Traditional vs Roth IRA

Personal Finance

Updated Apr 2026 • Has calculator

Comparison of after-tax retirement balances between a Traditional (pre-tax) and Roth (after-tax) IRA.

What is Trad vs Roth IRA?

The core trade-off between a Traditional and Roth IRA is about timing: Traditional contributions are pre-tax (you pay tax on withdrawal), while Roth contributions are after-tax (withdrawals are tax-free). If you expect to be in a higher tax bracket in retirement than today, the Roth wins. If you expect a lower bracket, Traditional wins. At identical tax rates, both are mathematically equivalent. The 2025 combined IRA contribution limit is $7,000 ($8,000 if age 50+).

Formula

Roth Advantage % = (Retirement Tax − Current Tax) ÷ (100 − Retirement Tax) × 100

Worked Example

2025

Step 1 Annual contribution: $7,000 | Term: 30 years | Return: 8%

Step 2 Current tax rate: 22% | Expected retirement rate: 25%

Step 3 Traditional after-tax balance: $7,000 × FV annuity × (1−25%) ≈ $590,273

Step 4 Roth balance: $7,000 × (1−22%) × FV annuity ≈ $613,884

Step 5 Roth advantage: +4.0% ($23,611 more after-tax)

Step 6 → Use Roth if taxes are likely to rise; Traditional if taxes will fall

Source: IRS — Traditional and Roth IRAs, Publication 590-A (2025-01-01)

Calculate Trad vs Roth IRA

Annual Contribution

Annual IRA contribution (2025 limit: $7,000; $8,000 if 50+)

Years to Retirement

Years until you start withdrawing

Expected Annual Return

Expected nominal annual return on investments

Current Marginal Tax Rate

Your current federal marginal income tax rate

Expected Retirement Tax Rate

Expected tax rate when you withdraw in retirement

Roth Advantage

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Not investment advice.

How to Interpret Trad vs Roth IRA

< -10

Traditional clearly better — taxes expected to fall significantly

-10 – -2

Traditional slightly better — lower taxes in retirement

-2 – 2

About equal — marginal tax rates similar

2 – 10

Roth slightly better — taxes expected to rise

> 10

Roth clearly better — taxes expected to rise significantly

📚 Retirement Planning — Complete the path

Sources