Roth vs Traditional IRA Calculator

A Roth IRA is better when you expect your tax rate in retirement to be higher than your tax rate now. You pay tax on contributions today at your current (lower) rate, then never pay tax on withdrawals. A Traditional IRA is better when you expect your retirement tax rate to be lower, you defer tax from a high bracket now and pay at a lower rate later. The math is symmetrical: if your current and retirement brackets are identical, the two are theoretically equal (before accounting for RMD rules, state taxes, and contribution limits).

For 2025, the annual IRA contribution limit is $7,000 for those under 50, and $8,000 for those 50 and older (the extra $1,000 is a catch-up contribution). The same limits apply to both Roth and Traditional IRAs combined, you can't put $7,000 in each. Income limits apply to Roth contributions: single filers phase out at $150,000-$165,000 MAGI; married filing jointly at $236,000-$246,000.

2025 federal income tax brackets (single filer): 10% on income up to $11,925; 12% on $11,925-$48,475; 22% on $48,475-$103,350; 24% on $103,350-$197,300; 32% on $197,300-$250,525; 35% on $250,525-$626,350; 37% on income above $626,350. Use your marginal rate, the bracket your next dollar of income falls into, not your effective rate, for this comparison.

The same logic applies to Roth 401k vs Traditional 401k: Roth contributions are after-tax and withdrawals are tax-free; Traditional contributions are pre-tax and taxable on withdrawal. The 401k contribution limit is $23,500 for 2025 ($31,000 with catch-up for age 50+). Unlike Roth IRAs, Roth 401ks have no income limits, making them valuable for high earners who can't directly contribute to a Roth IRA.

The backdoor Roth is a strategy for high-income earners above the Roth IRA income limits. You make a non-deductible contribution to a Traditional IRA (no income limit for contributions, only for deductibility), then immediately convert it to a Roth IRA. The conversion is taxable only on any gains between contribution and conversion. If done quickly with no pre-existing Traditional IRA balances, the tax hit is minimal. Consult a tax professional before implementing.