Roth IRA vs Traditional IRA Growth Calculator

Same contribution, two different tax treatments

Contributing $7,000/year for 25 years at an assumed 7% return, a Roth IRA (taxed at 22% before investing, tax-free after) ends with $345,339.75 after tax. A Traditional IRA (contributed pre-tax, taxed at an assumed 18% rate in retirement) ends with $363,049.48 after tax -- $17,709.73 more than Roth in this example.

Traditional wins here specifically because the retirement tax rate (18%) is lower than the contribution-year tax rate (22%). If those two rates were reversed -- a lower rate now than in retirement -- Roth would come out ahead instead, since a Roth locks in the contribution-year rate rather than the eventual withdrawal rate.

This comparison assumes the same $7,000 nominal contribution to both accounts, which slightly favors Traditional in practice: since Traditional contributions are pre-tax, a fair comparison would let the Roth contribution be reduced by the immediate tax paid, or grossed the Traditional contribution up to match Roth's after-tax cost -- this simplified model uses the same number for both.

The one input that decides the outcome

Ignores contribution limits, MAGI phaseouts, and RMDs. Not tax advice. The entire result hinges on the gap between nowTax and laterTax -- your actual tax rate 25 years from now is a guess, not a known number, so treat the 'winner' label as sensitive to that assumption rather than a fixed conclusion.

Contribution amount and years must both be greater than zero for either projection to run.

This model also doesn't account for annual contribution limits (which are far below $7,000 x 25 years of unconstrained growth in real dollar terms once IRS limits and catch-up contributions are factored in) or required minimum distributions on the Traditional side -- for RMD math specifically, see the IRA Required Minimum Distribution Calculator.

Related retirement-account decisions

If your employer offers a 401(k) match, that's typically a better first dollar than either IRA type since it's an immediate 100%-plus return -- check it on the 401(k) Employer Match Calculator before maxing an IRA.

An HSA is technically the most tax-advantaged account available to those who qualify (pre-tax in, tax-free growth, tax-free out for medical expenses) -- see the HSA Contribution Tax Savings Calculator for that comparison.

Frequently Asked Questions (FAQ)