How to use the IRA calculator
The Roth vs traditional tab compares what each account leaves you after tax. The Eligibility tab tells you what you are allowed to contribute and deduct.
- Annual contribution. What you plan to put in each year. The calculator caps it at each year’s IRA limit, adding the catch-up from age 50.
- Return and ages. The average yearly return and how many years the money has to grow.
- Tax rates. Your marginal rate now (federal bracket plus state) and the rate you expect to pay on traditional IRA withdrawals in retirement.
- Tax drag. How much return the taxable side account loses to tax each year, used only in the equal-cost comparison.
On the Eligibility tab, choose whether you or your spouse are covered by a workplace plan such as a 401(k), then enter your filing status, modified AGI and age.
How the comparison works
A Roth and a traditional IRA holding the same investments grow to the same balance. The difference is when the tax is paid. The calculator shows two comparisons, because they answer different questions:
Roth after tax = Balance
Traditional, same contribution = Balance × (1 − tret)Contributions are made at the start of each year at return r. tret is your tax rate on withdrawals. This comparison ignores the fact that a traditional contribution costs less out of pocket.
Traditional + invested savings = Balance × (1 − tret) + Side account
Break-even rate = Side account ÷ BalanceEach year's tax deduction (Contribution × tnow) is invested in a taxable account, so both options cost the same today. The Roth wins when tret is above the break-even rate.
With no tax drag, the break-even rate equals your tax rate today: if your rate does not change, the two accounts tie. Tax drag on the side account tilts the result toward the Roth.
A worked example
A saver who is 30 years old puts $7,000 a year into an IRA until 65 years, earning 7%. That is $245,000 contributed, growing to $1,035,394 in either account.
Today the saver’s marginal rate is 22%, and they expect to pay 15% on withdrawals. The Roth is worth $1,035,394, all of it tax-free. The traditional IRA owes $155,309 in tax, leaving $880,085. But the traditional contribution saved $1,540 of tax in the first year, and those savings, invested with 1% of drag, grow to $181,906.
Counting the side account, the traditional route ends with $1,061,991: the Traditional IRA comes out ahead by $26,597. The break-even retirement rate is 17.6%.
How the retirement tax rate decides it
| Retirement tax rate | Roth | Traditional + savings | Better choice |
|---|---|---|---|
| 12% | $1,035,394 | $1,093,053 | Traditional |
| 15% (example) | $1,035,394 | $1,061,991 | Traditional |
| 22% | $1,035,394 | $989,514 | Roth |
| 32% | $1,035,394 | $885,974 | Roth |
At 22%, the same rate as today, the Roth comes out ahead only because of the tax drag on the side account. With no drag the break-even is exactly 22.0%.
Two things make the retirement rate hard to guess. Traditional withdrawals stack on top of Social Security, pensions and required minimum distributions, which can push retirees into higher brackets than they expect. And tax law can change over a 35-year horizon. Many savers hold both kinds of account so that they can choose where to draw from each year.
When the “same contribution” view is the right one
The equal-cost comparison assumes you really invest the tax saving every year. Most people do not: the refund gets spent. If you would contribute the same dollar amount either way, the Roth simply shelters more money, and it beats the traditional IRA by the full tax on withdrawals, $155,309 in the example.
This matters most for anyone contributing the maximum. A $7,500 Roth contribution holds more after-tax value than a $7,500 traditional one, because the limit is the same but the Roth dollars are already taxed.
Eligibility: income limits and deductions
Anyone with taxable compensation can contribute to a traditional IRA, but two separate income tests apply:
- Roth contributions phase out by modified AGI, whether or not you have a workplace plan. Single filers lose eligibility between $153,000 and $168,000.
- The traditional IRA deduction phases out only if you, or your spouse, are covered by a workplace plan.
Within a phase-out range the allowance falls in proportion to how far your MAGI is into the range. The IRS rounds the result up to the next $10, and if it falls below $200 but above zero you may still contribute or deduct $200.
A single filer covered by a 401(k) with $160,000 of MAGI can put $4,000 into a Roth IRA, part of the full $7,500. They cannot deduct a traditional contribution. At $86,000, they could deduct $3,750. A married couple with $200,000 where only the spouse has a workplace plan keeps a full $7,500 deduction.
The backdoor Roth
At $180,000 of MAGI, a single filer is above the Roth limit, so the direct Roth allowance is $0. The common workaround is the backdoor Roth: contribute to a traditional IRA without taking a deduction, then convert that money to a Roth IRA. Conversions have no income limit. Little or no tax is due if you convert quickly, before the money earns much.
The catch is the pro-rata rule. If you hold pre-tax money in any traditional, SEP or SIMPLE IRA, the conversion is treated as coming proportionally from pre-tax and after-tax money, and the pre-tax share is taxable. Rolling old IRA balances into a 401(k) first is one way people avoid this. Report nondeductible contributions on Form 8606.
What this calculator does not include
- Changing tax rates over time. One rate now and one in retirement stand in for a lifetime of brackets.
- Withdrawal rules. Roth earnings are tax-free only after age 59½ and five years; early traditional withdrawals usually add a 10% penalty.
- RMDs. Traditional IRAs require minimum distributions from your 70s; Roth IRAs do not for the original owner.
- Compensation and spousal rules. Contributions cannot exceed earned income, and other special cases are not modeled.
- State nuances. Some states tax retirement income differently from wages.