Roth vs traditional calculator
With a traditional account you skip tax now and pay it when you withdraw; with a Roth you pay now and withdraw tax-free. Enter the amount you set aside before tax, the years, the growth and the two tax rates to compare what you would end up with.
Runs in your browser: nothing you enter is sent anywhere.
How to use it
- Enter the pre-tax amount you plan to save each year and for how long.
- Enter the growth rate and the two tax rates.
- Compare the two final amounts after tax.
How it works
Let f = ((1 + g)^n − 1) ÷ g be the growth factor of n yearly deposits at the end of each year. Traditional: X × f × (1 − tax later). Roth: X × (1 − tax now) × f. Both use the same f, so the winner depends only on the two tax rates.
Worked example
6,000 a year for 10 years at 0% growth. Traditional: 60,000, and with a 15% retirement rate 51,000 is left. Roth with a 24% rate now: 6,000 × 0.76 × 10 = 45,600. Traditional is ahead by 5,400.
Tips
- Because the growth factor cancels out, changing the growth rate changes the sizes but not who wins in this model.
- Real tax is progressive; a flat rate is only an approximation, so try several rates.
- For the savings side, see the 401(k) calculator.
Frequently asked questions
How does the comparison work?
You set aside the same pre-tax amount each year. In the traditional account all of it is invested and the final balance is taxed at your retirement rate. In the Roth account tax is paid first at today's rate, so less is invested, but the final balance is not taxed.
When does Roth come out ahead?
In this simplified model with flat rates, the Roth is ahead when your tax rate now is lower than your rate in retirement, and the traditional account when it is higher. With equal rates the two are the same.
What does this leave out?
Employer matches, contribution limits, early-withdrawal rules, rate brackets that change with income, taxes on other income and changes in law. It is an illustration, not tax advice.
What tax rates should I enter?
Your best estimate of the rate that applies to the money, now and when you withdraw. Neither rate is built in, because rates and brackets differ by country and change over time.