assumes Roth withdrawals in retirement are qualified distributions, meaning they are tax-free and penalty-free at the federal level. For a Roth IRA distribution to be qualified, two conditions generally must be met:

• The account owner must be age 59½ or older at the time of distribution.
• At least five tax years must have passed since the first year a Roth IRA contribution was made (the five-year rule).

Early or nonqualified distributions may receive different tax treatment, including possible income tax and a 10% early-withdrawal penalty on earnings. This calculator does not compute a complete early-withdrawal tax and penalty calculation.

The future retirement tax rate is one of the most important and least knowable inputs in this comparison. It depends on many factors that cannot be predicted, including:

• Your total retirement income and its sources
• Filing status in retirement
• Federal and state tax law at the time of withdrawal
• Required minimum distributions and their effect on taxable income
• Taxation of Social Security benefits
• Pensions and other income
• Withdrawal timing and sequence across multiple account types
• State of residence in retirement

Because the future rate is uncertain, this calculator displays a sensitivity table showing results across a range of possible future tax rates. Testing multiple scenarios is more informative than relying on any single rate assumption.

The break-even future tax rate is the modeled combined retirement tax rate at which the Traditional and Roth strategies produce approximately equal after-tax values under the entered assumptions. When your expected future tax rate is below the break-even, the Traditional strategy has the higher modeled value; when it is above the break-even, the Roth strategy does.

The break-even rate is not a forecast, a recommended tax rate, a guaranteed threshold, or a substitute for a comprehensive retirement income plan. It is a decision-support tool that shows how sensitive the comparison is to future tax-rate assumptions.

Under current federal law, Traditional IRAs are generally subject to required minimum distributions (RMDs) beginning at an applicable age. RMDs require account owners to withdraw a minimum amount each year, which is taxed as ordinary income, regardless of whether the funds are needed. This can increase taxable income in retirement and affect other income-based calculations such as Social Security benefit taxation and Medicare premiums.

Roth IRAs generally are not subject to lifetime RMDs for the original account owner under current federal rules, which is one reason some savers prefer Roth accounts for long-term tax and estate-planning flexibility.

This calculator compares account values at the selected retirement age and does not fully model a lifetime RMD schedule or the year-by-year tax effects of RMDs.

State income tax treatment of IRA contributions and withdrawals varies significantly by state. Some states conform to federal IRA tax treatment, some offer partial deductions or exclusions, and some have no income tax at all. The optional current and future state-rate fields in this calculator are simplified assumptions applied uniformly — they do not model the specific rules of any state.

Do not assume your state follows federal IRA tax treatment. Verify the rules of your current and expected retirement state with a qualified tax professional or your state's department of revenue.

Nominal future values represent the dollar amount you expect to have at retirement without adjusting for purchasing power. Inflation reduces what those dollars can buy. To express future balances in today's dollars, use the inflation-adjusted display mode:

For example, $500,000 in 25 years at 3% annual inflation has approximately the purchasing power of $239,000 today. Inflation-adjusted values help you understand what the projected balances mean in real terms, not just as nominal numbers.