Roth Vs Traditional Calculator

Retirement accounts and the employer match cover the container; this lesson is the deep dive on the single most-asked question about that container — Roth or Traditional? Both let you contribute the exact same monthly dollar amount, the real choice on a payroll form. A Traditional contribution is pre-tax, so it compounds to the identical gross balance a Roth contribution does — a Roth contribution is already-taxed money that then grows completely tax-free, and neither path pays any tax on its growth along the way. The only thing that ever touches the money is the ONE tax event: never, for Roth; at your future rate, for Traditional. That sounds simple, but almost every back-of-envelope comparison gets it wrong, because contributing the same dollar amount to each plan is not actually an equal sacrifice — the Traditional contribution shrinks your taxable income, so it costs you less take-home pay today than the Roth contribution does. Unless that monthly tax saving gets invested too, a naive comparison makes Traditional look strictly worse than Roth no matter what the tax rates are, which is backwards. Invest it, and the comparison collapses to one exact number: your current tax rate minus your expected retirement tax rate. Equal rates make the two plans identical, to the penny — not approximately, exactly, and that holds regardless of how much you contribute, what it returns, or how long it grows; only the tax-rate relationship ever decides the winner. The simulator races three balances — Roth, Traditional with the tax break invested, and Traditional with the tax break spent — so the size of that naive mistake is visible in dollars, not just asserted. The durable lesson: it's a bet on your own future bracket, never a bet on time horizon or investment return, and whichever way you bet, invest the tax break or the bet isn't even being placed fairly.

Free and interactive — no sign-up, nothing to install. Read the full lesson for the plain-language explanation.