Worth It Calcs
Methodology · Tax year 2026

How we calculate Roth vs. Traditional

Every formula, assumption and source behind the calculator, with a worked example. If something here doesn’t match what you see in the tool, the tool is wrong — please tell us.

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1. The question we answer

“Given my income, taxes, savings and plans, where should my next retirement dollar go — and why?” The calculator compares four strategies on the same budget: Roth-heavy, Traditional-heavy, a recommended mix the engine searches for, and your own custom allocation.

2. A fair comparison: equal economic cost

A $10,000 Roth contribution and a $10,000 Traditional contribution do not cost the same. The Traditional one is deductible, so it costs less take-home pay. By default every strategy is held to the same take-home cost each year.

Take-home cost of a strategy = Roth contributions + taxable deposits + Traditional contributions − (tax before − tax after the deductions)

“Tax before − tax after” is computed exactly with the 2026 brackets and your state rate, not by multiplying by one marginal rate, so a contribution that drops you into a lower bracket is handled correctly. If you enter your budget as gross (pre-tax) pay, we convert it to the take-home cost of saving that much pay in a Traditional account, so the economic cost is still identical across strategies.

Equal-contribution mode (optional) puts the same dollars into accounts in every strategy. The Traditional strategy then has a tax saving left over, which you can choose to have invested in a taxable account (default), spent, or added to more retirement contributions where room exists.

3. Per-dollar math and the break-even rate

G = (1 + r − fee)^n r = real return, n = years invested Traditional, per $1 of pre-tax earnings: G_T × (1 − t_future) Roth, per $1 of pre-tax earnings: (1 − t_today) × G_R Break-even future rate: t* = 1 − (1 − t_today) × G_R / G_T With identical investments and fees (G_R = G_T): t* = t_today

We use n = years to retirement plus half the retirement period, because Traditional and Roth money keeps growing tax-sheltered while you spend it. The full-plan break-even shown in the tool reruns your entire plan — limits, match, overflow to taxable, Social Security taxation, RMDs — with a flat retirement rate and solves for the rate where Roth-heavy and Traditional-heavy support the same spending.

Worked example

Single filer, $85,000 salary, 5% state tax, investing for 30 years at a 5% real return with equal fees.

  1. Tax today. Taxable income = $85,000 − $16,100 standard deduction = $68,900. Federal tax = $1,240 + $4,560 + 22% × $18,500 = $9,870. A $6,000 Traditional 401(k) contribution lowers taxable income to $62,900 and tax to $8,550 — a $1,320 federal saving (exactly 22%), plus $300 of state tax.
  2. Marginal rate today: 22% federal + 5% state = 27%. Average (effective) federal rate: $9,870 ÷ $85,000 = 11.6%. A deduction saves the marginal rate, not the average.
  3. Equal cost. $10,000 of pre-tax earnings: G = 1.0530 = 4.3219. Traditional grows to $43,219; if withdrawals are taxed at 17%, you keep $35,872. Roth: $10,000 × (1 − 0.27) = $7,300 grows to $31,550. Traditional wins because 17% < 27%.
  4. Break-even: t* = 1 − 0.73 × 4.3219 ÷ 4.3219 = 27%.
  5. Equal contribution (tax saving invested). Roth: $10,000 grows to $43,219. Traditional: $10,000 → $35,872 after 17% tax, plus the $2,700 tax saving invested in a taxable account at 5% minus 0.5% tax drag: $10,112, or $9,001 after 15% capital-gains tax on the $7,412 gain. Total $44,873 vs. $43,219.
  6. Employer match. “100% of the first 3% plus 50% of the next 2%” on $85,000 = $2,550 + $850 = $3,400 when you defer at least 5% ($4,250).

