How we worked it out
Updated as you change the numbers.
- Roth: $7,000.00 a year grows tax-free to $644,046.65.
- Traditional: the same after-tax cost buys $8,974.36 of pre-tax contribution, which grows and is then taxed at 15%: $701,845.71.
Method and assumptions
To compare fairly, each option costs you the same amount today. A Roth contribution of $X costs $X after tax. A traditional contribution is deductible, so the same out-of-pocket cost lets you contribute $X ÷ (1 − tax rate now); the balance is taxed at withdrawal. The taxable account pays tax on growth every year. When today’s and retirement tax rates are equal, the Roth and traditional come out the same. Income limits and annual contribution limits apply; check the IRS.
Questions
When is a Roth IRA better?
When your tax rate in retirement will be the same or higher than now, for example early in your career.
Sources
Method and figures checked on . Every worked answer on this page is covered by an automated test. Found a mistake? Tell us.