Retirement Planning
Roth vs Traditional
IRA Calculator
Estimate from your tax bracket
Most retirees have lower income
The only question that matters
Roth and Traditional IRAs are mathematically identical — if your tax rate never changes. The entire decision comes down to one question: Is your tax rate higher now or higher in retirement?
Traditional IRA: You deduct contributions now (lowering this year's taxes). Money grows tax-deferred. You pay ordinary income tax on withdrawals in retirement.
Roth IRA: You pay tax on contributions now. Money grows tax-free. You pay nothing on withdrawals in retirement — not on contributions, not on gains, nothing.
If your tax rate now is higher than it will be in retirement, Traditional wins. If your tax rate now is lower, Roth wins. If they're the same, it's a tie — both produce identical after-tax spending power.
Why your tax rate will (probably) drop
Most people have lower taxable income in retirement because:
- You're no longer earning a salary
- You stop paying FICA taxes (7.65% right there)
- You can control how much you withdraw from Traditional accounts
- You may move to a state with lower or no income tax
A married couple earning $150,000 today (22% bracket) might need only $80,000 in retirement (12% bracket). For them, Traditional is a clear winner.
The exception: Young high-earners in low brackets (e.g., a 25-year-old making $50,000 in the 12% bracket) should lean Roth. Their income will almost certainly rise, and they'll never have a lower tax rate than they do right now.
Practical rules of thumb
01
Under 30 and in 12% bracket?
Go Roth. You will never have a lower tax rate. Pay the small tax now and lock in decades of tax-free growth.
02
In the 22% or higher bracket?
Traditional usually wins. The upfront deduction is valuable, and most retirees drop at least one bracket.
03
Maxing out your 401(k) already?
A Roth IRA gives you tax diversification — having both types in retirement lets you manage your tax bracket year by year.
04
High income (over $150k single)?
You may be phased out of Roth IRA deductibility. Look into a Backdoor Roth or stick with Traditional 401(k).
A concrete example
Sarah is 35, earns $80,000 (22% bracket), and has $20,000 saved. She contributes $7,000/year for 30 years until 65.
Traditional: Saves $1,540/year in taxes now (22% of $7,000). Grows to ~$710,000. After 15% tax in retirement, she keeps ~$603,000.
Roth: Pays $1,540/year in taxes now. Grows to the same ~$710,000. Withdraws every dollar tax-free.
Result: Roth wins by ~$107,000 because her retirement tax rate (15%) is lower than her working rate (22%).
If Sarah's retirement tax rate were 22% (same as today), the two would be nearly identical. The difference is entirely driven by the tax rate change.
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