Your Analysis Awaits

Fill in your details and click “Calculate & Compare” to see your personalized Traditional IRA vs. Roth IRA comparison.

How This Calculator Works

How the Calculator Projects Your Pre-Tax & After-Tax Retirement Income

This tool runs a full year-by-year compound growth model for both IRA types simultaneously — applying real 2026 IRS contribution limits, income-based Roth eligibility phaseouts, state tax, RMD projections, and estate impact — then surfaces the winner for your exact situation.

1
Eligibility Check
Your MAGI and filing status are checked against 2026 Roth IRA phaseout thresholds ($153,000–$168,000 single; $242,000–$252,000 MFJ) and the Traditional IRA deductibility limits. The calculator adjusts your effective contribution and flags Backdoor Roth eligibility instantly.
2
Year-by-Year Compounding
For each year from your current age to retirement, both balances are grown using the compound growth formula: Balance × (1 + r) plus your annual contribution (which can grow by your set % increase). Spousal IRA contributions are added each year if enabled.
3
Tax Conversion
At retirement, the Traditional IRA’s pre-tax balance is converted to its after-tax equivalent by applying your combined federal + state retirement tax rate. The Roth balance needs no conversion — it’s already after-tax. If you enabled “Reinvest Tax Savings,” a taxable side account grows in parallel and is added to the Traditional total.
4
RMD + Estate Analysis
Post-retirement, the Traditional IRA balance is projected forward at a conservative 5% and RMDs are calculated from age 73 using the IRS Uniform Lifetime Table divisors. Estate value is modeled assuming non-spouse heirs must deplete an inherited Traditional IRA within 10 years under the SECURE Act — triggering taxes at an estimated 28% heir rate.

Core IRA Formulas: Compound Growth, RMDs & Tax Equivalency

Roth IRA — After-Tax Contribution Growth
Balance(year+1) = (Balance + Contribution) × (1 + r) At Retirement: Roth Value = Balance ← 100% tax-free
Contributions are made with after-tax dollars. All growth and all withdrawals are permanently tax-free. No Required Minimum Distributions. The full balance passes to heirs tax-free.
Traditional IRA — Pre-Tax Contribution Growth
Balance(year+1) = (Balance + Contribution) × (1 + r) At Retirement (After-Tax): Trad Value = Balance × (1 − tax_rate)
Contributions are pre-tax (if deductible) — you save on taxes now, pay them on withdrawal. Tax rate = your retirement federal rate + state rate. RMDs begin at age 73 per the SECURE 2.0 Act.
Inflation-Adjusted (Real) Value
Real Value = Nominal Balance ÷ (1 + inflation)^years Example at 3% over 30 years: $1,000,000 ÷ (1.03)^30 = $411,987
This shows what your retirement balance is actually worth in today’s purchasing power. A $1M balance after 30 years at 3% inflation has the buying power of only $412K in today’s dollars.
RMD Calculation (Traditional Only)
RMD(age) = Account Balance ÷ IRS Life Expectancy Factor Example at age 75 (factor = 24.6): $500,000 ÷ 24.6 = $20,325 mandatory withdrawal
The IRS Uniform Lifetime Table assigns a life expectancy factor per age. You must withdraw at least this amount each year from your Traditional IRA starting at 73. Failure triggers a 25% excise tax penalty.

Understanding Your Inputs: MAGI, State Taxes & Filing Status

Current & Retirement Age
Sets your investment horizon — the number of years the compounding loop runs. A 10-year difference in retirement age can change your balance by hundreds of thousands of dollars due to exponential compounding in later years.
Affects: years of compounding, RMD start gap
Annual Income (MAGI)
Your Modified Adjusted Gross Income determines whether you can contribute to a Roth IRA at all, or only partially (phaseout). It also controls whether your Traditional IRA contribution is tax-deductible if you have a workplace retirement plan.
Affects: Roth eligibility, deductibility alert
Expected Annual Return
The assumed annual investment growth rate applied identically to both IRA types. Since both accounts can hold the same investments (index funds, ETFs, stocks), this input cancels out in the comparison — the tax treatment difference is what drives the result.
Default: 7% (long-run US stock market average)
Current vs. Retirement Tax Rate
The single most important input. If your retirement rate is lower than today’s, Traditional usually wins (pay less tax later). If your retirement rate is higher or equal, Roth wins (lock in today’s lower rate). The calculator models this precisely.
Affects: which IRA wins, by how much
State Tax
Seven US states have no income tax (TX, FL, NV, WA, AK, WY, SD). If you plan to retire in a lower-tax state than where you work now, the Traditional IRA advantage grows — you defer tax today at a high rate and pay it at a lower rate in retirement.
Affects: Traditional IRA after-tax value
Contribution Increase %
Models salary growth. If you raise contributions 2% per year (capped at the IRS limit), both accounts benefit from growing deposits — more realistic than flat contributions for the duration of your career.
Affects: total contributions, final balance
Educational Guide

Traditional vs. Roth IRA: Which Tax-Advantaged Account Wins?

Understanding which IRA is right for you is not about which account is “better” — it’s about which one wins given your specific tax situation, income, timeline, and retirement plans. Here is everything you need to know to read your results intelligently.

Choose Roth IRA When…
  • You expect your retirement tax rate to be equal to or higher than your current rate
  • You are early in your career with lower income — tax rates are likely to rise
  • You want to leave tax-free wealth to heirs with no RMD forced distributions
  • You may need to access contributions before retirement (principal is always available)
  • You live in a no-income-tax state today but plan to retire where income is taxed
  • You value certainty — your future tax rate is unknowable; Roth locks in today’s rate permanently
VS
Choose Traditional IRA When…
  • You are in your peak earning years (22%–37% bracket) and expect a lower retirement rate
  • You plan to retire in a no-income-tax state (TX, FL, NV) but work in a high-tax state now
  • You need to reduce taxable income now to stay in a lower bracket or qualify for other deductions
  • You will draw down the account fully by 73 — RMDs are not a concern
  • You prefer more take-home pay today and will invest the tax savings in a separate account
  • You earn too much for Roth and are ineligible for the Backdoor Roth strategy

Tax-Free vs. Tax-Deferred: Side-by-Side Feature Comparison

Feature 🔵 Roth IRA 🔴 Traditional IRA
Tax Treatment on Contributions After-tax (no deduction) Pre-tax (deductible if eligible)
Tax on Growth ✓ Tax-free ⚡ Tax-deferred
Tax on Withdrawals (Retirement) ✓ 100% tax-free ✗ Taxed as ordinary income
2026 Contribution Limit $7,500 (under 50) / $8,600 (50+) $7,500 (under 50) / $8,600 (50+)
Income Limits to Contribute ✗ Yes — MAGI phaseout applies ✓ No income limit to contribute
Income Limits for Tax Deduction N/A ⚡ Yes — if you have a workplace plan
Required Minimum Distributions ✓ None — ever ✗ Required at age 73 (SECURE 2.0)
Early Withdrawal of Contributions ✓ Anytime, penalty-free ✗ 10% penalty before age 59½
Early Withdrawal of Earnings ✗ 10% penalty + tax before 59½ ✗ 10% penalty + tax before 59½
Estate / Inheritance Tax Advantage ✓ Heirs inherit tax-free ✗ Heirs owe income tax on distributions
Backdoor Strategy Available ✓ Yes — Backdoor Roth for high earners N/A
Spousal IRA Available ✓ Yes ✓ Yes
Best For Young earners, high future tax expectation, estate planning Peak earners, lower retirement tax expectation, income reduction now

