Is Roth always better than Traditional?

No. Roth wins if your tax rate will be higher in retirement; Traditional wins if it will be lower. If your rate drops even slightly in retirement (for example 24% now to 22% later), Traditional can produce a larger after-tax balance.

How do I choose between Roth and Traditional?

Compare your marginal tax rate today with your expected rate in retirement. Higher later favors Roth; lower later favors Traditional. When uncertain, many people split contributions between both.

What does the Roth vs Traditional calculator compare?

It compares the after-tax value of each account using the same pre-tax budget, correctly taxing the Roth contribution up front so the comparison is apples-to-apples.

Retirement

Roth vs Traditional: when the Traditional comes out ahead

Alex is thirty, just started a job with real benefits, and the HR portal wants an answer: Roth or Traditional? A coworker says what everyone online says, “Just do the Roth,” with total confidence and no math. That advice is right often, but far from always, and in Alex’s very ordinary case the Traditional comes out about $19,000 ahead.

The one comparison that decides it

With a Roth you pay tax now and withdraw tax-free later. With a Traditional you skip the tax now and pay it when you withdraw. So the decision mostly comes down to whether your tax rate is higher now or in retirement. Higher later favors the Roth. Lower later favors the Traditional.

A worked example

Here’s Alex: age 30, retiring at 65, contributing $7,000 a year at a 7% return, with a 24% tax rate today and 22% in retirement (plenty of people drop a bracket or two):

Traditional after-tax value: $754,773
Roth after-tax value: $735,420
Winner: Traditional, by $19,353

The Traditional wins because Alex skipped the tax at 24% and paid it later at 22%. Two points on a large balance adds up to about $19,000. Taking the coworker’s advice here would have meant paying the higher rate up front for no benefit.

Run it with your brackets →Free Roth vs Traditional calculator, no sign-up. Compare after-tax outcomes using your own tax rates.

When the Roth wins

Plenty of the time. Early in your career you may be in a low bracket now and a higher one later, and then the Roth can win by a lot. It also has advantages the basic math understates: no required minimum distributions, simpler planning, and protection if tax rates rise for everyone. Young and on a lower income, the Roth is often right. At peak earnings and expecting a lower bracket later, the Traditional deserves a close look.

Where this estimate can be off

Alex doesn’t need to know the exact retirement tax rate, just which direction it’s likely to go. Nobody knows their future tax rate, or what Congress will do to brackets over 30 years. Run the calculator with a couple of reasonable guesses. If they point in different directions, that uncertainty is a good argument for splitting your contributions between the two.

Figures from TheSharpDollar’s Roth vs Traditional calculator using its sample scenario. Your result depends on your tax rates, contributions and timeline.