In Short
A Roth taxes your contribution now and lets it come out tax-free; a traditional account cuts your tax now and taxes every withdrawal. With the same contribution, the traditional account comes out ahead only if your tax rate in retirement is below the break-even rate, which is close to today's rate when you invest the tax you save. For 2026 you can put up to $24,500 in a 401(k) and $7,500 in an IRA, and a Roth IRA phases out between $153,000 and $168,000 of income for single filers [1][2].
How to Use the Roth vs Traditional Calculator
- Pick a 401(k) (or 403(b) / 457) or an IRA, and enter your age and what you plan to put in each year.
- Enter your income and filing status. The calculator figures your federal bracket, or you can turn that off and enter your own rate, state tax included.
- Enter your best guess of your tax rate in retirement, the years until you retire and a yearly return.
- Choose whether you'd invest the tax a traditional account saves you. Or tap Say It All: “I'm 40 and earn 95k, single, putting 7,000 a year in an IRA for 25 years, 12 percent tax in retirement, 7 percent return.”
The Formula
Both accounts start with the same yearly contribution and grow at the same return. The difference is when the tax is paid: a Roth's qualified withdrawals are tax-free, and traditional withdrawals are taxed as income [5].
- Balance = yearly contribution × ((1 + return)^years − 1) ÷ return
- Roth, after tax = balance
- Traditional, after tax = balance × (1 − retirement tax rate) + invested tax savings after tax
- Tax savings each year = contribution × tax rate now (their gains taxed at 15% when withdrawn)
- Break-even retirement rate = invested tax savings after tax ÷ balance
- Roth IRA limit in the phase-out = limit × (top of range − MAGI) ÷ range, rounded up to $10 (at least $200)
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| 401(k), $10,000 a year for 30 years, 22% now, 15% in retirement | 7% return · tax savings invested | Traditional $989,458 vs Roth $944,608 · break-even 19.75% |
| Same, but the tax savings are spent | 7% return · nothing invested | Roth $944,608 vs Traditional $802,917: Roth ahead by $141,691 |
| IRA, $7,500 a year for 35 years, 12% now, 22% in retirement | 7% return · tax savings invested | Roth $1,036,777 vs Traditional $919,162 · break-even 10.66% |
| 401(k), $24,500 a year for 20 years, 32% now, 22% in retirement | 7% return · tax savings invested | Traditional $1,080,138 vs Roth $1,004,390 · break-even 29.54% |
| Roth IRA eligibility: single, $160,000 MAGI, age 40 | 2026 phase-out $153,000–$168,000 | Roth IRA limited to $4,000 (of $7,500) |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
What Is the Difference Between a Roth and a Traditional Account?
A traditional 401(k) or deductible IRA lowers your taxable income in the year you contribute. The money grows tax-deferred, and every dollar you take out later is taxed as ordinary income [5]. A Roth works the other way round: you pay the tax now, and qualified withdrawals (after age 59½, once the account is 5 years old) are tax-free, earnings included [5].
The two share one yearly limit. For 2026 that's $24,500 of 401(k) deferrals plus an $8,000 catch-up at 50 or older ($11,250 at ages 60 to 63), and $7,500 to all your IRAs plus a $1,100 catch-up at 50 [1][2]. For 2025 the figures were $23,500 and $7,000 [3].
How Do You Know Which One Comes Out Ahead?
It comes down to your tax rate now versus your tax rate when you withdraw. If the traditional account's tax savings are invested, the break-even retirement rate sits just below today's rate: a little lower because those savings sit in a taxable account, where gains are taxed [8]. Above the break-even rate the Roth leaves more; below it the traditional account does.
If you'd spend the tax savings instead, the Roth leaves more at almost any retirement rate, because a Roth dollar holds more after-tax money. A Roth IRA also has no required minimum distributions for the original owner, which a traditional IRA does [5].
What Are the 2026 Roth IRA Income Limits?
A Roth IRA contribution phases out between $153,000 and $168,000 of modified AGI for single and head of household filers, between $242,000 and $252,000 for married couples filing jointly, and between $0 and $10,000 if married filing separately [1][2]. For 2025 the ranges were $150,000–$165,000 and $236,000–$246,000 [3]. Inside the range, the limit shrinks in proportion and is rounded up to the next $10 [4][6].
A Roth 401(k) has no income limit, and converting a traditional IRA to a Roth has no income limit either, though the amount converted is taxed [4].
When Is a Traditional IRA Deductible?
If neither you nor your spouse is covered by a retirement plan at work, a traditional IRA is fully deductible at any income. If you are covered, the 2026 deduction phases out between $81,000 and $91,000 of MAGI (single or head of household) and $129,000 to $149,000 (married filing jointly). If only your spouse is covered, it phases out between $242,000 and $252,000 [1][7]. For 2025: $79,000–$89,000, $126,000–$146,000 and $236,000–$246,000 [3].
A non-deductible contribution still goes in. It becomes basis that isn't taxed again when withdrawn; only its earnings are [4]. The calculator handles this when you pick an IRA and your workplace coverage.
Frequently Asked Questions
Is a Roth or traditional 401(k) better?
It depends on your tax rate now versus in retirement. With the same contribution and the tax savings invested, the traditional 401(k) leaves more if your retirement rate is below the break-even rate, which is a little under today's rate. At 22% now, 30 years and a 7% return, the break-even is about 19.75%.
What is the Roth IRA income limit for 2026?
The contribution phases out between $153,000 and $168,000 of modified AGI for single filers, $242,000 to $252,000 for married couples filing jointly, and $0 to $10,000 if married filing separately [1][2].
How much can I put in a Roth IRA in 2026?
$7,500, or $8,600 at age 50 or older, across all your traditional and Roth IRAs, and no more than your taxable compensation [1][2]. Inside the income phase-out the limit is smaller.
Can I have a Roth 401(k) and a Roth IRA?
Yes. They have separate limits: $24,500 for 401(k) deferrals and $7,500 for IRAs in 2026 [1]. The Roth 401(k) has no income limit; the Roth IRA does.
What is the deadline for 2026 IRA contributions?
The tax-filing deadline: April 15, 2027. Extensions don't extend it [4]. 401(k) deferrals have to come out of your pay by December 31.
Do I have to pay tax on Roth IRA withdrawals?
Not on qualified distributions: after age 59½ and at least 5 years after your first Roth IRA contribution. Your own contributions can always come out tax-free; earnings taken early may be taxed and face a 10% additional tax [5].
Sources
- Notice 2025-67: 2026 retirement plan limits and IRA / Roth IRA phase-out ranges — Internal Revenue Service
- 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 — Internal Revenue Service
- Notice 2024-80: 2025 retirement plan limits and IRA / Roth IRA phase-out ranges — Internal Revenue Service
- Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) — Internal Revenue Service
- Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) — Internal Revenue Service
- Roth IRAs — Internal Revenue Service
- IRA deduction limits — Internal Revenue Service
- Topic no. 409, Capital gains and losses — Internal Revenue Service
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.