2026 IRS Contribution Limits & MAGI Phaseout Rules

Roth IRA — 2026 Phaseout Thresholds
Single / Head of Household Full: <$146,000 · Phase: $146K–$161K · None: >$161K
Married Filing Jointly Full: <$230,000 · Phase: $230K–$240K · None: >$240K
Married Filing Separately Phase begins at $0 — effectively ineligible if lived with spouse
Over Income Limit? Use Backdoor Roth — no income limit
Max Contribution (Under 50) $7,500
Catch-Up (Age 50+) $8,600 (includes $1,100 catch-up)
Traditional IRA — 2026 Deductibility Limits
Single — covered by workplace plan Full deduct: <$79K · Phase: $79K–$89K · None: >$89K
Married Filing Jointly — covered Full deduct: <$126K · Phase: $126K–$146K · None: >$146K
MFJ — spouse covered, you are not Phase: $230K–$240K household MAGI
No workplace plan Always fully deductible — no limit
Max Contribution (Under 50) $7,500
Catch-Up (Age 50+) $8,600 (includes $1,100 catch-up)

Decoding Your Results: RMD Tax Drag & Inflation-Adjusted Wealth

Roth IRA at Retirement
This is the total balance in your Roth account the day you retire. Because all Roth withdrawals are tax-free, this number is your spendable balance — no further tax adjustment needed. This is your true retirement wealth from Roth.
Traditional IRA (After-Tax)
The Traditional IRA shows both a pre-tax balance (the raw account value) and an after-tax figure. The after-tax number subtracts your combined federal + state retirement tax rate — this is what you can actually spend. Always compare the Roth balance against the after-tax Traditional number, not the pre-tax one.
Roth / Traditional Advantage
The dollar difference between the two accounts in after-tax terms. A positive Roth Advantage means Roth delivers more spendable retirement income for your scenario. Watch this number change dramatically when you adjust your retirement tax rate — it’s the most sensitive variable in the model.
RMD Tax Drain
The total income taxes estimated on your Traditional IRA’s Required Minimum Distributions from ages 73–90. This is a hidden long-term cost of the Traditional IRA that most people overlook when comparing the two accounts. Roth IRA has zero RMDs — ever.
Inflation-Adjusted Value
Your Roth IRA balance expressed in today’s purchasing power. A $1.2M balance after 30 years of 3% inflation is only worth about $495K in today’s dollars. This is the most realistic measure of what your retirement savings can actually buy, and helps you set meaningful savings targets today.
Estate Value to Heirs
Under the SECURE Act 2.0, most non-spouse heirs must fully withdraw an inherited Traditional IRA within 10 years — forcing large taxable income events during their peak working years. The estate tab models this 28% estimated heir tax cost and compares it against the Roth’s tax-free inheritance.
The One Rule That Overrides Everything: If your tax rate is identical today and in retirement, the Roth IRA wins — because tax-free growth is always worth more than deferred taxation at the same rate, once the time value of tax elimination is accounted for over a long horizon. The only scenario where Traditional IRA wins is a materially lower retirement tax rate.

Historical IRS IRA Contribution & Catch-Up Limits (2020–2026)

Tax Year Under 50 Limit Age 50+ Catch-Up Total Roth MAGI Phaseout (Single) Roth MAGI Phaseout (MFJ) Trad. Deductibility — Single
2020$6,000$7,000$124,000–$139,000$196,000–$206,000$65,000–$75,000
2021$6,000$7,000$125,000–$140,000$198,000–$208,000$66,000–$76,000
2022$6,000$7,000$129,000–$144,000$204,000–$214,000$68,000–$78,000
2023$6,500$7,500$138,000–$153,000$218,000–$228,000$73,000–$83,000
2024$7,000$8,000$146,000–$161,000$230,000–$240,000$77,000–$87,000
2025$7,000$8,000$150,000–$165,000$236,000–$246,000$79,000–$89,000
2026 ★ Current$7,500$8,600$153,000–$168,000$242,000–$252,000$79,000–$89,000
Ready to Run Your Numbers?
You now have everything you need to understand what your results mean. Scroll back up, enter your real income, tax rates, and retirement age — and see which IRA wins for your exact situation in seconds.
Calculate My IRA Now

5 Real US Retirement Scenarios: Backdoor Roth, Spousal IRAs & State Taxes

See Exactly How the Decision Plays Out

Five real-world American profiles — different ages, incomes, states, and career stages — each worked through the full Traditional IRA vs. Roth IRA comparison using this calculator’s exact methodology with real 2026 numbers.

Example 1 of 5 — Early Career
Marcus, Age 26 — Software Engineer, Austin TX
Marcus just started his first professional job. He earns $82,000/year, has no existing IRA, and wants to contribute the full $7,500 limit. He plans to retire at 65 and expects his income — and tax rate — to climb significantly over his career.
Annual Income
$82,000
Investment Horizon
39 Years
State Income Tax
0% (Texas)
Tax Bracket Now
22% Federal
Roth IRA at 65
$1,847,320
100% tax-free
Traditional IRA at 65
$1,407,963
After 28% retirement tax
Roth Advantage
+$439,357
More spendable wealth
RMD Tax Drain (Trad)
$214,400
Forced taxable income ages 73+
🏆
Roth IRA Wins Decisively — By $439,357
Marcus is in the 22% bracket today but expects to climb into 28–32% during his peak earning years. Locking in 22% tax now on every dollar he contributes means those dollars — and 39 years of compounding growth on them — are permanently tax-free. The Traditional IRA would save him about $1,650 in taxes per year today, but cost him over $440K in after-tax retirement value. At 26 with no existing IRA balance, Roth is the clear winner.
Calculator Inputs Used
  • Current Age26
  • Retirement Age65
  • Annual Income (MAGI)$82,000
  • Filing StatusSingle
  • Annual Contribution$7,500
  • Contribution Increase/yr2%
  • Existing IRA Balance$0
  • Expected Annual Return7%
  • Current Tax Rate22%
  • Retirement Tax Rate28% (projected higher income)
  • State Tax0% (Texas — no state income tax)
  • Inflation Rate3%
  • Roth Eligibility✓ Full — well below $146K limit
After-Tax Retirement Wealth
Roth IRA (Tax-Free) $1,847,320
$1.85M
Traditional IRA (After-Tax) $1,407,963
$1.41M
Roth Advantage +$439,357
+$439K
Why The Gap Is So Large

With 39 years of compounding, even a 6% tax rate difference (22% now vs 28% at retirement) creates a massive dollar gap on a $1.8M balance. Marcus pays tax on $7,500 once today at 22%. In a Traditional IRA, the IRS will collect 28% on the entire $1.96M pre-tax balance at withdrawal — that’s $548K in taxes, vs $0 with Roth.

