Traditional vs Roth Calculator

The only fair comparison holds your gross income constant. With Traditional you contribute the full pre-tax amount and pay no tax today; the money grows tax-deferred and is taxed at your retirement rate when you withdraw it. With Roth you get no deduction, so contributing the same pre-tax amount actually costs you contribution × (1 − rate now) in after-tax dollars. That smaller amount grows and is withdrawn tax-free.

Each is grown as an annual contribution stream: balance = balance × (1 + return) + contribution for the number of years. Traditional's end balance is then multiplied by (1 − retirement rate); Roth's is already tax-free.

The rule of thumb: Roth comes out ahead if your tax rate in retirement is higher than today; Traditional does if it is lower; the break-even is exactly when the two rates are equal. Because both dollars grow at the same rate, the decision is purely a bet on your future tax rate versus today's.

Related strategy: the Roth conversion ladder. In low-income years (early retirement, a gap year, a sabbatical) you can convert money from Traditional to Roth, deliberately filling up the low tax brackets while your income is small. You pay ordinary tax on the converted amount that year, then wait five years, after which each converted chunk can be withdrawn penalty-free before age 59½. Repeating this yearly builds a "ladder" of seasoned conversions, letting you access retirement money early and shift future growth into the tax-free bucket at bargain rates.

Simplifications: constant return and contribution, annual compounding, flat tax rates, no contribution limits or employer match. Illustrative, not advice.