4. Contribution rules and eligibility (2026)

  • 401(k)/403(b)/457/TSP employee limit $24,500, shared by Roth and Traditional; catch-up $8,000 at 50+, or $11,250 at ages 60–63. Contributions are also capped at your pay.
  • From 2026, catch-up contributions must be Roth if prior-year FICA wages from that employer exceeded $150,000. You enter your 2025 wages (W-2 box 3); if you leave it blank we assume current pay and say so in the results. Whether your plan matches catch-up deferrals is a setting (on by default).
  • Contributions already made this year (any employer, any IRA) reduce the first year’s room; the match on deferrals already made is not counted again. Later years use full limits.
  • IRA limit $7,500 (+$1,100 at 50+), shared by Roth and Traditional, capped at compensation. A non-working spouse filing jointly can contribute from the couple’s combined pay (spousal IRA).
  • Roth IRA phase-out (MAGI): $153,000–$168,000 single/HOH; $242,000–$252,000 joint; $0–$10,000 separate. Separate filers who lived apart from their spouse all year use the single ranges (for the Traditional IRA deduction too).
  • Traditional IRA deduction phase-out when covered by a workplace plan: $81,000–$91,000 single; $129,000–$149,000 joint. If only your spouse is covered: $242,000–$252,000. Separate filers: $0–$10,000. Not covered and spouse not covered: fully deductible at any income.
  • Phase-outs follow IRS mechanics: reduce proportionally, round up to the next $10, and allow $200 if the result is between $0 and $200.
  • MAGI is estimated as gross income minus Traditional 401(k) contributions in each strategy (so Traditional 401(k) dollars can restore IRA eligibility), unless you enter it.
  • Employer match uses your plan formula, optional dollar cap, the $360,000 compensation limit, the $72,000 annual additions limit and your vesting assumption. Roth and Traditional deferrals both earn the match; it is never counted twice and never comes out of your budget. For couples, match tiers are funded in order of the match earned per dollar (after vesting), so a tight budget goes to the richer match first, whichever spouse has it. A Roth employer match is taxable now; that tax is paid out of the year’s budget before anything is invested.

5. How the recommended mix is chosen

The engine does not use a fixed priority list. It simulates candidate strategies — 0%, 50% or 100% of 401(k) deferrals as Roth, then refines in 25-point steps around the best; Roth IRA, deductible Traditional IRA, backdoor Roth or no IRA (only those you are eligible for); IRA before or after extra 401(k) dollars — always collecting the full match first. Each candidate runs through every working year and every retirement year. The winner is the candidate that supports the highest steady after-tax spending — the best of the strategies tested, not a proven optimum across every possible split. If several candidates are within 0.25% of each other, we prefer the one with the most balanced Roth/Traditional split, because the difference is smaller than the uncertainty in future tax law.

6. Year-by-year projection

  • All projections run in today’s dollars: nominal return, salary growth and contribution growth are converted to real terms with your inflation rate. The tool can show future (nominal) dollars for balances.
  • Brackets, the standard deduction, contribution limits and IRA phase-outs are inflation-indexed by law, so they are held constant in real terms. Social Security taxation thresholds are not indexed, so they shrink in real terms each year.
  • Contributions go in at the start of each working year and grow for the year. Fees are subtracted from each account’s return. Taxable accounts lose a yearly tax drag. Tax basis (brokerage cost basis, non-deductible IRA basis, Roth contributions) is a fixed nominal amount, so it is deflated each year in this real-dollar model — inflation-only gains are still taxed.
  • For couples, each person contributes until their own retirement age; spending withdrawals begin when the last one retires. A spouse who has already stopped working counts their pension and Social Security in those years’ taxes and IRA income tests (we assume that income is spent on living costs, not saved), and still takes RMDs, taxed at the household’s working-year rates, with the after-tax remainder saved in the taxable account. (Someone still working may delay RMDs from the current employer’s plan if the plan allows it and they own 5% or less of the business — never from IRAs.)

7. Retirement taxes

Bracket mode (default): each year we tax Traditional withdrawals (including RMDs), pensions, other income and the taxable share of Social Security (IRS Publication 915 formula) using the 2026 brackets, the standard deduction, the age-65 additional deduction and — for 2025–2028 only — the $6,000 senior deduction with its 6% phase-out. Long-term gains stack on top of ordinary income in the 2026 0% / 15% / 20% bands (0% up to $49,450 single, $98,900 joint, $66,200 head of household; 20% above $545,500 / $613,700 / $579,600), plus the 3.8% net investment income tax above $200,000 / $250,000 of MAGI (not inflation indexed). State tax applies your retirement-state rate to Traditional withdrawals and pensions (not Social Security); Pennsylvania, Illinois and Mississippi generally exempt retirement-plan income and are modeled that way.