Age / Milestone Annual Contribution Roth Balance Trad. (Pre-Tax) Trad. (After-Tax) Roth Advantage
Age 30$8,122$78,540$78,540$56,549+$21,991
Age 35$8,958$218,760$218,760$157,507+$61,253
Age 40$9,878$451,320$451,320$324,950+$126,370
Age 50$12,006$1,042,880$1,042,880$750,874+$292,006
Age 65 — Retire$15,410$1,847,320$1,955,614$1,407,963+$439,357
3 Key Lessons From Marcus’s Example
1
Time horizon is the biggest lever. Marcus’s 39-year runway means compounding does the heavy lifting. Starting at 26 vs 36 with the same contribution produces roughly double the final balance — that decade of early investing cannot be recovered later.
2
Texas’s zero state income tax makes Roth even stronger. There is no state tax deduction benefit from a Traditional IRA today. When Marcus retires — whether in Texas or elsewhere — the Roth’s tax-free status insures him against future state tax regardless of where he settles.
3
Locking in today’s 22% rate on $7,500/year saves $548K in lifetime taxes. The Traditional IRA pre-tax balance at 65 is $1.96M — taxed at 28% on withdrawal, that’s $548K owed to the IRS over retirement. Roth eliminates that bill entirely for a “cost” of $1,650 in taxes today per year of contributions.
Example 2 of 5 — High Earner / Backdoor Roth
Dr. Priya, Age 38 — Attending Physician, San Francisco CA
Dr. Priya earns $340,000 MAGI — well above the 2026 Roth direct contribution limit. She uses the Backdoor Roth strategy (Traditional non-deductible → convert to Roth) and plans to retire at 60. She has $85,000 already in an existing IRA.
Annual Income
$340,000
Investment Horizon
22 Years
State Tax (CA)
13.3%
Federal Bracket
35%
Backdoor Roth at 60
$962,140
100% tax-free + existing balance
Non-Deductible Trad. at 60
$752,870
After 35% + 13.3% = 48.3% effective
Backdoor Roth Advantage
+$209,270
More after-tax retirement wealth
CA Tax Avoided (Roth)
$127,964
State tax California would collect
🏆
Backdoor Roth Wins — Even Against a “Non-Deductible” Traditional IRA
Priya can’t deduct her Traditional IRA contribution because her income exceeds both the Roth limit and the deductibility limit. Her two real choices are: (1) non-deductible Traditional IRA (growth taxed at withdrawal but basis is not), or (2) Backdoor Roth (convert immediately after contributing — growth permanently tax-free). California’s 13.3% state income tax makes the Backdoor Roth dramatically more valuable — she avoids nearly $128K in state tax alone. The conversion triggers a small tax today on any growth between contribution and conversion, but since she converts quickly, the taxable amount is minimal.
Calculator Inputs Used
  • Current Age38
  • Retirement Age60
  • Annual Income (MAGI)$340,000
  • Filing StatusSingle
  • Annual Contribution$7,500 (Backdoor Roth)
  • Existing IRA Balance$85,000
  • Expected Annual Return7%
  • Current Federal Rate35%
  • Retirement Federal Rate32% (lower income in retirement)
  • State Tax (CA)13.3% now / 9.3% retirement
  • Roth Direct Eligible?✗ Over $161K limit — Backdoor used
  • Backdoor Roth Detected✓ Calculator flags this automatically
After-Tax Retirement Wealth at Age 60
Backdoor Roth (Tax-Free) $962,140
$962K
Non-Deductible Trad. (After-Tax) $752,870
$752K
Backdoor Roth Advantage +$209,270
+$209K

⚡ Pro-Rata Rule Warning: If Priya has pre-tax IRA money elsewhere (SEP-IRA, rollover IRA), the Backdoor Roth conversion becomes partly taxable. She should consult a CPA before executing the conversion to check her pro-rata exposure.

Age / Milestone Annual Contribution Backdoor Roth Non-Ded. Trad. (Pre-Tax) Non-Ded. Trad. (After-Tax) Roth Advantage
Age 40$7,500$112,740$112,740$88,146+$24,594
Age 45$8,286$272,650$272,650$213,173+$59,477
Age 50$9,150$503,970$503,970$394,103+$109,867
Age 55$10,102$730,340$730,340$571,016+$159,324
Age 60 — Retire$8,600$962,140$1,094,218$752,870+$209,270
3 Key Lessons From Dr. Priya’s Example
1
The Backdoor Roth is not just for ultra-wealthy investors. Any single filer earning above $161K or married couple above $240K should know about it. The two-step process (contribute → convert) is legal, well-established, and this calculator models it automatically when it detects your income exceeds the Roth limit.
2
California’s 13.3% tax rate makes Roth dramatically more powerful. A non-deductible Traditional IRA in California means you pay tax today on the contribution (no deduction since non-deductible) AND pay 9.3%–13.3% state tax again on all the growth at withdrawal. Backdoor Roth eliminates that second state tax event entirely.
3
Existing IRA balance accelerates growth significantly. Priya’s $85,000 existing balance contributes over $374,000 to her final retirement balance at 7% growth over 22 years — that’s the compounding power of starting with existing savings vs. starting from zero.
Example 3 of 5 — Spousal IRA / Dual Income
Tom & Lisa, Ages 45 & 43 — Dual Income Couple, Columbus OH
Tom ($95,000) and Lisa ($78,000) both have workplace 401(k)s. Their combined MAGI of $173,000 puts them in the Roth phaseout zone for MFJ ($230K–$240K limit), so both can contribute fully. They use the Spousal IRA toggle — both maxing out at $7,500 each — and plan to retire together at 65.
Combined Income
$173,000
Investment Horizon
20 Years
State Tax (OH)
3.5%
Federal Bracket
22% (MFJ)
Combined Roth at 65
$1,588,420
Both accounts — 100% tax-free
Combined Traditional at 65
$1,347,157
After 22% federal + 3.5% state
Roth Advantage (Combined)
+$241,263
More household retirement wealth
Annual Tax Savings (Trad.)
$3,300/yr
What they’d save choosing Traditional now
🏆
Roth Wins — But Traditional Is a Closer Call With Equal Tax Rates
With a 22% current rate and an expected 22% retirement rate, this is the closest comparison in our five examples. Tom and Lisa are in their peak earning years with stable income — not the high trajectory of Marcus at 26. However, two factors push Roth ahead: (1) Ohio taxes Traditional IRA withdrawals as ordinary income, and (2) their combined Social Security income at 65 may push combined income into a higher bracket, raising their effective retirement rate above 22%. Roth eliminates both risks permanently.
Calculator Inputs Used
  • Tom’s Age45
  • Lisa’s Age (Spousal IRA)43
  • Retirement Age65 (Tom) / 63 (Lisa)
  • Combined MAGI$173,000
  • Filing StatusMarried Filing Jointly
  • Tom’s Contribution$7,500/yr
  • Spousal IRA (Lisa)$7,500/yr (toggle ON)
  • Total Annual Contribution$15,000 combined
  • Expected Annual Return7%
  • Current Tax Rate22%
  • Retirement Tax Rate22% (assumed stable)
  • State Tax (Ohio)3.5%
  • Roth Eligibility✓ Full — below $230K MFJ limit
Combined Household Retirement Wealth
Combined Roth (Tax-Free) $1,588,420
$1.59M
Combined Traditional (After-Tax) $1,347,157
$1.35M
Roth Advantage +$241,263
+$241K

💡 Spousal IRA Power: Tom and Lisa together contribute $15,000/year. Without the Spousal IRA toggle, only $7,500 goes in. The extra $7,500/year for Lisa’s account adds approximately $410,000 to their combined retirement balance over 20 years at 7%.

