Roth vs Traditional IRA
Compare after-tax retirement outcomes based on your tax brackets, age, and expected returns.
After 35 years (after-tax value)
Roth IRA
$58K
Tax-free withdrawals
Traditional IRA
$66K
Taxed at 12% withdrawal
Traditional wins by $7K
Because your retirement tax bracket (12%) is higher than or equal to your current bracket (22%), the upfront tax deduction from Traditional contributions is more valuable. You save more by deferring taxes to later.
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Start Growing Your Net WorthWhen Roth Wins
Roth wins when your tax rate in retirement will be higher than it is now. This is common for young professionals early in their careers, people who expect significant income growth, and anyone who believes tax rates will rise nationally. With a Roth, you pay taxes on contributions now but never pay taxes on growth or withdrawals.
When Traditional Wins
Traditional wins when your current tax rate is higher than what you'll pay in retirement. This often applies to high earners in peak years who plan to retire with lower income, or people in states with high income tax who plan to retire in a tax-free state.
The Roth Conversion Ladder
An advanced strategy for early retirees: contribute to Traditional during high-earning years (getting the deduction at a high rate), then convert to Roth during low-income retirement years (paying taxes at a low rate). The converted funds become available tax-free after 5 years. This requires planning ahead but can save tens of thousands in lifetime taxes.