Manual mode: Traditional withdrawals and pensions are taxed at the flat federal rate you enter plus your retirement-state rate; the taxable share of Social Security (provisional income includes capital gains) is taxed at the federal rate.

Withdrawal order each year:

  1. Each owner’s required minimum distribution, taken from that owner’s own pre-tax accounts (one spouse’s RMD is never taken from the other’s accounts). RMDs start at 73 (born 1951–1959) or 75 (born 1960 or later), using the IRS Uniform Lifetime Table. Roth IRAs and Roth 401(k)s have no lifetime RMDs. Surplus RMD cash is reinvested in a taxable account.
  2. Any Roth conversion you set up — after the RMD, which cannot be converted.
  3. Taxable savings.
  4. Accounts of anyone 59½ or older: pre-tax and Roth in proportion to their balances. Roth earnings are tax-free only once five tax years have passed — with separate clocks for the Roth IRA (first Roth IRA contribution or conversion) and the Roth 401(k) (first designated Roth contribution in the plan). You can enter both years for each person; with no Roth money yet, each clock starts with the first dollar the plan puts into that account type. Rollovers between a Roth 401(k) and a Roth IRA are not modeled. Before that, Roth IRA contributions and conversions still come out first and tax-free, then earnings are taxed — no penalty after 59½. Roth 401(k) earnings are taxed pro-rata in the same situation. If you already have Roth money but leave its year blank, the main figures assume five years have passed; we also run the cautious case (clock starting this year) and, when it changes the answer, show the results as a provisional range.
  5. For anyone under 59½, penalty-free money first: Roth IRA money in IRS ordering — regular contributions, then conversions oldest first (the part that was taxable at conversion, then the non-taxable part). The 10% recapture applies only to the taxable part of a conversion less than five years old, and converted money is not taxed a second time, so a non-taxable backdoor conversion is reachable right away. Earnings come out last and are taxed and penalized. Tax and penalty apply to the amounts actually withdrawn from each layer, not an average. Then the current employer’s 401(k) if you confirmed the age-55 rule for that person (taxed, but no penalty). The age-55 rule is off unless you tick it, separately for each spouse.
  6. Only then other pre-tax money and Roth earnings, taxed and charged the 10% early-withdrawal penalty. Rule 72(t) payments are not assumed. Penalties reduce the spending figures and are flagged.

Two separate runs are kept: one at exactly the spending you asked for (which may run short — this drives the shortfall age and penalty warnings) and one at the sustainable level (used for the charts). Sustainable spending is the highest constant after-tax income (today’s dollars, including Social Security and pensions) that lasts to your planning age, found by bisection. Spendable wealth at retirement = taxable after capital-gains tax + Roth + Traditional × (1 − the average tax rate the plan pays on Traditional withdrawals).

8. Special cases

  • Backdoor Roth (Form 8606 pro-rata): converting a new non-deductible contribution x when your Traditional, rollover, SEP and SIMPLE IRAs already hold P (including any basis B) makes x × (P − B) ÷ (P + x) taxable, using the amount actually contributed. The same amount stays in the Traditional IRA as basis and is carried forward: later withdrawals, RMDs and conversions are taxed pro-rata. You can enter existing basis from your latest Form 8606. Balances are measured at the start of the year as a stand-in for year-end. It is never shown as automatically tax-free.
  • Early access before 59½: the access check lists taxable savings, Roth IRA contribution basis, Roth conversions at least five years old, and — only if you confirm your plan allows it and you separate at 55 or later — your current employer’s 401(k), each as a balance and after estimated tax, against your after-tax spending need (your target minus Social Security, pensions and other income after the tax on them). The year-by-year projection enforces the same rules, so a strategy that needs penalized withdrawals shows lower spending and a warning. Rule 72(t) payments are described but not assumed.
  • Roth conversions: the extra tax is the exact difference in that year’s tax with and without the conversion. It is paid from taxable savings if you choose — we sell enough to cover both the conversion tax and the capital-gains tax that sale triggers — or withheld from the conversion, which adds the 10% penalty on the withheld amount before 59½. We flag Medicare IRMAA (2026 first threshold $109,000 single / $218,000 joint, two-year lookback) for conversions at 63 or later.
  • International retirement: not modeled. Choosing a non-US retirement country hides after-tax retirement results instead of guessing.