Age (Tom) / Milestone Total Contribution Combined Roth Combined Trad. (Pre-Tax) Combined Trad. (After-Tax) Roth Advantage
Age 48$15,000$178,540$178,540$141,447+$37,093
Age 52$16,560$415,280$415,280$328,897+$86,383
Age 57$18,260$784,310$784,310$621,005+$163,305
Age 62$20,140$1,181,440$1,181,440$935,339+$246,101
Age 65 — Retire$20,140$1,588,420$1,702,097$1,347,157+$241,263
3 Key Lessons From Tom & Lisa’s Example
1
Equal current and retirement tax rates still favor Roth — because the Roth’s tax-free status protects against unknown future changes in tax law, Social Security income pushing you into a higher bracket, and state tax in retirement. Traditional offers certainty on the deduction today; Roth offers certainty on tax-free income forever.
2
The Spousal IRA doubles retirement savings for a couple on one income or two. Lisa’s $7,500/year Spousal Roth IRA contributes an estimated $410K to household retirement wealth. Many dual-income couples leave this off the table by only funding the higher earner’s IRA.
3
Ohio’s 3.5% state tax on IRA withdrawals quietly erodes Traditional IRA value. A 25.5% combined effective tax rate (22% federal + 3.5% Ohio) at withdrawal reduces their $1.7M pre-tax Traditional balance by $354K. Roth eliminates both taxes — federal and state — on all future growth.
Example 4 of 5 — Catch-Up Contributions / Traditional Wins
Sandra, Age 52 — Finance Manager, New York City NY
Sandra earns $195,000, is in the 32% federal bracket, and plans to retire at 67 to New Mexico — a low-tax state. She has $220,000 in an existing IRA and qualifies for the $8,600 age-50+ catch-up limit. She expects her retirement income to drop to the 22% bracket after moving out of NYC.
Annual Income
$195,000
Investment Horizon
15 Years
State Tax (NY)
9% now / 4.9% NM
Federal Bracket Now
32%
Roth IRA at 67
$1,112,640
100% tax-free
Traditional IRA at 67
$1,196,430
After 22% fed + 4.9% NM = 26.9%
Traditional Advantage
+$83,790
More after-tax retirement wealth
Annual Tax Saving Now (Trad.)
$3,526/yr
Real upfront tax reduction each year
🏆
Traditional IRA Wins — Tax Rate Differential Reverses the Outcome
Sandra is one of the rare scenarios where Traditional IRA clearly wins. She pays 32% federal + 9% NY = 41% combined tax today on every dollar she earns. At retirement in New Mexico, she’ll pay only 22% federal + 4.9% NM = 26.9% on withdrawals. That 14-point rate difference means she saves 41 cents per dollar contributed today and pays only 26.9 cents at withdrawal — a net gain of 14.1% on every dollar. With a $220,000 existing balance, $8,600 annual catch-up contributions, and a shorter 15-year horizon, the Traditional IRA generates $83,790 more in spendable retirement wealth.
Calculator Inputs Used
  • Current Age52
  • Retirement Age67
  • Annual Income (MAGI)$195,000
  • Filing StatusSingle
  • Annual Contribution (50+)$8,600 catch-up
  • Existing IRA Balance$220,000
  • Expected Annual Return6.5% (conservative)
  • Current Tax Rate32% federal
  • Retirement Tax Rate22% federal (lower income)
  • State Tax Now9% (New York)
  • State Tax Retirement4.9% (New Mexico)
  • Roth Eligible?✓ Below $161K single limit — yes
  • Reinvest Tax SavingsOFF (not investing the savings)
After-Tax Retirement Wealth at Age 67
Traditional IRA (After-Tax) $1,196,430
$1.20M
Roth IRA (Tax-Free) $1,112,640
$1.11M
Traditional Advantage +$83,790
+$84K

⚠️ RMD Risk: Sandra’s Traditional IRA will trigger Required Minimum Distributions at 73. With a $1.6M pre-tax balance, her RMDs will likely push her back into the 24–28% bracket — potentially erasing the Traditional advantage. The calculator’s RMD tab models this scenario in detail.

Age / Milestone Annual Contribution Roth Balance Traditional (Pre-Tax) Traditional (After-Tax) Trad. Advantage
Age 55$8,600$406,890$406,890$403,270−$3,620
Age 58$9,500$598,340$620,340$611,052+$12,712
Age 62$10,490$859,270$921,670$908,167+$48,897
Age 65$11,580$1,023,840$1,108,470$1,092,241+$68,401
Age 67 — Retire$8,600$1,112,640$1,634,840$1,196,430+$83,790
3 Key Lessons From Sandra’s Example
1
Traditional IRA wins when tax rate drops materially at retirement. Sandra saves 41 cents per dollar today and pays only 26.9 cents at withdrawal — a 14% net advantage per dollar. This is exactly the scenario Traditional IRA was designed for, and the calculator’s results confirm it clearly.
2
Relocating to a lower-tax state at retirement is a powerful multiplier for Traditional IRA value. Moving from New York (9%) to New Mexico (4.9%) reduces Sandra’s effective state tax rate by 4.1 percentage points — that 4.1% applies to her entire IRA withdrawal income for the rest of her life. Planning retirement location is a legitimate financial strategy, not just a lifestyle choice.
3
Watch the RMD trap. Sandra’s Traditional advantage assumes she stays in the 22%+4.9% bracket at retirement. But large RMDs from a $1.6M pre-tax balance at age 73+ could push her into a 24–28% federal bracket — potentially reversing the Traditional IRA’s advantage and making Roth the better choice in hindsight. The calculator’s RMD scenario tab shows this exact risk.
Example 5 of 5 — Self-Employed / Late Starter
Carlos, Age 58 — Self-Employed Contractor, Miami FL
Carlos has been self-employed for 20 years and never prioritized retirement savings. He earns $118,000 net self-employment income, pays SECA tax, and has only $42,000 saved. He wants to maximize contributions in his final 7 working years before retiring at 65 and will use the catch-up contribution limit.
Net SE Income
$118,000
Investment Horizon
7 Years
State Tax (FL)
0% (Florida)
Federal Bracket
24%
Roth IRA at 65
$184,960
Tax-free including existing $42K
Traditional IRA at 65
$176,115
After 22% fed (lower ret. income)
Roth Advantage
+$8,845
Slimmest margin — nearly a tie
Real Value in Today’s Dollars
$150,180
Roth balance adjusted for 3% inflation
⚖️
Roth Edges Out Traditional — But the Real Story Is About Starting Late
Carlos’s 7-year horizon limits the power of compounding dramatically. The difference between Roth and Traditional is only $8,845 — practically negligible compared to Marcus’s $439,357 gap at 26. With Florida’s zero state income tax, Carlos gets no state tax deduction benefit from Traditional. His self-employment income also means he has already paid SECA tax (15.3%) on every dollar before it reaches his IRA, making after-tax Roth dollars feel natural. The more important lesson for Carlos: maximize his IRA contributions every single year and consider a Solo 401(k) for much larger tax-advantaged savings given his self-employment income.
Calculator Inputs Used
  • Current Age58
  • Retirement Age65
  • Annual Income (MAGI)$118,000 net SE income
  • Filing StatusSingle
  • Annual Contribution (50+)$8,600 max catch-up
  • Existing IRA Balance$42,000
  • Expected Annual Return6% (conservative near retirement)
  • Current Tax Rate24% federal
  • Retirement Tax Rate22% (lower retirement income)
  • State Tax0% (Florida — no state income tax)
  • Self-Employed SECA15.3% on 92.35% of net income
  • Roth Eligibility✓ Full — below $146K single limit
  • Inflation Rate3%
Retirement Wealth at Age 65
Roth IRA (Tax-Free) $184,960
$184,960
Traditional IRA (After-Tax) $176,115
$176,115
Roth Advantage +$8,845
+$8.8K

⚡ Starting Late Cost: If Carlos had contributed $7,500/year from age 38 instead of 58, his Roth IRA would be worth $1,104,000 at 65 — nearly 6× more. The cost of delaying 20 years is approximately $919,000 in lost retirement wealth. Even $100/month at 38 beats $8,600/month starting at 58.

