The Same $7,500, Two Very Different Retirements
Meet Dana and Marcus. Both are 30, both invest the full $7,500 2026 IRA limit every year, both earn the same 7% return for 35 years. They each end up with the same $1,035,000 on paper. But one of them keeps far more of it. Here's the part nobody spells out: that pile of money is only half the story. The other half is who pays the tax, and when. Get that piece wrong and you can hand the IRS tens of thousands of dollars you never needed to.
Dana picks a Roth IRA. She earns $70,000 and sits in the 22% bracket today. She pays income tax first, then invests what's left. The contribution gives her no deduction now, so April brings no refund. But at 65 she withdraws that $1,035,000 and the IRS takes $0. Tax-free, every dollar. The number she sees on her statement is the number she actually gets to spend.
Marcus picks a Traditional IRA. Same income, same bracket, but he deducts every contribution. At 22%, each $7,500 contribution hands him back about $1,650 a year in reduced taxes, real money he can invest or spend right now. Over 35 years that's roughly $57,750 in upfront tax savings. The catch arrives in retirement: every dollar he withdraws is taxed as ordinary income. If he's still in the 22% bracket when he retires, that million-dollar balance is really worth only about $807,000 to him after the tax bill.
So who won? It comes down to one comparison and nothing else: your tax rate the year you contribute versus your tax rate the year you withdraw. If Marcus retires in a lower bracket, say 12% instead of 22%, his deduction-now strategy pulls clearly ahead, because he skipped tax at 22% and paid it at 12%. But if Dana's career takes off and she'd otherwise have retired in a 32% bracket, locking in today's 22% rate was the smarter move by a wide margin.
Same contributions, same returns, opposite winners, all decided by a single number most people never bother to estimate.
Run the extremes and the stakes get concrete. Contribute at 22% and withdraw at 12%, and the Traditional route leaves Marcus with roughly $103,000 more after tax than the Roth across that career. Flip it, contribute at 22% and withdraw at 32%, and the Roth wins by a similar margin. The difference between a good guess and a bad one here isn't a rounding error; it's six figures. That's the gap this calculator closes. You enter your bracket today and your expected bracket in retirement, and it runs both accounts side by side, to the dollar, including the tax savings a Traditional contribution generates along the way. Instead of guessing which side of the break-even you land on, you see the exact after-tax balance each account hands you.