Traditional IRA vs Roth IRA
Traditional IRA
- • Tax-deductible contributions (reduce taxable income now)
- • Tax-deferred growth
- • Withdrawals taxed as ordinary income in retirement
- • Required Minimum Distributions (RMDs) apply
Roth IRA
- • Contributions made with after-tax dollars
- • Tax-free growth
- • Qualified withdrawals are completely tax-free
- • No RMDs during your lifetime
How This Calculator Works
Traditional IRA: You get an upfront tax deduction on contributions. The final balance is taxed at your expected retirement tax rate.
Roth IRA: You pay taxes upfront on contributions. All growth and qualified withdrawals are 100% tax-free.
When to Choose Traditional IRA
- You expect to be in a lower tax bracket in retirement
- You want the immediate tax deduction to reduce your current taxable income
- You are in a high tax bracket now
When to Choose Roth IRA
- You expect to be in a higher or same tax bracket in retirement
- You want tax-free income in retirement for flexibility
- You want to leave a tax-free inheritance to heirs
- You are young and have many years for tax-free compounding