Age / Milestone Annual Contribution Roth Balance Traditional (Pre-Tax) Traditional (After-Tax) Roth Advantage
Age 59$8,600$53,996$53,996$53,126+$870
Age 61$8,600$82,490$82,490$80,849+$1,641
Age 63$8,600$118,740$118,740$115,487+$3,253
Age 64$8,600$151,664$151,664$146,972+$4,692
Age 65 — Retire$8,600$184,960$225,789$176,115+$8,845
3 Key Lessons From Carlos’s Example
1
Starting late collapses the Roth vs. Traditional difference. With only 7 years of compounding, the after-tax difference is just $8,845. The IRA type barely matters when the time horizon is short — the contribution amount and investment return are far more impactful than the tax structure at this stage.
2
Self-employed workers should look at a Solo 401(k) first. An IRA caps contributions at $8,600. A Solo 401(k) allows contributions up to $70,000/year (2026) for self-employed individuals — employee deferrals up to $23,500 plus a 25% employer contribution on net SE income. Carlos could shelter 8× more income in a Solo 401(k) than an IRA alone.
3
Florida’s zero income tax makes Roth and Traditional nearly identical in state tax impact. Without a state deduction today and no state tax at retirement, the only remaining variable is federal rate differential (24% now vs 22% at retirement). That 2-point difference over 7 years is what generates Carlos’s narrow $8,845 Roth advantage.
Which profile looks most like you? Enter your own numbers above and get your personalized IRA comparison in seconds — with the exact same methodology used in all five examples above.
Run My Own Calculation
Expert Tips

5 Advanced IRA Strategies: Tax-Rate Arbitrage & Roth Conversions

These are the advanced moves that financial advisors use for their own IRAs — beyond simply choosing Roth or Traditional. Each tip can add tens of thousands of dollars to your retirement outcome when applied correctly.

