One Contest, Two Tax Rates
An IRA — an individual retirement account, defined in IRS Publication 590 — is a tax shelter with a door at
one end or the other. Traditional (and its employer cousins SEP and SIMPLE) shelters the entrance:
contributions are pre-tax or deductible, growth is untaxed, and the bill arrives on withdrawal.
Roth shelters the exit: contributions are taxed going in, and growth and qualified withdrawals are
never taxed again. This calculator exists because comparing the two from after-tax inputs rigs the game —
so it starts from before-tax dollars, converts the Roth and taxable columns to after-tax terms, and
lets two tax rates decide everything.
Traditional (after tax) ÷ Roth = (1 − retirement tax rate) ÷ (1 − current tax rate)
AdSense Space
(In-Article Fluid Banner)
Read the defaults through that formula. A $7,500 before-tax contribution is worth $7,500 inside a Traditional
IRA but only $5,625 inside a Roth (25% prepaid), so the Traditional's headline balance, $1,066,343, towers over
the Roth's $799,758 — an illusion, until the Traditional pays its 15% retirement tax and lands at $906,392.
The honest margin is $106,634, and it exists for exactly one reason: 15% is cheaper than 25%. Swap the two
rates in the form and the verdict swaps with them, to the same dollars. Set them equal and the two after-tax
balances tie precisely — paying the tax before the growth or after it is the same bill when the rate is the
same, because multiplication does not care about order. Regular taxable savings, taxed on its interest every
year at the current rate, trails both at $563,434: it enjoys neither shelter, which is the quiet proof that
the shelter itself — at either end — is where the money is.
The four flavors
Traditional IRA — the default individual account: deductible contributions (the deduction phases out at
higher incomes if a workplace plan covers you), penalty-free withdrawals after 59½, and required minimum
distributions from age 73. 2026 limit: $7,500, or $8,600 at 50+. Roth IRA — after-tax in, tax-free out,
no RMDs in the owner's lifetime, direct contributions phased out for high earners; our Roth IRA Calculator
explores it on its own terms. SEP IRA — built by employers, mostly the self-employed and small firms:
only the employer contributes, at a uniform percentage for all eligible employees, up to the lesser of 25% of
compensation or $72,000 for 2026 — nearly ten times the individual limit — with immediate 100% vesting
and no catch-up contribution. SIMPLE IRA — for businesses with 100 or fewer employees: employees may
contribute up to $17,000 in 2026 (catch-ups of $4,000 at 50+, and $5,250 for ages 60–63), and the employer
must either match up to 3% of compensation or contribute 2% for everyone. One sharp edge: a SIMPLE's early
withdrawal penalty is 25%, not 10%, during the first two years.
Rollovers and the 401(k) next door
Most workplace plans — 401(k)s, 403(b)s, 457s, SEPs, SIMPLEs (after two years) — can be rolled into a
Traditional IRA when you change jobs, tax-free if done directly, and reported on Forms 1099-R and 5498 even
when no tax is due. Traditional and Roth money must stay in separate accounts. Against a 401(k), the IRA
trades a lower limit ($7,500 vs $24,500 in 2026) and no employer match for near-limitless investment choice
and typically lower fees — which is why the standard play is both: capture the full 401(k) match first, then
let the IRA's freedom take the next dollars. At the far end of choice sits the self-directed IRA (about 2% of
all IRAs), which reaches into real estate, private companies, tax liens and digital assets under heavy IRS
scrutiny — though even it may never hold life insurance, S-corporation shares, collectibles or antiques, or
real estate for personal use.
FAQ
Which rate should I enter for retirement?
Your best estimate of the marginal rate your withdrawals will actually face — often lower than today's, because retirement income usually drops and part of each withdrawal fills the lower brackets. The whole Traditional-vs-Roth answer hangs on this one guess, so try it a few points in each direction and see whether the verdict is robust or knife-edge.
Why does taxable savings fall so far behind?
It pays the current marginal rate on its interest every single year, so on the defaults it compounds at 4.5% instead of 6% — and unlike the other three columns it never gets a shelter at either end. The $236,324 gap between it and the Roth is the price of that annual tax drag.
Disclaimer: This calculator provides estimates for educational purposes only and does not constitute financial or tax advice. Limits shown are for the 2026 tax year.