Roth vs Traditional IRA
Compare the after-tax value of saving the same amount of pre-tax income into a Roth versus a Traditional IRA. Adjust contributions, years, returns, and tax rates to see which strategy has the edge under simple, steady-assumption math.
Assumptions
This model assumes steady tax rates, level annual contributions at year-end, and no contribution limits or phaseouts. It is purely educational and not tax advice.
Per-Dollar Comparison
Think of this as what happens to $1 of pre-tax income you're willing to save.
Roth IRA: $1 now$8 after-tax at retirement
Traditional IRA: $1 now$9 after-tax at retirement
Advantage per $1 saved-$1
End Balance (Annual Contributions)
Total contributions (pre-tax salary over the years)$679,699
Roth IRA (after-tax, tax-free later)$530,165
Traditional IRA (after retirement tax)$577,744
Which side wins under these assumptions?
Traditional has the edge. Deferring tax now at 22.0% and paying later at 15.0% produces more after-tax wealth under these assumptions.
Rule-of-Thumb Insight
- • In this simplified model, the breakeven happens when your retirement marginal tax rate equals your current marginal tax rate.
- • If you expect your retirement tax rate to be lower than today's, Traditional tends to win for the same pre-tax savings effort.
- • If you expect your retirement tax rate to be higher, Roth often comes out ahead because you lock in today's lower tax rate on the contributed dollars.
- • Real life adds complexity: employer matches, contribution limits, RMD rules, Social Security taxation, state taxes, and estate planning can all influence the optimal mix.