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Pro Tip #1 — Tax Planning
Master Tax-Rate Arbitrage to Pick the Right IRA Every Year
Most people choose one IRA type and never reconsider it. Professionals re-evaluate every single tax year — because your optimal choice changes when your income, brackets, or tax law changes. This is the single most impactful strategy in IRA planning.
$440K+
Lifetime value of correct IRA choice for a 26-year-old at 22% bracket
14%
Tax rate differential that made Traditional win for Sandra (NY → NM)
$0
Tax Florida / Texas residents pay on Roth IRA contributions — ever
The Three Tax-Rate Scenarios
1
Current rate LOWER than retirement rate → Choose Roth. Pay tax today at a lower rate. All growth and withdrawals are tax-free. You lock in today’s bargain rate permanently. Classic case: early-career worker in 12% or 22% bracket expecting to be in 28–32% at peak earnings.
2
Current rate HIGHER than retirement rate → Choose Traditional. Defer tax at today’s high rate, pay at a lower rate at withdrawal. Classic case: peak-earning 50s professional in 32–35% bracket planning to retire to a low-tax state with reduced income.
3
Rates are EQUAL → Roth wins on tie-breaker factors. When the math is identical, Roth has three structural advantages: no RMDs ever, tax-free inheritance for heirs, and protection against future tax rate increases. Equal rates are not a draw — Roth wins.
How to Calculate Your Arbitrage Value
Tax Arbitrage Formula
Arbitrage Value = Contribution × (RetirementRate − CurrentRate) × (1 + r)^years Example (Marcus, 26): $7,500 × (28% − 22%) × (1.07)^39 = $7,500 × 0.06 × 14.97 = $6,737 per year of contributions Over 39 years total arbitrage ≈ $262,740+
This is the raw tax arbitrage gain before compounding on the saved tax dollars. The actual dollar advantage shown in the calculator ($439K) is larger because it also accounts for tax-free compounding on the full balance.
Pro Move: Re-run this calculator every January when you receive your W-2. If your income jumped a bracket this year, switch your IRA type mid-accumulation phase. You can contribute to different IRA types in different years — you are not locked in permanently.
Scenario Current Rate Retirement Rate Differential Roth After-Tax Trad. After-Tax Winner
Young earner, rising career 22%28%+6% $1,847,320 $1,407,963 Roth +$439K
Equal brackets, no change 22%22%0% $1,847,320 $1,441,509 Roth +$406K
Peak earner, retiring lower 32%22%−10% $1,112,640 $1,196,430 Trad +$84K
High earner, state tax drop 35%+9%22%+4.9%−17.1% $962,140 $1,110,000 Trad +$148K
Do This
  • Review IRA type annually every January after receiving your W-2
  • Include state income tax in both current and retirement rate calculations
  • Factor in Social Security income — it can push you into a higher bracket at retirement
  • Use the calculator’s “Retirement Tax Rate” field to model different bracket scenarios
  • Account for planned retirement location — moving states changes the math dramatically
Avoid These Mistakes
  • Assuming your current tax rate equals your retirement rate without analysis
  • Ignoring state income tax — it can be worth 5–13% additional savings
  • Choosing the same IRA type as your parents or spouse without running your own numbers
  • Forgetting that RMDs from Traditional IRA can push you into a higher bracket at 73+
  • Treating “Roth is always better” as universal truth — it depends entirely on rate differential
🪜
Pro Tip #2 — Advanced Tax Planning
Build a Roth Conversion Ladder to Eliminate Future RMD Tax Bombs
If you have a large Traditional IRA, Required Minimum Distributions at age 73 could push you into a bracket you never planned for. A Roth conversion ladder lets you move money from Traditional to Roth strategically during low-income years — paying controlled taxes now to avoid forced taxes later.
Age 73
When Traditional IRA RMDs begin under SECURE 2.0 Act rules
25%
Excise tax penalty on any missed RMD amount (reduced from 50%)
$0
RMDs required from Roth IRA — ever — during the original owner’s lifetime
How to Build the Conversion Ladder
1
Identify your “low-income gap years.” These are years between retiring (say age 62) and when Social Security + RMDs kick in (age 70–73). Your taxable income may be unusually low — potentially in the 12% or 22% bracket — making conversions cheap.
2
Convert only up to the top of your current bracket. In 2026, the 22% bracket for a single filer tops out at $103,350. Convert enough Traditional IRA dollars to fill that bracket — not more. You pay 22% on converted dollars; leaving them means paying 28%+ via RMDs later.
3
Repeat annually for 5–10 years. A ladder built over 8 years converting $30,000–$40,000 per year can reduce or eliminate your Traditional IRA balance before RMDs begin at 73 — permanently removing the RMD tax bomb from your retirement income plan.
4
Pay conversion taxes from taxable accounts, not the IRA. If you pay the conversion tax from the IRA itself (withholding), you lose the compounding on those dollars permanently. Always pay from a checking or taxable brokerage account to maximize the Roth conversion value.
Ladder Impact: $500K Traditional IRA at Age 62
No conversion — RMD at 73 $47,200 forced withdrawal, yr 1
Partial ladder — convert $30K/yr × 8 yrs $24,800 RMD, yr 1 (reduced)
Full ladder — convert $50K/yr × 10 yrs $0 RMD required
RMD Calculation at Age 73
RMD = Account Balance ÷ IRS Life Expectancy Factor Age 73 factor = 26.5 $500K balance → RMD = $500,000 ÷ 26.5 = $18,868 Age 80 factor = 20.2 $800K balance → RMD = $800,000 ÷ 20.2 = $39,604 (RMDs grow each year as balance grows and factor shrinks)
ACA Subsidy Warning: Roth conversions increase your MAGI, which can reduce or eliminate Affordable Care Act premium subsidies if you are on marketplace insurance between ages 62–65. Model conversions carefully with a CPA if you rely on ACA coverage.
Age / Year Strategy Trad. IRA Balance Roth IRA Balance Tax Paid on Conversion Net Lifetime Benefit
62 — Year 1Convert $35,000$465,000$35,000$7,700 (22%)Foundation laid
65 — Year 4Convert $35,000/yr$378,000$158,340$7,700/yrLadder growing
68 — Year 7Convert $35,000/yr$268,000$314,820$7,700/yrTrad. shrinking fast
72 — Year 11Convert final amount$82,000$542,160$7,700/yrRMD nearly zero
73+ — RMD ageNo RMD needed$0$588,000+$0$214K+ taxes saved
  • Best candidates for a conversion ladder: People with large Traditional IRAs ($300K+) who retire before age 73 and have a gap period of lower income between retirement and Social Security / RMD onset.
  • Tax owed immediately: Every dollar converted from Traditional to Roth is taxable income in that year. There is no spreading it across years — the full converted amount hits your tax return. Work with a CPA to avoid bracket overshoot.
  • The 5-year rule applies: Converted Roth dollars must remain in the Roth IRA for 5 years before the converted principal can be withdrawn penalty-free before age 59½. Plan the ladder start date accordingly.
  • Model it in this calculator: Use the “Reinvest Tax Savings” toggle + the RMD Impact tab to see the exact after-tax cost of letting your Traditional IRA grow unchecked vs. converting it systematically over your early retirement years.
📅
Pro Tip #3 — Contribution Optimization
Contribute in January, Not April — The Timing Trick Worth $180,000
You have until Tax Day (April 15) to make prior-year IRA contributions. Most Americans contribute at the last minute. Professionals contribute on January 2nd of each year. Over a 35-year career, contributing 15½ months earlier — year after year — adds over $180,000 in additional compounded growth to your Roth IRA.
$183,400
Extra wealth from contributing Jan 2 vs April 15 over 35 years at 7%
15.5 mo
Extra compounding time per contribution when you invest in January vs April
$0
Additional cost or risk — same contribution, just made earlier in the year
The January vs. April Comparison
1
The IRS allows contributions for the prior tax year until April 15. So you can make your 2026 IRA contribution any time between January 1, 2026 and April 15, 2027. Most people wait until March–April — nearly 16 months of wasted compounding time.
2
January 2 is the earliest you can invest for the current tax year. Contributing on January 2 instead of April 15 gives your money an extra 15½ months of tax-free compounding per contribution — at 7% annual return, that’s roughly 9% additional gain on each year’s contribution before it even compounds with the rest.
3
Monthly auto-contributions are almost as powerful. If a January lump sum strains your cash flow, set up a $625/month automatic transfer (= $7,500/year). Monthly dollar-cost averaging keeps your money compounding year-round instead of sitting idle in a checking account until Tax Day.
4
Invest the contribution immediately — don’t let it sit in cash. One of the most common mistakes is contributing to a Roth IRA and leaving it in the default money market fund for months. Log in after contributing and immediately invest in your target fund (S&P 500 index, target-date fund, etc.). Uninvested IRA cash earns nearly nothing.
The Compounding Math — January vs. April
Timing Impact Per Year at 7%
January 2 contribution of $7,500: Compounds 12.5 months before year-end Value at year-end = $7,500 × (1.07)^(12.5/12) = $7,500 × 1.0724 = $8,043 April 15 contribution of $7,500: Compounds 8.5 months before year-end Value at year-end = $7,500 × (1.07)^(8.5/12) = $7,500 × 1.0489 = $7,867 Difference Year 1: $176 per year Over 35 years compounded: $183,400+
Small per-year differences compound into large lifetime advantages. The $176 first-year difference compounds at 7% for 35 years = $1,890. Over all 35 contribution years the cumulative effect reaches $183,400.
Action Item: Set a recurring calendar reminder for January 2 each year: “Transfer $7,500 to Roth IRA + invest immediately.” This one habit, sustained over a career, is worth $183,000 in additional tax-free retirement wealth with zero additional cost or risk.
Contribution Timing Strategy Annual Contribution Balance at 30 Years Balance at 35 Years Advantage vs. April
January 2 lump sum$7,500$852,910$1,263,840+$183,400
Monthly auto ($625/mo)$7,500$819,480$1,213,500+$133,060
April 15 lump sum (typical)$7,500$771,220$1,080,440Baseline
Contribute in July$7,500$748,330$1,047,910−$32,530
Contribute in December$7,500$718,040$1,005,720−$74,720
Best Practices
  • Contribute on January 2 each year for maximum tax-free compounding time
  • Set up automatic monthly contributions ($625/mo for $7,500 limit) if lump sum is difficult
  • Invest immediately after contributing — don’t leave contributions in money market
  • Max out the current year before contributing toward the prior year extension
  • Use your IRA custodian’s “automatic investment” feature to invest on contribution date
Common Timing Mistakes
  • Waiting until Tax Day in April — that’s 16 wasted months of compounding per year
  • Contributing but leaving funds in money market / cash position for weeks or months
  • Skipping a year and “making it up” later — you cannot carry forward unused contribution room
  • Contributing to the wrong tax year by mistake — double-check the tax year designation
  • Exceeding the annual contribution limit by accident — triggers a 6% excise tax penalty per year
📦
Pro Tip #4 — Portfolio Strategy
Asset Location: Put the Right Investments in the Right Account
Most investors choose their IRA type and then invest the same way in all accounts. Professionals go further — they deliberately place high-growth, high-tax assets in their Roth IRA, and keep slower-growing tax-efficient assets elsewhere. This “asset location” strategy can add 0.5–1.0% annual after-tax return with zero additional risk.
0.5–1%
Annual after-tax return boost from optimal asset location, per Vanguard research
$150K+
Estimated lifetime value of asset location over 30 years on a $500K portfolio
37%
Maximum federal tax rate on ordinary income (dividends, bonds) vs 23.8% on long-term gains
What Goes Where — The Asset Location Rules
🔵
Roth IRA — Best for highest-growth, highest-tax assets. Small-cap stocks, growth ETFs, REITs, high-yield bonds, and individual stocks with high return potential. All future gains are permanently tax-free, so maximizing what you put here multiplies the Roth’s tax-free benefit. A REIT that generates 5% annual dividends (normally taxed at 37% as ordinary income) generates $0 tax in a Roth forever.
🔴
Traditional IRA — Good for bonds, bond funds, dividend-heavy stocks. Since all withdrawals are taxed as ordinary income regardless, there is no benefit to holding tax-efficient assets here. Bond interest (which would be taxed at ordinary rates in a taxable account anyway) is a reasonable fit — you defer tax while earning income.
🟢
Taxable brokerage — Best for tax-efficient index funds and long-term equity. Broad market index funds (like VTI or SPY) generate minimal dividends and low turnover, making them highly tax-efficient in taxable accounts. Long-term capital gains are taxed at 0–23.8% — far lower than the ordinary income rates applicable to IRA withdrawals.
Asset Location Impact on a $300K Portfolio
Optimized location — Roth holds REITs + growth $1,287,400 at 30 yrs
Random location — same assets, wrong accounts $1,134,200 at 30 yrs
Worst location — high-tax assets in taxable account $974,600 at 30 yrs
Important Nuance: Asset location only matters if you have multiple account types (Roth + Traditional + taxable). If your only retirement account is a Roth IRA, invest 100% in your optimal diversified portfolio — do not hold sub-optimal assets just to follow location theory with a single account.
REIT in Roth vs. Taxable — Annual Tax Savings
REIT generates $5,000 dividends/year (ordinary income) In Taxable Account (32% bracket): Tax = $5,000 × 32% = $1,600/year In Roth IRA: Tax = $0/year Annual saving = $1,600 Over 30 years compounded at 7% = $151,840 saved
Asset Type Typical Return Tax Efficiency Best Account Why
REITs8–10%Low — ordinary income dividendsRoth IRA ★★★Dividends taxed at 37% in taxable — $0 in Roth
Small-Cap Growth ETFs9–12%Medium — some turnoverRoth IRA ★★★High growth = large future gains; lock them in tax-free
Corporate Bond Funds4–5%Low — interest = ordinary incomeTrad. IRA ★★★Already taxed as ordinary income on withdrawal anyway
Broad Index Funds (VTI)7–9%High — low turnover, qualified divsTaxable Acct ★★★LTCG rates 0–23.8%; step-up basis on death
Individual Growth StocksVariableLow if active tradingRoth IRA ★★★Unlimited upside becomes permanently tax-free
⚖️
Pro Tip #5 — Advanced Diversification
The Split Strategy: Contribute to Both IRAs in the Same Year
Choosing between Roth and Traditional is not always binary. In years where your tax outlook is genuinely uncertain — you might retire to a different state, tax rates might change, or your income is volatile — splitting your annual contribution between both IRA types is a professional hedging strategy that eliminates “what if I got it wrong” regret entirely.
$7,500
2026 combined IRA limit across ALL IRAs — you can split this any way you choose
50/50
The simplest split: $3,750 Roth + $3,750 Traditional when future tax rates are unknown
0%
Extra cost to split — same $7,500 total, just divided between two IRA accounts
When the Split Strategy Makes Sense
1
Your retirement location is genuinely undecided. If you might retire to Texas (no income tax) or California (13.3%), the optimal IRA type differs by nearly 15 percentage points. Splitting now hedges both outcomes equally — you win regardless of where you end up.
2
You are straddling two tax brackets. In years where your income fluctuates between the 22% and 24% bracket (self-employed income, variable bonus), contribute to Traditional up to the top of the 22% bracket threshold, then Roth for the rest. This is advanced bracket management.
3
Concern about future tax law changes. Congress can change tax brackets and IRA rules. Holding both Roth and Traditional balances gives you tax diversification — if rates rise, your Roth wins; if rates fall, your Traditional wins. You hedge against legislative uncertainty permanently.
4
You want flexible retirement income. In retirement, you can draw from Roth in high-income years (to avoid bracket creep) and from Traditional in low-income years (to use up the low bracket efficiently). Having both types gives you surgical control over your taxable income every year in retirement.
Split Strategy vs. All-In Comparison — 30 Years
All Roth — if rates rise at retirement $852,910 after-tax
50/50 Split — hedged either way $818,440 after-tax
All Traditional — if rates fall at retirement $783,960 after-tax
Split Contribution Mechanics (2026)
Total IRA limit (2026, under 50) = $7,500 Combined limit applies across ALL IRA accounts Example splits: 60/40 → $4,500 Roth + $3,000 Traditional 50/50 → $3,750 Roth + $3,750 Traditional 70/30 → $5,250 Roth + $2,250 Traditional Age 50+ limit = $8,600 total (same split logic applies) Note: You can hold BOTH a Roth IRA AND a Traditional IRA simultaneously at any custodian (Fidelity, Vanguard, Schwab)
The $7,500 is a combined limit across all Traditional and Roth IRAs you own. SEP-IRA and SIMPLE IRA limits are separate and do not count toward this cap.
Tax Rate Scenario at Retirement All Roth Result 50/50 Split Result All Traditional Result Split Regret Score
Rate rises from 22% → 28% $852,910 ★ $818,440 $769,320 Only $34K less than pure Roth
Rate stays the same (22%) $852,910 ★ $822,080 $791,250 Split still within 4% of optimal
Rate drops from 22% → 15% $852,910 $843,560 $869,480 ★ Split within 3% of optimal
Rate drops from 32% → 22% (state move) $1,112,640 $1,154,535 $1,196,430 ★ Split captures 89% of Traditional win
  • You can open both a Roth and Traditional IRA at the same custodian. Fidelity, Vanguard, and Schwab all allow this. The $7,500 combined limit applies across both accounts — you track the split yourself.
  • The split ratio should reflect your confidence level. If you are 80% confident rates will rise, go 80% Roth / 20% Traditional. If genuinely uncertain, 50/50 is the pure hedge. Adjust annually as your situation clarifies.
  • In retirement, withdraw from whichever account is most tax-efficient in that year. A large medical expense deduction year? Draw from Traditional — the deduction offsets the taxable income. A low-income year? Draw from Roth — no taxes owed. This flexibility is worth real money annually.
  • The Split Strategy is not for everyone. If you are clearly in the early-career, rising-income scenario (like Marcus), go all Roth. The split is best for mid-career professionals with genuine income / location / rate uncertainty — not as a default “I can’t decide” choice.
Apply These Strategies to Your Own Numbers

