Roth vs Traditional Calculator
Pay tax now or pay tax later? Run your numbers through both paths and get a plain-English verdict — the answer is simpler than the internet makes it sound.
Your inputs
After-tax value over time
The elegant truth: it's commutative
Here's the whole debate in one line of math. Start with amount A, return r, n years, tax now tnow, tax later tret:
Traditional: A × (1 + r)n × (1 − tret)
Multiplication is commutative — the order doesn't matter. If your tax rate is the same now and in retirement, both paths give exactly the same after-tax dollars. The entire Roth-vs-Traditional question collapses to one guess: will your marginal tax rate be higher now or in retirement?
When each side wins
- Roth wins when your rate is lower now: early career, a sabbatical year, early retirement before Social Security and RMDs begin. Paying 12% now to avoid 22% later is a steal.
- Traditional wins when your rate is higher now: peak earning years. Deducting at 32–37% today and withdrawing at 22% in retirement is the mirror-image steal.
- Tie on dollars when rates are equal — though Roth still dodges required minimum distributions and passes tax-free to heirs.
Worked example
Convert $50,000 now at a 24% marginal rate, vs leaving it Traditional and paying 22% in retirement. 7% return, 20 years. Growth factor ≈ 3.87×. Traditional: $50,000 × 3.87 = $193,500, minus 22% tax = $150,900 after tax. Roth: pay 24% now ($12,000), invest $38,000 × 3.87 = $147,000 tax-free. Traditional wins by about $3,900 — because the retirement rate (22%) is lower than today's (24%). Flip the rates and the winner flips too.
Caveats worth knowing
- Pay the conversion tax from outside funds. Withholding tax from the converted amount shrinks the Roth and can trigger a 10% early-withdrawal penalty under 59½. No outside cash? The conversion math gets much worse.
- Your future tax rate is a guess. Brackets, your income, and even tax law itself will change over decades. Many planners hedge by holding both account types.
- Five-year rules. Converted Roth dollars generally must season five years before penalty-free withdrawal of the conversion amount if you're under 59½.
- State taxes count. Converting while in a high-tax state and retiring to a no-income-tax state tilts hard toward Traditional — and vice versa.
- RMDs. Traditional accounts force withdrawals starting in your 70s; Roth IRAs don't (during your lifetime), which matters for estate planning.
Roth IRA rules: IRS Publication 590-A (contributions) and 590-B (distributions). Conversion mechanics: IRS Form 8606 instructions.