Roth IRA vs Traditional IRA
Pay tax now or later? Roth and Traditional IRA produce identical results if your tax rate is constant — the choice is about your expected rate change.
Roth: you pay tax on contributions, growth and withdrawals are tax-free. Traditional: contributions are tax-deductible now, growth grows tax-deferred, withdrawals are taxed as ordinary income. If your tax rate is the same in retirement, both produce identical after-tax wealth — the choice is a bet on your future tax rate.
Key Differences
| Aspect | Roth IRA Calculator | 401(k) Calculator |
|---|---|---|
| Tax on contribution | Yes, post-tax | No, deductible |
| Tax on growth | No | Deferred |
| Tax on withdrawal | No | Yes, ordinary income |
| Required Minimum Distributions | None (Roth IRA) | Starting age 73 |
| 2026 contribution limit | $7,000 ($8,000 50+) | $23,000 401(k); $7,000 IRA |
When to use Roth IRA Calculator
- You're in a lower tax bracket today than you expect to be in retirement (early-career)
- You expect federal tax rates to rise broadly
- You want tax diversification and have other pre-tax accounts
- Income too high for Traditional deduction phase-out
When to use 401(k) Calculator
- You're in a high tax bracket today (peak earning years)
- You expect to retire to a lower-tax state or with lower income
- You want the tax deduction now to free up cash for investing
Frequently Asked Questions
If my tax rate is identical in retirement, which is better?
Mathematically identical. The compounding works out the same — pay tax on the seed (Roth) or pay tax on the harvest (Traditional). Both leave you with the same after-tax dollars.
What's the catch with Roth?
Lower take-home now (you're paying tax on contributions). And income limits: in 2026, Roth IRA phases out for single filers above ~$165k MAGI.