Roth IRA vs Traditional IRA Guide: Formula & Worked Example
Short answer
After-tax value of Roth vs Traditional contributions. In the fixed example below, traditional wins by is 26,177.92. Your answer depends on the inputs and assumptions you choose.
Formula
Result = Roth IRA vs Traditional IRA calculation using yearly contribution, years to retirement, annual return, tax rate now, tax rate in retirement
The inputs are yearly contribution, years to retirement, annual return, tax rate now, tax rate in retirement. Use the input scale shown beside each field and keep time periods and units consistent. Only round the final result for display.
Worked example
- Yearly contribution
- 7000
- Years to retirement
- 30
- Annual return
- 7
- Tax rate now
- 22
- Tax rate in retirement
- 15
- Traditional wins by: 26,177.92
- Roth (tax-free): 707,511.29
- Traditional after tax: 601,384.60
- + invested tax savings (Trad.): 132,304.61
Understanding the result
After-tax value of Roth vs Traditional contributions. Start with the base example, then replace each value with the figure that matches your situation.
Yearly contribution
The example uses 7000 for yearly contribution. This is an illustration, not a recommended value. Keep the unit and time period shown by the field.
Years to retirement
The example uses 30 for years to retirement. This is an illustration, not a recommended value. Keep the unit and time period shown by the field.
Annual return
The example uses 7 % for annual return. This is an illustration, not a recommended value. Keep the unit and time period shown by the field.
Tax rate now
The example uses 22 % for tax rate now. This is an illustration, not a recommended value. Keep the unit and time period shown by the field.
Tax rate in retirement
The example uses 15 % for tax rate in retirement. This is an illustration, not a recommended value. Keep the unit and time period shown by the field.
What the comparison means
The comparison changes only yearly contribution, keeping every other example input fixed. This isolates that input's effect on the primary result. It does not predict future outcomes.
Rates, fees, eligibility, local tax rules and provider rounding can change the final amount. Reference tax and exchange-rate data may be outdated; verify the official source before deciding.
Comparison
| Scenario | Input | Result |
|---|---|---|
| Lower input | Yearly contribution: 5600 | Traditional wins by: 20,942.33 |
| Base example | Yearly contribution: 7000 | Traditional wins by: 26,177.92 |
| Higher input | Yearly contribution: 8400 | Traditional wins by: 31,413.50 |
Common mistakes
- Using the wrong units for yearly contribution.
- Comparing results while changing more than one input at a time.
- Rates, fees, eligibility, local tax rules and provider rounding can change the final amount. Reference tax and exchange-rate data may be outdated; verify the official source before deciding.
Checklist
- Confirm yearly contribution.
- Confirm years to retirement.
- Confirm annual return is expressed in %.
- Confirm tax rate now is expressed in %.
- Confirm tax rate in retirement is expressed in %.
- Check the result against your source or provider.
Calculators Percentage Editorial Team
Calculator guides from the Calculators Percentage team. These introductory examples are educational, not professional advice.
Last reviewed:
Rates, fees, eligibility, local tax rules and provider rounding can change the final amount. Reference tax and exchange-rate data may be outdated; verify the official source before deciding.