Compare ending after-tax wealth from a Roth IRA and a Traditional IRA at any contribution, return, and tax-rate assumption — including the tax-refund-invested adjustment most casual calculators forget.
If your tax rate stays the same from now until retirement, the two are mathematically identical. Roth wins when retirement rate > current rate (early-career, expect promotions, expect higher future tax rates). Traditional wins when current rate > retirement rate (peak earnings, modest retirement spending). The calculator shows the dollar gap for your specific assumptions.
| Account | Annual Contribution | Ending Pre-Tax | Tax at Withdrawal | Plus Refund Compounded | Ending After-Tax |
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Takes about 2 minutes.
Where Roth and Traditional differ. Traditional IRA contributions reduce current-year taxable income; withdrawals in retirement are taxed as ordinary income. Roth IRA contributions use post-tax dollars; withdrawals (after age 59½ and 5-year rule) are tax-free. The fundamental trade-off is "when do you pay the tax".
The equivalence theorem. If your marginal tax rate is identical now and at retirement, the two account types produce the same after-tax wealth. Algebra: Traditional = X(1+r)^n(1-t_ret); Roth = X(1-t_now)(1+r)^n. When t_now = t_ret, these are equal. The two choices only matter when you expect rates to change.
The tax-refund-invested trap. Most casual Roth vs Traditional comparisons show Traditional's ending balance taxed at withdrawal but forget that Traditional gave you a tax refund up front. Putting $7,000 in Traditional at a 22% marginal rate generates a $1,540 refund this April. If you invest that refund at the same return, after 30 years it grows to about $11,720. Add that to the after-tax Traditional withdrawal for a true comparison — that's the figure shown here.
Roth advantages beyond the math. Three things the equivalence theorem can't capture: (1) Roth withdrawals are tax-free, which means they don't count toward provisional-income calculations for Social Security taxation, IRMAA Medicare surcharges, or ACA subsidy phase-outs. (2) Roth has no Required Minimum Distributions, so the account can compound past age 73. (3) Roth balances inherit tax-free to heirs (subject to 10-year rule). These matter when you're running a 40-year retirement plan.
2026 limits. $7,000 contribution under 50; $8,000 with the $1,000 catch-up at 50+. Income phase-out (estimated): Roth direct contributions phase out at $153,000-$168,000 single and $242,000-$252,000 married. Above these, the backdoor Roth conversion is the standard workaround. Confirm exact limits against IRS Rev. Proc. annual release.
A 30-year-old in the 22% marginal bracket plans to contribute $7,000 per year to an IRA for 35 years. They expect retirement to land in the 12% bracket (Social Security plus modest withdrawals from this single account). Assumed real return: 7%.
Roth path. Out-of-pocket each year is $7,000 (already-taxed dollars). After 35 years at 7%: $7,000 × ((1.07^35 − 1) / 0.07) = $7,000 × 138.24 = $967,700. All tax-free at withdrawal. Roth ending after-tax: $967,700.
Traditional path (with tax-refund-invested adjustment). Same $7,000 going to the account each year. Annual tax refund = $7,000 × 22% = $1,540, also invested at 7% in a taxable account. After 35 years: pre-tax IRA = $967,700. Tax at 12% retirement bracket = $116,124, leaving $851,576. Compounded refund = $1,540 × 138.24 = $212,890 (ignoring annual cap-gains tax for simplicity). Total = $851,576 + $212,890 = $1,064,466.
Traditional wins by $96,766 — about 10% more wealth. The 10 percentage-point spread between today's 22% bracket and retirement's 12% bracket is the entire driver. Flip the assumption — retirement at 24% (perhaps because tax rates rise) — and Roth wins by roughly the same magnitude.
Same numbers, equal rates. Both at 22%: Roth = $967,700; Traditional after-tax + invested refund = $7,000 × (1−0.22) × 138.24 + $1,540 × 138.24 = $754,805 + $212,890 = $967,695. Identical to the dollar (the $5 gap is rounding). This is the equivalence theorem in numerical form.
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