Roth vs Traditional IRA Calculator 🌎

The Core Tax Math

A Roth IRA and a Traditional IRA both shelter investment gains from annual taxation — that part is identical. The divergence is when the IRS collects.

Traditional IRA: You deduct the contribution today, reducing your current-year taxable income (subject to deductibility phase-outs if you have a workplace plan). The account grows pre-tax. Every dollar you withdraw in retirement — original contributions and gains alike — is taxed as ordinary income. RMDs begin at age 73 under SECURE 2.0, whether you need the cash or not.

Roth IRA: You contribute with after-tax dollars (no deduction). The account grows tax-free. Qualified withdrawals — meaning the account has been open at least 5 tax years and you are at least 59½ — are 100% tax-free. There are no RMDs during the original owner's lifetime.

If your marginal tax rate at retirement equals your rate today, the two accounts produce mathematically identical after-tax outcomes. The Roth wins when your future rate is higher; the Traditional wins when it is lower. Everything else is a refinement of that single fact.

How this calculator compares them (equal out-of-pocket): both routes contribute the same dollar amount, so the Traditional route also gets credit for the tax deduction it generates each year. The calculator assumes you invest that yearly tax saving (contribution × current rate) at the same return, and adds that side fund to the Traditional's after-tax balance: Roth total = future value, tax-free; Traditional total = future value × (1 − retirement rate) + invested tax savings. Simplification to note: the side fund is modeled as if it grew without taxes on its own gains — in a real taxable brokerage account, dividends and realized gains would trim it somewhat, so the Traditional figure is a slight upper bound.

2026 Contribution Limits & Income Phase-Outs

These limits are aggregate across all your IRAs — you cannot put $7,500 in a Roth and $7,500 in a Traditional.

The Backdoor Roth (and Mega Backdoor Roth)

If your MAGI exceeds the Roth phase-out, the backdoor Roth is still legal and remains the standard high-earner workaround. The mechanics:

1. Make a non-deductible contribution to a Traditional IRA (no income limit on contributions, only on deductibility).
2. Immediately convert the Traditional balance to Roth. Because it was non-deductible, only the gains between contribution and conversion are taxable — usually pennies.
3. File Form 8606 to document basis.

The pro-rata rule is the trap. The IRS treats all your Traditional, SEP, and SIMPLE IRA balances as a single pool when computing the taxable portion of any conversion. If you have a $90,000 rollover Traditional IRA (from an old 401(k)) and add a $7,500 non-deductible contribution, only 7.7% of any conversion is non-taxable — the other 92.3% is fully taxed. The fix is to roll the existing Traditional IRA balance into your current 401(k) before doing the backdoor, leaving the IRA pool at $0.

The Mega Backdoor Roth is a separate strategy inside a 401(k) plan that allows it: you make after-tax (not Roth) contributions up to the $72,000 total 415(c) limit (2026, IRS Notice 2025-67) and then immediately convert them to Roth via in-service distribution or in-plan Roth rollover. It only works if your plan document permits both after-tax contributions and the conversion mechanism.

The 5-Year Rule(s) — There Are Actually Two

1. Contribution 5-year rule: Your first Roth IRA must be open for 5 tax years before earnings can be withdrawn tax-free, even after 59½. The clock starts January 1 of the tax year of your first contribution, so a contribution made in April 2026 for tax year 2025 starts the clock on January 1, 2025.
2. Conversion 5-year rule: Each Roth conversion has its own 5-year clock before the converted principal can be withdrawn penalty-free if you are under 59½. After 59½ this rule is moot.

Contributions (not earnings, not conversions) can always be withdrawn tax- and penalty-free at any age — Roth IRAs effectively double as a tax-advantaged emergency fund.

Qualified vs Non-Qualified Distributions

A qualified Roth distribution requires both: (a) the 5-year clock has passed, and (b) you are 59½, disabled, a first-time homebuyer ($10,000 lifetime cap), or the distribution goes to a beneficiary. Qualified = 100% tax-free.

A non-qualified Roth distribution applies ordering rules: contributions come out first (always tax-free), then conversions (potentially subject to the 10% penalty within 5 years if under 59½), then earnings (taxed plus 10% penalty). The 10% early-withdrawal penalty has standard exceptions: medical >7.5% AGI, qualified higher-education expenses, up to $5,000 for birth/adoption, substantially equal periodic payments (72(t)/SEPP), and so on.

Roth Conversion Ladder (Pre-RMD Tax-Bracket Arbitrage)

This is the most underused strategy in retirement planning. Between the year you retire (often 60-ish) and the year RMDs begin (73), you are typically in a low-income trough. Each year, you convert just enough Traditional IRA to Roth to fill up your current tax bracket without spilling into the next. Example: a married couple with $30,000 of Social Security and no other income has roughly $94,000 of headroom inside the 12% bracket in 2026 — they can convert ~$94,000 from Traditional to Roth annually at 12%, which is almost certainly lower than the rate their heirs would pay later or the rate they will pay once RMDs and Social Security stack at 73.

The conversion is a taxable event in the year you do it. There is no income limit on conversions (unlike contributions). Watch out for IRMAA Medicare premium surcharges if you are 63+, and watch the Social Security taxation cliff that turns each marginal conversion dollar into ~$1.85 of taxable income.

SEP-IRA for Side Hustles

If you have 1099 or self-employment income, a SEP-IRA lets you contribute up to 25% of net self-employment earnings (effectively ~20% of net SE income after the SE tax deduction) up to the 2026 cap of $72,000. SEP contributions are traditional (pre-tax) only. For most side hustlers the Solo 401(k) is better — it allows both Roth and Traditional contributions, the same $72k total limit, and a $24,500 employee deferral that is far more flexible than the SEP's employer-only structure. The SEP wins on simplicity (no separate plan document, no Form 5500 until $250k in assets); the Solo 401(k) wins on optionality.

The Decision Framework

In order of priority:

1. Match your employer's 401(k) match first. It is a 50–100% guaranteed return.
2. Pick Roth if your current marginal rate is ≤ 24% and you have 20+ years of growth ahead. The mathematical edge is small, but the optionality is huge.
3. Pick Traditional if your current marginal rate is 32% or higher and you expect to drop at least two brackets in retirement. The deduction today is too valuable to defer.
4. Diversify if you genuinely cannot predict — splitting 50/50 between Roth and Traditional is a hedge, not a cop-out. Future tax rates are policy, not physics.
5. Always do the backdoor Roth if you are above the phase-out and have no pro-rata problem. It costs you the price of a 15-minute Form 8606 each April.

This calculator handles the mechanics. The decision is yours.

What changed in 2026 (vs 2025)

After two flat years, the IRA limit finally moved: IRS Notice 2025-67 raised the contribution cap and — for the first time — the age-50 catch-up, which is now indexed under SECURE 2.0 after years frozen at $1,000.

The same limit applies whether you choose Roth, Traditional, or split between both — it's a combined cap across all your IRAs.