Roth vs Traditional Breakeven Calculator
When tax-now equals tax-later.
Compare Roth vs Traditional retirement contributions: pay tax now or later? See which route nets more at your working-life and retirement tax rates.
What this tool does
Roth contributions use after-tax money but withdraw tax-free. Traditional contributions use pre-tax money but withdrawals are taxed in retirement. This calculator models the net value of each approach by comparing what you'll actually have to spend after all taxes are paid. Enter your contribution amount, your current marginal tax rate, your expected marginal rate in retirement, the annual return you anticipate, and the number of years until retirement. The result shows which account type leaves you with more spendable wealth at retirement. The outcome depends most heavily on the difference between your working-life tax rate and your retirement tax rate—the wider the gap, the clearer the advantage. For example, if you expect to be taxed at a much lower rate in retirement than today, the traditional route may produce a larger after-tax sum. The calculation is for educational illustration and assumes consistent rates and returns over time.
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Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
1,000 contributed today: Roth costs 600 net at 40% working rate, grows tax-free to 4,322 at 5% over 30 years. Traditional contributes 1,000 gross, grows to 4,322 — taxed at 25% retirement rate leaves 3,242. Working rate higher than retirement rate favours traditional; lower favours Roth.
What the result means
Net retirement values for both routes shown. The bigger figure indicates the better choice at these rate assumptions. Run the math at different retirement rate assumptions to see sensitivity.
A worked example
Try the defaults: contribution amount of 1,000, working-life marginal rate of 40%, retirement marginal rate of 25%, expected annual return of 5%. The tool returns 3,241.46. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.
What moves the number most
The result responds to Contribution Amount, Working-Life Marginal Rate, Retirement Marginal Rate, Expected Annual Return, and Years to Retirement. Two inputs usually tip the answer one way or the other. Identify which ones matter most by flipping each value past a round threshold and watching whether the option with the lower calculated total changes.
The formula behind this
Roth: contribution net of tax now, then tax-free growth and withdrawal. Traditional: contribution at gross, growth, then taxed at retirement rate. Whichever rate is higher determines the better route. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.
How this changes the answer
The breakeven point is the retirement tax rate where Roth and Traditional produce identical net results. Below that, Roth wins; above, Traditional wins. The longer the time horizon and the higher the expected return, the more either choice gets amplified — small rate gaps compound into meaningful differences over decades.
What this doesn't capture
Required Minimum Distributions, contribution limits, employer-match treatment, and the option to do partial Roth conversions later all sit outside this calculation. The model also assumes a single flat retirement tax rate, when in reality retirement income often crosses multiple brackets. The result functions as a directional answer, not the final word.
A £1,000 contribution growing at 5% annually over 30 years results in 3,241.46 net value difference between Roth and traditional accounts.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
This calculator models the after-tax outcome of two contribution strategies over a fixed time horizon. For the Roth approach, the contribution amount is reduced by the working-life marginal tax rate, then grows at the expected annual return for the specified number of years, with withdrawals treated as tax-free. For the Traditional approach, the full contribution grows at the same annual return over the same period, then the accumulated balance is reduced by the retirement marginal tax rate upon withdrawal. The model assumes a constant annual return, no fees or withdrawals during the accumulation period, and that marginal tax rates remain fixed across time. It does not account for market volatility, inflation, tax bracket changes, contribution limits, or early withdrawal rules.
References
Frequently Asked Questions
How do I know my retirement rate?
What about state pension?
Does this work for Roth employer retirement plan vs Traditional employer retirement plan?
Government rule changes?
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