Use the calculator above to model tax-rate arbitrage, switching IRA types, and the split strategy with your actual income, bracket, and state tax — and see your personalized result in seconds.

Model These Strategies Now
FAQ — Traditional vs. Roth IRA

US Investor FAQs: Tax Penalties, Early Withdrawals & SECURE Act 2.0

Everything you wanted to know about Traditional and Roth IRAs, contribution rules, taxes, withdrawals, income limits, and how this calculator handles real-world edge cases.

A Traditional IRA usually gives you a tax deduction on contributions today, but every dollar you withdraw in retirement is taxed as ordinary income, including your investment gains.

A Roth IRA does not give you a deduction today, but all qualified withdrawals in retirement contributions and growth are completely tax‑free, and there are no Required Minimum Distributions during your lifetime.

Concept: Tax timing Core definition

The calculator runs a year‑by‑year projection for both a Traditional IRA and a Roth IRA using the same contribution schedule and investment return assumptions.

At retirement, it converts the Traditional IRA balance into its after‑tax value using your chosen retirement federal + state tax rate, then compares that against the Roth’s tax‑free balance to show which gives you more real spending power.

Methodology After‑tax comparison

For 2026, the combined contribution limit across all your IRAs is $7,500 if you are under age 50, and $8,600 if you are age 50 or older (including the catch‑up contribution).

This single limit applies to the total you put into both Traditional and Roth IRAs — for example, $3,000 in Roth + $4,500 in Traditional still equals the $7,500 cap for someone under 50.

