What's the real difference between Roth and Traditional?

When you pay the tax. Traditional contributions skip tax now and are taxed at withdrawal; Roth contributions are taxed now and withdraw tax-free. With the same pre-tax income contributed to each, they land in exactly the same place when your tax rate now equals your rate in retirement — so the entire contest is a bet on which rate is higher.

What is the break-even tax rate?

Your marginal tax rate today. If your retirement rate ends up below it, Traditional wins; above it, Roth wins; equal, they tie. That's the whole math — everything else is a judgment about future rates and the features the rate comparison ignores.

Why do many people choose Roth despite the math favoring Traditional?

Because the 'Traditional wins' result rests on assuming a lower retirement rate — a bet that tax rates fall. Roth also has no required minimum distributions, its balance is fully yours (no embedded tax liability), and it hedges against rates rising from today's historically low levels.

Should I split between Roth and Traditional?

Many planners like a mix — 'tax diversification.' Holding both lets you choose which pot to draw from each retirement year to manage your bracket, and hedges the future-rate bet in both directions. A common pattern: Traditional in peak-earning years, Roth in lower-income years.

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Roth vs. Traditional Calculator

The fair version of this comparison: the same pre-tax income into each account. Traditional invests it all now and pays tax at withdrawal; Roth pays tax now, invests a bit less, and withdraws free. The winner comes down to one guess — your tax rate in retirement — and this page is honest about that.

Monthly contribution (pre-tax income)

Years until retirement

yrs

Tax rate now (marginal)

Tax rate in retirement (your guess)

Annual return

Verdict

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Traditional, after tax

Roth, tax-free

Break-even rate

—

Worth knowing: the whole result hinges on a tax rate decades out, and nobody knows it. Today's brackets are historically low. That's why this federal-only page deliberately doesn't crown a winner on false precision — the "what the math can't price in" section below is as much of the answer as the numbers are.

The comparison most calculators get wrong

The common mistake is comparing equal contributions — $500 into Traditional vs. $500 into Roth. But $500 of Roth costs more of your paycheck, because the tax was already paid on it. The fair test is equal pre-tax income: $500 of gross pay becomes $500 in Traditional, or (at a 22% rate) $390 in Roth. Run that comparison and a clean fact drops out:

If your tax rate is the same now and in retirement, the two accounts land in exactly the same place. Commutative multiplication — taxing before growth or after growth doesn't matter. Which means the entire Roth-vs-Traditional contest reduces to one question: will your retirement rate be higher or lower than today's? Your current marginal rate is the break-even.

The math

Traditional = FV(c) × (1 − t_ret) · Roth = FV(c × (1 − t_now))

where FV is the future value of the monthly annuity at your return. Since FV is linear in the payment, Roth = FV(c) × (1 − t_now) — so the two differ only by which tax rate multiplies the same grown pot.

One asterisk in Traditional's favor: your retirement withdrawals don't all get taxed at one rate. They fill the standard deduction and low brackets first, so the average rate you'll actually pay is usually below the marginal rate you'd enter here. Entering your marginal retirement rate is the conservative-toward-Roth assumption.

Why "Traditional wins" deserves an asterisk

Most people assume a lower rate in retirement — less income, lower bracket — and the calculator dutifully crowns Traditional. But notice what that assumption is: a bet that your tax rates fall. It embeds both a forecast about your income and a forecast about Congress, from a starting point of historically low brackets. If rates hold or rise, Roth wins the same comparison. A calculator that flatly declares Traditional the winner is laundering a guess into a verdict.

What the rate comparison can't price in

RMDs. Traditional accounts force withdrawals from age 73–75 — taxed whether you need the money or not, potentially bumping your bracket, Medicare premiums, and the tax on your Social Security. Roth has none.

Uncertainty itself. A Roth balance is fully yours; a Traditional balance carries an embedded tax bill at an unknown future rate. Certainty has value beyond expected dollars.

Flexibility. Holding both lets you choose which pot to draw from each year to steer your bracket in retirement — which is why "some of each" beats "pick the winner" for many savers.

If you max out, Roth shelters more. The limit is on dollars in, not on after-tax value — so a maxed-out Roth account is worth more than a maxed-out Traditional one. The equal-pre-tax-income comparison above only holds below the cap.

Common questions

Does the employer match change anything?

The match is pre-tax by default, so choosing Roth for your own contributions usually gives you a mix automatically. (SECURE 2.0 lets plans offer a Roth match instead — still uncommon, but worth checking your plan's rules.) Either way, capture the whole match before optimizing anything else.

What if I'm in a low bracket right now?

Low-income years — early career, grad school, a sabbatical, early retirement — are Roth's best moments: you're locking in a cheap tax rate. The same logic drives Roth conversions in low-income years (see the Roth conversion calculator below).

Do state taxes matter here?

Yes, and they can dominate: contribute Traditional in a high-tax state, retire to a no-tax state, and you've dodged the state tax entirely — a real Traditional edge this federal-only comparison doesn't count. The reverse move argues for Roth.

Is there an income limit?

Roth IRA contributions phase out at higher incomes (backdoor conversions are the common workaround), but Roth 401(k)s have no income limit — anyone whose plan offers one can use it at any income.

See what the split does to your actual plan

Tesserae models your retirement by tax bucket — Traditional, Roth, taxable — with withdrawal ordering, RMDs, and conversion ladders, so the Roth question gets answered inside your real numbers. Privacy-first: you enter your own numbers, and we never touch your bank login.

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