It Comes Down to Two Tax Rates
A traditional contribution is deducted now and taxed when you take it out. A Roth contribution is taxed now and comes out tax-free. If the money grows at the same rate either way, the only real difference is which tax rate applies: the one you pay today or the one you'll pay on withdrawals. Lower later favors traditional. Higher later favors Roth.
A single filer earning $80,000 in a state with no income tax saves 22% on a $7,000 traditional IRA contribution, $1,540 a year. With $40,000 of other taxable income in retirement, the calculator estimates about 12% on withdrawals. After 30 years at 6%, traditional comes out ahead by $57,123. The break-even rate is 22%: below it, traditional wins.
When Roth Wins
Roth tends to win when your rate now is low. A 25-year-old earning $45,000 is in the 12% bracket, so a traditional contribution saves only 12%. Forty years of growth builds a balance big enough that withdrawals of 4% a year, added to $40,000 of other income, are taxed at about 15.6%. Roth comes out ahead by $40,448.
Roth also has advantages the dollar comparison doesn't show. You can take out Roth IRA contributions (not earnings) at any time without tax or penalty. Roth IRAs and, since 2024, Roth 401(k)s have no required minimum distributions during your life. And tax-free withdrawals don't raise the income that decides how much of your Social Security is taxed or what you pay for Medicare.
State Tax Can Decide It
Moving changes the math. A single filer earning $120,000 in California saves 31.3% on a traditional contribution, federal and state. Staying in California in retirement, traditional comes out ahead by $75,832. Retiring to Florida, which has no income tax, the rate on withdrawals falls to about 12% and the traditional advantage grows to $110,248. Illinois, Mississippi and Pennsylvania don't tax 401(k) and IRA withdrawals at all, and Iowa doesn't from age 55. In Illinois, Mississippi and Iowa, a traditional contribution also lowers state tax now, so the state tax on that money is never paid. Pennsylvania is the exception the other way: it doesn't let you deduct 401(k) or IRA contributions, so there's no state saving now either.
2026 and 2027 Limits and Income Rules
| 2026 | 2027 | |
|---|---|---|
| IRA contribution limit (traditional and Roth combined) | $7,500 (+$1,100 at 50+) | $7,500 (+$1,100 at 50+) |
| 401(k) limit (traditional and Roth combined) | $24,500 (+$8,000 at 50+) | $25,500 (+$8,500 at 50+) |
| Roth IRA phase-out, single or head of household | $153,000–$168,000 | $158,000–$173,000 |
| Roth IRA phase-out, married filing jointly | $242,000–$252,000 | $250,000–$260,000 |
| Traditional IRA deduction phase-out, single, covered at work | $81,000–$91,000 | $83,000–$93,000 |
| Traditional IRA deduction phase-out, joint, covered at work | $129,000–$149,000 | $133,000–$153,000 |
| Traditional IRA deduction phase-out, joint, only spouse covered | $242,000–$252,000 | $250,000–$260,000 |
| Wages above which 401(k) catch-ups must be Roth | $150,000 | $155,000 |
Phase-out ranges are modified AGI. The catch-up rule looks at the prior year's wages from the same employer. You can make 2026 IRA contributions until the April 2027 tax filing deadline.
Related Calculators
The Roth IRA calculator shows how much you can contribute at your income and how the account grows. The 401(k) calculator projects your balance with an employer match. The income tax calculator shows your bracket, federal and state.
Frequently Asked Questions
Is a Roth or traditional IRA better?
It depends on one comparison: your tax rate now against your tax rate on the money when you take it out. If you expect a lower rate in retirement, traditional usually comes out ahead; if you expect the same or higher, Roth does. Early-career savers in the 10% or 12% bracket often do better with Roth; people in the 22% bracket or above who expect less taxable income in retirement often do better with traditional.
What is the break-even tax rate?
The tax rate on withdrawals at which Roth and traditional leave you exactly the same amount. It sits close to the rate a traditional contribution saves you today, a little lower when the invested tax savings owe tax on their gains. If you expect to pay less than the break-even rate in retirement, traditional wins.
Why does the calculator invest the tax savings from a traditional contribution?
To compare them at the same cost. A $7,000 Roth contribution costs $7,000 out of your pocket; a $7,000 traditional contribution costs less, because it cuts this year's tax. Investing that tax cut makes the two choices cost the same, which is the only fair way to say which leaves you more. If you would spend the tax savings instead, traditional looks worse than shown.
Can I contribute to a Roth IRA at any income?
No. For 2026, the Roth IRA limit shrinks between $153,000–$168,000 of modified AGI for single filers and $242,000–$252,000 for married couples filing jointly, and is zero above that. For 2027, the ranges are $158,000–$173,000 and $250,000–$260,000. Roth 401(k) contributions have no income limit.
Can I deduct a traditional IRA contribution if I have a 401(k) at work?
Yes, but the deduction shrinks at higher incomes. For 2026, a single filer covered by a plan at work loses it between $81,000–$91,000 of modified AGI, and a married couple filing jointly where the contributing spouse is covered between $129,000–$149,000. If only your spouse is covered, the range is $242,000–$252,000. Above the range you can still contribute, but the contribution isn't deductible.
Do I have to make 401(k) catch-up contributions as Roth?
Only if your wages from that employer were over $150,000 the year before ($155,000 for 2027 catch-ups, based on 2026 wages). That rule from SECURE 2.0 started in 2026. Your regular contributions up to $24,500 can still be traditional.
Can I split my contributions between Roth and traditional?
Yes. You can divide a year's contributions between both kinds, as long as the total stays within the limit. Splitting is a reasonable choice when your expected retirement rate is close to the break-even rate, and it gives you both taxable and tax-free money to draw from later.