Financial

Roth vs Traditional IRA & 401k Calculator

Compare pre-tax and Roth IRA/401(k) balances. Calculate compound interest, employer matching, Roth conversion taxes, and find your optimal retirement path.

Interactive Calculator

1. Provide Details

Account Type

Your Annual Contribution ($)

Employer Match % (For 401k)

Years to Retirement

Expected Annual Return (%)

Current Income Tax Rate (%)

Retirement Income Tax Rate (%)

Traditional Balance to Convert to Roth ($)

2. Output Results

How to Calculate: Formula & Steps

Traditional plans defer taxes until withdrawal, while Roth plans are funded with post-tax dollars to allow tax-free growth. Employer matching is added to the traditional pre-tax portion.

Formula Used:

FV = Contribution × [((1 + r)^n - 1) / r]; Traditional Net = FV × (1 - Retirement Tax); Conversion Tax = Balance × Current Tax

Step-by-Step Calculation Example

Contributing $6,500 annually at 7% for 25 years yields $411,114. Traditional is taxed at retirement, Roth is tax-free. Converting a $50k Traditional IRA at a 22% tax rate triggers $11,000 in tax due today.

Common Mistakes to Avoid

Assuming Roth is always superior without calculating tax bracket shifts.
Not maximizing contributions early to exploit compound interest.
Forgetting to pay Roth conversion taxes from outside the account (paying it from the IRA triggers early withdrawal penalties).

Practical Use Cases

Retirement planning
Investment comparisons
Roth conversion tax planning
401k match modeling

Expert Tips

If you are currently in a low tax bracket, Roth is usually the best choice.
Always contribute at least enough to capture your full employer 401(k) match—it is free money.
If doing a Roth conversion, make sure you have cash reserves in a regular bank account to pay the conversion tax.

Frequently Asked Questions About Roth vs Traditional IRA & 401k Calculator

What is the difference between a Roth and Traditional retirement account?

Traditional accounts are funded with pre-tax dollars, lowering your taxable income today, but withdrawals are taxed at retirement. Roth accounts are funded with post-tax dollars, meaning no tax deduction today, but all future compound interest, growth, and withdrawals are 100% tax-free.

Does a Roth IRA earn interest or grow?

A Roth IRA is an investment container (not a single interest-bearing account like a bank CD). Within the IRA, you invest in assets like stock index funds, mutual funds, or bonds. The account grows through compound interest, capital gains, and dividend payouts, which are entirely tax-free.

What is a Roth conversion, and how are the taxes calculated?

A Roth conversion is transferring assets from a Traditional (pre-tax) IRA or 401(k) to a Roth (post-tax) IRA. Because these funds have never been taxed, the entire converted amount is added to your taxable income for the year, and taxes are due at your current income tax rate. For example, converting $50,000 in a 22% tax bracket costs $11,000 in conversion taxes.

How does employer matching work in a Traditional vs. Roth 401(k)?

If you select a 401(k), employers can match your contributions (e.g. 50% match up to 6%). Historically, all employer matching funds must go into a Traditional pre-tax account, which will be taxed upon withdrawal. Even if you contribute to a Roth 401(k), the matched portion usually grows pre-tax in a traditional sleeve.

What is a good rate of return for an IRA?

Historically, the average rate of return for a balanced stock market index fund (like the S&P 500) inside an IRA is roughly 7% to 10% per year, adjusted for inflation, over a long-term (20+ year) horizon.