US Roth vs Traditional IRA Calculator

Traditional IRA gives you a tax deduction now, then taxes withdrawals in retirement. Roth IRA gives no deduction now, but withdrawals (including all gains) come out tax-free. Pick traditional if you expect to be in a lower tax bracket in retirement; Roth if higher. Most younger workers, expecting career income growth, lean Roth.

Both have a 2024 contribution limit of $7,000 ($8,000 if 50+), combined across all your IRAs. So you cannot put $7,000 in a traditional and another $7,000 in a Roth. The choice (or split) applies to your single shared annual limit.

Roth IRA eligibility phases out at higher incomes. For 2024, single filers can contribute fully up to $146,000 MAGI, partially to $161,000, and not at all above. MFJ phases out from $230,000 to $240,000. Traditional IRA deductibility also phases out, but only if you (or your spouse) have a workplace retirement plan - without one, traditional contributions are deductible at any income.

High earners use the 'backdoor Roth': contribute $7,000 to a traditional IRA non-deductible, then convert it to Roth. The conversion has no income limit. The pro-rata rule complicates this if you have other pre-tax IRA balances - look up the rule before doing it, or consult a CPA.

Mid-career years where income drops temporarily (sabbatical, parental leave, layoff, retirement before Social Security starts) are prime for Roth conversions. Converting $50,000 of traditional IRA to Roth in a year you have low taxable income costs much less in tax than doing it later when retirement RMDs push you into higher brackets.

Retirees often face the 'tax torpedo' at age 73 when required minimum distributions on traditional accounts start, sometimes pushing them into higher Medicare premium brackets too. Spreading conversions across the early-retirement years (60-72) at controlled rates flattens this. The [Compound Interest Calculator](/compound-interest-calculator) helps model multi-decade outcomes.

Roth contributions (not earnings) can be withdrawn anytime, tax-free and penalty-free, because you already paid tax on them. Earnings come out tax-free only after age 59 and a half AND the account being open 5 years. Traditional withdrawals before 59 and a half generally trigger 10% penalty plus income tax.

Roth IRAs have no required minimum distributions during the original owner's lifetime, making them the best wealth-transfer vehicle to heirs. Inherited Roths still must be drained within 10 years (post-SECURE Act 2019), but the heirs pay no tax on the distributions either. Traditional IRAs inherited by non-spouses also drain within 10 years but the heirs owe income tax.