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Compare after-tax retirement value from a Roth IRA (post-tax contributions, tax-free growth) versus a Traditional IRA (pre-tax contributions, taxed withdrawals).
Formula
Roth: contribute post-tax, withdraw tax-free -> FV = Σ C×(1+r)t. Traditional: contribute pre-tax (invest the tax saving too), withdraw taxed -> FV × (1 − retirement tax rate).
Worked example
$7,000/year for 30 years at 7%: the Roth ends at about $707,000 tax-free. The Traditional grows to the same $707,000 but a 22% retirement tax leaves ~$551,000 - so the Roth wins if your tax rate is the same or higher later.
Quick reference
| Now vs later tax | Better choice |
|---|---|
| Lower rate now | Roth (lock in the low rate) |
| Same rate | Roth (contribution-limit advantage) |
| Much lower rate later | Traditional |
General guidance only.
Frequently asked questions
Should I choose a Roth or Traditional IRA?
If you expect to be in the same or a higher tax bracket in retirement, the Roth is usually better because withdrawals are tax-free and it effectively lets you shelter more money. If you expect a much lower bracket later, the Traditional’s upfront deduction can win.
What are the IRA contribution limits?
For 2025 the total across all your IRAs is $7,000, or $8,000 if you are 50 or older. Roth contributions phase out at higher incomes.