Roth vs. Traditional Contribution Calculator Methodology

The calculator estimates Roth after-tax value, traditional after-tax value, current tax savings, invested side account value, contribution-limit effects, withdrawal taxes, employer match, break-even future tax rate, warnings, insights, and a yearly after-tax value timeline.

Roth contributions are modeled as after-tax contributions. If qualified Roth withdrawals are assumed, the Roth employee balance is not taxed at withdrawal. If qualified treatment is not assumed, Roth earnings are taxed using the traditional withdrawal tax-rate assumption as a simplified warning-style estimate.

Traditional contributions are modeled as pre-tax contributions. The retirement balance grows using the entered expected return minus fees, then the modeled withdrawal value is reduced by the selected future or custom withdrawal tax rate.

Current tax savings are estimated by multiplying the traditional contribution by the current effective tax rate. The effective current rate is the entered federal rate plus the state and local rate when state and local taxes are included.

If enabled, traditional tax savings are added to a side account. The side account uses the entered annual return, reduced by tax drag when applicable. If side-account modeling is off, the traditional tax savings are shown but not compounded separately.

Same contribution amount compares Roth and traditional using the same annual contribution. Same out-of-pocket cost treats the Roth contribution as the after-tax budget and estimates how much traditional contribution that budget could support before contribution limits apply.

The main retirement accounts compound annually using the expected annual return minus the investment fee or expense ratio. Contributions may increase by the entered annual percentage and are modeled for the selected contribution years.

Traditional balances are taxed at the future effective tax rate unless a custom traditional withdrawal tax rate is entered. Roth qualified withdrawals are assumed to have no withdrawal tax on the Roth employee balance. These are simplified tax assumptions, not filing calculations.

Employer match is optional. The match is limited by the entered match percentage and salary cap. The default assumes matching dollars are pre-tax. Employer match treatment can vary by plan, so this is a simplified comparison assumption.

The calculator uses a binary search from 0% to 70% to estimate the future tax rate at which Roth and traditional after-tax values are approximately equal. If no stable break-even appears in that range, the calculator reports that instead.

This calculator does not include exact Roth IRA eligibility, exact traditional IRA deductibility, workplace plan eligibility, contribution deadline rules, qualified distribution rules, Roth five-year rules, required minimum distributions, state-specific retirement tax rules, exact tax brackets, tax credits, early withdrawal penalties, backdoor Roth rules, mega backdoor Roth rules, pro-rata rules, or professional financial, investment, tax, legal, retirement, brokerage, or accounting advice.

This calculator uses user-entered assumptions and simplified tax modeling. Actual Roth and traditional outcomes can vary based on eligibility, income limits, contribution limits, plan rules, tax rates, withdrawal timing, state taxes, and future law changes.

These calculators are for educational purposes only and are not financial, tax, legal, insurance, investment, real estate, employment, medical, childcare, vehicle-buying, or professional advice.

This calculator is for educational purposes only and is not financial, investment, tax, legal, retirement, brokerage, accounting, or professional advice.