Roth vs Traditional Calculator

Most retirement plans let you choose Roth contributions (taxed now, tax-free later) or traditional contributions (tax-free now, taxed later). The right choice depends mostly on one question: will your tax rate be higher now or in retirement? This calculator makes the comparison concrete.

What this calculator does

Enter a yearly contribution in pre-tax dollars, your combined tax rate now, the rate you expect in retirement, years until retirement and an investment return. The calculator shows:

• which option comes out ahead,
• the after-tax difference at retirement,
• the traditional account's after-tax value at retirement, and
• the Roth account's value at retirement, which is tax-free.

The formula in plain English

To compare fairly, both choices cost you the same today.

• Traditional: you contribute the full amount before tax. It grows, and you pay tax at your retirement rate when you withdraw.
• Roth: the same pre-tax dollars become a smaller after-tax contribution, because you pay tax at today's rate first. It grows and comes out tax-free.

Future value = each year's contribution, growing at your return until retirement.

Traditional after tax = future value × (1 − retirement tax rate).

Roth = future value × (1 − today's tax rate).

Whichever tax rate is lower wins. If they're equal, the results are the same.

A worked example

Dr. Patel contributes $10,000 a year for 25 years with a 7% return. His combined tax rate now is 27%, and he expects 22% in retirement.

• Future value before taxes: about $676,800.
• Traditional: after 22% tax, about $527,900.
• Roth: after paying 27% upfront, about $494,000.
• Traditional comes out about $33,800 ahead.

If he expected a 30% rate in retirement instead, the Roth would win. As a resident with a 17% combined rate, Roth would clearly win.

Why it matters at each career stage

If you're: Student

Most students have little earned income, but if you work, a Roth IRA is a great place for savings. Your tax rate is likely the lowest it will ever be.

If you're: Resident / fellow

Roth contributions usually make sense in training. Your tax rate is low, and you'll likely be in a much higher bracket as an attending. Many residents use the Roth option in their 403(b) and also fund a Roth IRA.

If you're: Employed

High-earning attendings often lean toward traditional contributions to cut taxes at their highest rates. Many also use the backdoor Roth to add some tax-free money. Splitting between both is a reasonable hedge.

If you're: Practice owner

Practice owners can use both in a solo 401(k) or practice plan. Years with lower income, such as when you start a practice, can be good times to favor Roth or do Roth conversions.

Other things to weigh

Tax diversification. Having both types of accounts lets you choose where to withdraw from each year, which helps manage taxes in retirement.

Required minimum distributions. Traditional accounts require withdrawals starting in your 70s. Roth 401(k)s no longer require them during your lifetime, and Roth IRAs never do.

Heirs. Roth money passes to heirs tax-free, which can matter for estate planning.

State moves. If you'll retire in a state with no income tax, traditional contributions made in a high-tax state may save more.

Future tax law. Tax rates could change. Splitting contributions spreads that uncertainty.

A simple approach

If you're unsure, a common rule of thumb is to use Roth when your marginal rate is 22% or lower and traditional when it's 32% or higher, and to split in between. Revisit the choice when your income changes significantly.

Next, see your current marginal and effective tax rates, learn the backdoor Roth, or project your 403(b). Our backdoor Roth guide walks through each step.