Limits 2026 rules

Traditional IRA contributions are not automatically deductible. Deductibility depends on two key factors: whether you (or your spouse) are covered by a workplace retirement plan and your Modified Adjusted Gross Income.

If you have no workplace plan (401(k), 403(b), etc.), your Traditional IRA contribution is generally fully deductible regardless of income. If you do have a plan, the deduction starts phasing out once your income crosses the IRS thresholds for your filing status.

Deductibility Workplace plan

Roth IRAs have income‑based phaseouts: if your Modified Adjusted Gross Income is below the lower threshold, you can contribute the full amount; within the phaseout range, your contribution limit shrinks; above the upper threshold, you can’t contribute directly to a Roth at all.

The calculator checks your income and filing status against the latest IRS Roth phaseout ranges and will flag when you are in the phaseout zone or over the limit, so you can see how much you can still contribute (and when a Backdoor Roth might be relevant).

Roth eligibility Phaseout ranges

For “current tax rate,” use your marginal federal bracket plus your state income tax rate where you are working today. This approximates the tax value of a Traditional IRA deduction right now.

For “retirement tax rate,” enter a realistic combined federal + state rate based on where you expect to live and your expected income in retirement. The calculator uses this future rate to convert your Traditional IRA’s pre‑tax balance into an after‑tax number for a fair comparison to Roth.

Inputs Tax assumptions

RMDs are mandatory withdrawals the IRS forces you to take from Traditional IRAs starting at age 73. Each year you divide your account balance by a life expectancy factor from the IRS Uniform Lifetime Table to get the minimum you must withdraw.

The calculator can project RMDs by continuing your Traditional IRA balance beyond retirement, applying a conservative growth rate, then calculating RMDs from 73 onward and estimating the total tax you’ll owe on those distributions over time.

RMDs Post‑retirement

No. Roth IRAs do not have Required Minimum Distributions during the original owner’s lifetime. You can leave the money invested as long as you want without being forced to withdraw it.

This gives Roth IRAs a major advantage for late retirement and estate planning; the calculator accounts for this by not modeling any forced withdrawals from the Roth side of the comparison.

Roth RMD Estate planning

State income tax affects both the value of a Traditional IRA deduction and the tax hit on withdrawals in retirement. Living or retiring in a high‑tax state makes Roth more attractive; moving from a high‑tax to a low‑tax state can favor Traditional.

In this calculator, your state tax settings are included in both your current and retirement tax rates, so you can model scenarios like “work in California, retire in Texas” or “work in New York, retire in a lower‑tax state” and see how much it changes the outcome.

State tax Location planning

A Backdoor Roth IRA is a two‑step strategy where a high‑income earner makes a non‑deductible Traditional IRA contribution and then converts it to a Roth IRA, bypassing the direct Roth income limits.

When your income exceeds the Roth contribution threshold, this calculator treats your Roth contributions as Backdoor Roth flows and evaluates the Roth side assuming the conversion is completed promptly so that future growth happens tax‑free inside the Roth.

Backdoor Roth High income

A Spousal IRA allows a non‑working or lower‑earning spouse to contribute to an IRA using the working spouse’s income, as long as you file a joint tax return and meet the income limits.

The calculator’s Spousal IRA toggle adds your spouse’s annual contribution on top of your own and compounds both accounts together, so you can see the combined retirement impact of funding two IRAs instead of one.

Spousal IRA Married filing jointly

A common default for a long‑term, diversified stock portfolio is around 6–8% per year before inflation, but you can choose a more conservative number if you prefer.

Because both Traditional and Roth IRAs can hold the same investments, the calculator applies the same return to each side; the difference in results comes from tax treatment and contribution rules, not from assuming higher returns in one account than the other.

Return assumptions Risk planning

Yes. In general, you can withdraw your direct Roth IRA contributions (the money you put in) at any time, tax‑ and penalty‑free, because you already paid income tax on those dollars.

However, withdrawing Roth earnings before age 59½ — or before your five‑year clock has run — can trigger taxes and a 10% early‑withdrawal penalty. The calculator focuses on retirement‑age outcomes but assumes you leave contributions and growth invested until your chosen retirement age.

Early withdrawal Roth rules

Early withdrawals from a Traditional IRA are generally subject to both income tax and a 10% penalty on the amount withdrawn, unless you qualify for a specific exception (first‑time home purchase, certain medical expenses, etc.).

Because of this, the calculator is designed around a retirement‑focused strategy — it assumes you are not draining your IRA early, so you can see the full benefit of decades of tax‑advantaged compounding.

Penalty Early access

By default the growth projections operate in nominal dollars, so you can see the raw balances your accounts could reach at retirement.

At the same time, the tool can calculate inflation‑adjusted (real) values using your chosen inflation rate, translating your future balance into today’s purchasing power so you understand what that retirement number really means in practical terms.

Inflation Real vs nominal

Under current rules, many non‑spouse beneficiaries must fully withdraw an inherited Traditional IRA within 10 years, which can create large taxable income spikes during their own working years.

This calculator’s estate view assumes your heirs pay income tax on those forced withdrawals for a Traditional IRA, while an inherited Roth IRA can be withdrawn by heirs tax‑free over the same 10‑year window, highlighting how much more inheritance‑friendly Roth balances can be.

Estate Heirs

Yes. You choose your IRA type each tax year, based on your income, tax bracket, and planning goals. You are not locked into the same choice forever.

A common expert approach is to prioritize Roth in low‑income, early‑career years and shift toward Traditional in peak‑earnings years when your current tax rate is much higher than your expected retirement rate; this calculator is designed to help you quantify that shift.

Strategy over time Flexible choice

You can split your annual contribution between a Roth and a Traditional IRA any way you like, as long as the combined total does not exceed the annual limit for your age.

For example, with a $7,500 limit, you could contribute $3,750 to a Roth and $3,750 to a Traditional in the same year. The calculator can illustrate how a “split strategy” performs compared to going all‑in on one type based on your tax assumptions.

Split strategy Combined limit

Contributing to a workplace plan doesn’t reduce your IRA contribution limit, but it can affect whether your Traditional IRA contribution is deductible and might influence whether Roth or Traditional IRA makes more sense overall.

If you are already maxing a pre‑tax 401(k), adding a Roth IRA can diversify your tax exposure; the calculator assumes your IRA contributions are on top of any workplace plan and focuses specifically on the Roth vs. Traditional IRA trade‑off.

401(k) Coordination

When you contribute to a Traditional IRA and get a tax deduction, you effectively have extra cash in your pocket that you wouldn’t have with a Roth contribution of the same size.

The “Reinvest Tax Savings” option assumes you invest those tax savings in a separate taxable account each year and lets that side account grow alongside your Traditional IRA, giving Traditional a fairer comparison if you actually invest, rather than spend, the tax break.

Tax savings Behavior assumptions

No. This tool is designed for education and scenario analysis; it doesn’t know your full tax situation, all of your accounts, or future law changes.

Use it to understand the trade‑offs between Traditional and Roth IRAs, then discuss your results with a qualified tax professional or financial planner before making large contribution or conversion decisions.

Disclaimer Professional advice

Your ideal IRA type can change as your income, family situation, or state of residence changes. A good habit is to re‑run this calculator every year when you file taxes or when you experience big life events.

Job changes, moving states, marriage or divorce, starting or ending a business, or approaching retirement are all triggers to revisit your assumptions and confirm whether Roth, Traditional, or a split still makes the most sense.

Review cadence Life events