The short answer
Contributing $7,000/year for 35 years (age 30 to 65) at 7% growth builds a $1,001,526 Roth IRA balance — entirely tax-free at withdrawal. Run the same contributions through a Traditional IRA at a 22%-now, 25%-in-retirement tax rate, and the after-tax result is only $776,546 — a $224,981 advantage for the Roth, purely because the retirement tax rate is higher than today's.
Key takeaways
- Roth IRA balances are the after-tax number — no further tax is owed on qualified withdrawals, unlike a Traditional IRA where withdrawals are taxed as ordinary income.
- The Roth-vs-Traditional comparison hinges entirely on whether your tax rate in retirement will be higher or lower than it is now — a 22%-to-25% jump produced a $224,981 Roth advantage here; a rate that drops instead would favor Traditional.
- Roth IRA contributions phase out by income: a single filer gets the full $7,000 limit up to $146,000 in income, only $5,133 at $150,000, and $0 at $161,000 or above.
- Unlike a Traditional IRA (which requires RMDs starting at 73 or 75), a Roth IRA has no required minimum distributions during the original owner's lifetime.
Roth vs. Traditional: the tax-rate bet
Roth: $7,000/yr × 35 years @ 7% = $1,001,526 (tax-free)
Traditional: same contributions/growth × (1 − 25% retirement tax) = $776,546
Roth advantage = $1,001,526 − $776,546 = $224,981
Every dollar contributed to a Roth IRA has already been taxed at your current rate, so what accumulates — including all investment growth — comes out tax-free. A Traditional IRA lets the same dollar grow tax-deferred, but every withdrawal is taxed at your rate in retirement. When the retirement rate is higher than today's rate, as in this 22%-to-25% example, the Roth comes out ahead by whatever growth accumulated on the portion that would otherwise be lost to tax. If your retirement tax rate is expected to be lower — a common assumption for someone retiring with less income than they earn now — the comparison can favor Traditional instead. There's no universal right answer; it depends entirely on your own tax-rate trajectory.
Income limits: how much you're actually allowed to contribute
| Single-Filer Income | Allowed Contribution |
|---|---|
| Up to $146,000 | $7,000 (100%) |
| $150,000 | $5,133 (73%) |
| $155,000 | $2,800 (40%) |
| $161,000 and above | $0 (0%) |
Unlike a Traditional IRA, which anyone with earned income can contribute to (deductibility is what phases out, not the ability to contribute), a Roth IRA's contribution limit itself shrinks and eventually disappears as income rises. The phase-out is linear across the income band — $146,000 to $161,000 for single filers — so the closer your income sits to the top of that range, the less you can put in directly. Married couples filing jointly have a separate, higher band. High earners above the limit sometimes use a "backdoor Roth" (a nondeductible Traditional IRA contribution converted to Roth), which has its own tax considerations worth discussing with a tax professional.
Related calculators
- IRA Calculator — compare Traditional IRA growth against a taxable brokerage account.
- 401(k) Calculator — model a workplace plan with employer match alongside your IRA.
- RMD Calculator — see the required withdrawals a Traditional IRA faces that a Roth avoids.