Mr Calcu | Compare IRA options and choose the smartest path to a tax-efficient, stress-free retirement.

Compare and optimize your retirement savings with our Roth vs Traditional IRA calculator. Discover your best option and feel confident about your future.

Roth Vs Traditional IRA Description

Overview: Choosing the Right IRA

Deciding between a Roth IRA and a Traditional IRA involves weighing tax strategies, retirement goals, and income forecasts. This tool compares the two options to help you make an informed decision.

Key Differences at a Glance

• Roth IRA: Contributions are made with after-tax dollars. Withdrawals are tax-free if qualified.
• Traditional IRA: Contributions may be tax-deductible. Withdrawals are taxed as ordinary income.
• Tax Timing: Roth provides tax-free withdrawals later; Traditional offers tax breaks now.
• Required Minimum Distributions (RMDs): Roth IRAs do not require RMDs during the original owner's life; Traditional IRAs do.

Detailed Comparison

Roth IRA Features

• Funded with after-tax income (no upfront tax deduction).
• Investments grow tax-free over time.
• Qualified withdrawals are 100% tax-free.
• No RMDs for the original account owner.

Traditional IRA Features

• May provide a tax deduction when you contribute, depending on income.
• Growth is tax-deferred until retirement withdrawals.
• Withdrawals are taxed at your ordinary income rate.
• RMDs start at age 73.

Mathematical Derivation

To determine the effective after-tax value of each IRA type, use the following formulas:

Future Value = Contribution × (1 + r)^n
Traditional IRA After-Tax = FV × (1 - t_r)
Roth IRA After-Tax = Contribution × (1 - t_c) × (1 + r)^n

Where:

• r = Annual rate of return
• n = Years until retirement
• t_c = Current tax rate
• t_r = Retirement tax rate

Edge Case Considerations

• High-Income Professionals: A backdoor Roth may be ideal for those exceeding income limits.
• Low-Income Early Retirees: Roth conversions during low-income years can reduce lifetime tax liability.
• Estate Planning: Roth IRAs offer more favorable inheritance rules.
• State Taxes: If retiring in a no-income-tax state, a Traditional IRA might yield better results.
• Changing Income Levels: Younger workers expecting higher earnings may benefit from Roth IRAs today.

Mini Case Studies

Case Study A: Amanda, Age 25

Amanda earns $45,000 and contributes $6,000 to a Roth IRA. Over 40 years at 6% annual returns, her account grows to nearly $96,000. She pays no taxes on qualified withdrawals, maximizing post-retirement value.

Case Study B: Mark, Age 55

Mark earns $160,000. He contributes $7,000 to a Traditional IRA, receiving a 32% tax deduction now. Upon retirement in the 22% tax bracket, he withdraws $93,000 (10 years of growth), retaining more after taxes than he would have with Roth contributions.

Take control of your future—use this calculator to find the smartest, most tax-efficient IRA strategy for your retirement goals.