How to Use This Tool
Enter what you contribute, how long it grows, and your marginal tax rate now and in retirement. The Traditional side invests its tax saving too, which is what makes the comparison meaningful.
The comparison almost everyone makes is not a comparison
Putting 7,000 into a Roth and 7,000 into a Traditional are not equivalent acts. The Roth 7,000 comes out of money you have already paid tax on. The Traditional 7,000 comes out of pre-tax income and hands you a refund — 1,680 at a 24% rate — which the usual comparison silently spends.
7,000, 7% for 30 years, 24% now and 24% later The usual comparison Roth 53,286 Traditional 40,497 Roth "wins" by 12,789 The fair comparison Roth 53,286.00 Traditional after tax 40,497.20 1,680 tax saving, grown 12,788.59 Traditional total 53,285.79
The remaining 21 cents is floating-point rounding. In exact arithmetic the two are the same number, and you can see why by writing them out. With contribution C, return r, years n, and one tax rate t:
Roth C x (1+r)^n
Traditional C x (1+r)^n x (1-t) the account, taxed on the way out
+ C x t x (1+r)^n the refund, invested
= C x (1+r)^n x [(1-t) + t]
= C x (1+r)^n
So what does decide it
Only the difference between your rate now and your rate then, and it is symmetric. Going from 24% to 12% puts Traditional ahead by 6,394. Going from 12% to 24% puts Roth ahead by exactly the same 6,394. Everything else — the return, the years, the amount — scales both sides together.
Which means the question is not "which account is better" but "will my marginal rate be higher or lower when I withdraw". Higher earners near the peak of their career usually expect lower; someone early in their career, or expecting rates to rise, usually expects higher.
The real Roth advantage is the contribution limit
Contribution caps are set in nominal money, and that quietly favours Roth. At a 24% rate, 7,000 of post-tax money is the equivalent of 7,000 / 0.76 = 9,211 of pre-tax income. So a Roth lets you shelter about 32% more purchasing power under the same headline limit.
This only matters if you are actually hitting the cap. If you contribute less than the maximum, you could always have put more into the Traditional instead, and the advantage disappears.
What this model leaves out
The side account is treated as growing tax-free, which no taxable account does — dividends and realised gains get taxed along the way, which drags it and tilts the real answer towards Roth. Working the other way, Traditional withdrawals fill the lower brackets rather than being taxed entirely at your top rate, which flatters Traditional. Required minimum distributions, state taxes, employer matching, and the effect of retirement income on other benefits are all absent.
This is general information, not tax or financial advice. Contribution limits and bracket thresholds change every year, so check the current figures before acting on any of it.
