Roth vs Traditional IRA Calculator

The Core Math: Tax Now vs. Tax Later

The decision between a Roth and a Traditional IRA comes down to a single concept: tax rate arbitrage. A Traditional IRA gives you a tax deduction today. You invest pre-tax dollars, they grow tax-deferred, and you pay income tax when you withdraw the money in retirement. A Roth IRA works in reverse. You invest after-tax dollars, they grow tax-free, and you withdraw the money completely tax-free in retirement.

Mathematically, if your tax rate today is exactly the same as your tax rate in retirement, the two accounts produce the exact same after-tax result. The choice only matters if you believe your tax rate will be higher or lower when you retire. If you expect higher taxes later (due to government debt, higher income, or changes in tax law), the Roth wins. If you expect lower taxes later, the Traditional wins.

Why the Roth IRA Often Wins in Practice

Even if your tax brackets stay the same, the Roth IRA has structural advantages. First, it has no Required Minimum Distributions (RMDs). With a Traditional IRA, the IRS forces you to start withdrawing money at age 73. With a Roth, you can leave the money invested indefinitely, growing tax-free for your heirs. Second, the Roth provides tax diversification. If you enter retirement with a mix of pre-tax (Traditional 401k/IRA) and post-tax (Roth) money, you can control your taxable income year-by-year to stay in the lowest possible bracket.

Third, Roth contributions (not earnings) can be withdrawn at any time penalty-free and tax-free. This acts as a backup emergency fund. Traditional IRA withdrawals before age 59½ are subject to a 10% penalty plus income tax, unless you qualify for an exception.

When the Traditional IRA Wins

The Traditional IRA is mathematically superior if you are currently in a high tax bracket (32% or higher) and expect to be in a lower bracket in retirement. Taking the tax deduction now saves you 32% to 37% on every dollar contributed. If you withdraw that money in retirement at 22%, you pocket the 10% to 15% difference in tax savings.

High earners often use the Traditional IRA to lower their Modified Adjusted Gross Income (MAGI) today, which can help them qualify for other tax credits, avoid the Net Investment Income Tax (NIIT), or stay under income thresholds for other benefits.

The "Backdoor Roth" Strategy for High Earners

If your income is too high to contribute directly to a Roth IRA (above $161,000 for single filers or $240,000 for married filing jointly in 2026), you can use a "Backdoor Roth." This involves making a non-deductible contribution to a Traditional IRA, and then immediately converting that money into a Roth IRA. Because you already paid tax on the contribution, the conversion is (mostly) tax-free.

The Backdoor Roth is legal and widely used, but it is subject to the "Pro-Rata Rule." If you have existing pre-tax money in any Traditional IRAs, the IRS looks at the total balance. You cannot just convert the new non-deductible contribution; a portion of the conversion will be taxable based on the ratio of pre-tax to post-tax money. This often requires the help of an accountant.

Contribution Limits and Income Caps for 2026

For 2026, the maximum annual contribution is $7,000 (or $8,000 if you are 50 or older). This is a combined limit across all your IRAs. There is no income limit to contribute to a Traditional IRA, but the ability to deduct the contribution phases out if you (or your spouse) are covered by a workplace retirement plan.

Direct Roth IRA contributions are limited by income. Single filers can contribute the full amount if they earn under $146,000, with the ability phasing out completely at $161,000. Married couples filing jointly can contribute fully under $230,000, phasing out at $240,000. If you are above these limits, the Backdoor Roth strategy is the standard workaround.