9. What is precise and what is estimated

Exact for the numbers you enter: 2026 contribution limits, catch-ups, phase-outs, the match formula, and the arithmetic of growth and withdrawals. Federal income tax follows the 2026 brackets but assumes the standard deduction and no credits, so treat it as an estimate.

Estimates: future returns, inflation, salary, spending, Social Security, future tax law (we assume today’s brackets, indexed), your state’s actual rules and rates (we use the rate you enter), itemized deductions and credits (not modeled; we flag the Saver’s Credit), payroll taxes (unchanged by Roth vs. Traditional, so excluded), and heirs’ taxes.

Simplifications: one federal filing status for life; state tax as a single rate you enter — state figures are estimates and cannot capture every state’s rules for pensions, Social Security or Roth income (no state-specific early-withdrawal penalties); Roth 401(k) clocks are per person, not per employer plan (enter the earliest qualifying plan year if a Roth 401(k) was rolled over directly); the pro-rata rule uses balances at the start of the year; capital gains in working years and in conversion-tax sales use your flat capital-gains rate.

10. Testing

Tax on the next retirement dollar. Besides the average tax on Traditional withdrawals, the model measures the incremental rate directly. In every retirement year of the recommended plan, it adds $1,000 of Traditional withdrawal with everything else unchanged and records the extra federal and state tax. The figure shown is the average of those yearly rates. It includes the effects a bracket table alone misses: Social Security becoming taxable (up to 85¢ per extra dollar), the 2025–2028 senior deduction phasing out, and capital gains pushed into a higher band. Hand-calculated tests check it against closed-form bracket math.

Inflation and future limits. All projections are in today’s dollars. Contribution limits, brackets and the standard deduction are indexed by law, so they are held level in today’s dollars; thresholds the law does not index (Social Security taxation, the 3.8% investment-income tax) shrink in real terms each year. The 401(k) and IRA limits for next year were not yet published when these rules were set, so the tool uses this year’s limits until the rules file is updated.

Close calls. When the recommended strategy is within about 1% (and at least $250 a year) of the strongest different option, or ties it, the result is labelled a close call. It is shown as a “slight edge” rather than a recommendation, with the all-Traditional and all-Roth figures side by side.

Year-by-year plan. The “What to contribute, year by year” table lists the recommended strategy’s contribution to each account for every year until each person stops working. Years with the same accounts are grouped, and amounts are in today’s dollars. Catch-up contributions appear from age 50, as Roth when the prior-year wage rule requires it. The rules listed under the table come from your own inputs: the age-55 exit year, the no-rollover warning, the pro-rata rule and the early-access check. Contributions already made this year count against that year’s budget, using their take-home cost. Their pre-tax (Traditional) part also lowers that year’s taxable pay and MAGI, so the rest-of-year plan and today’s tax rate start from where you actually are.

The engine ships with an automated test suite (71 tests) covering the 20 required scenarios — from a 25-year-old with no plan to a 65-year-old retiree weighing conversions — regression tests for every defect found in the six independent audits of 13–14 November 2026 (provisional range for unknown Roth start years, separate Roth IRA and Roth 401(k) clocks, Roth-match tax with a retired spouse’s benefits, the Roth five-year rule, a retired spouse’s pension and Social Security during working years, layer-by-layer taxation of early Roth withdrawals, the 5%-owner RMD rule, contributions already made this year, RMDs for a retired spouse while the other works, opt-in age-55 rule per spouse, Roth conversion ordering and recapture, after-tax bridge need, manual-mode Social Security with gains, requested vs. sustainable spending runs, Roth-match tax funding, early-withdrawal access, owner-level RMDs, cross-spouse match order, Form 8606 basis, catch-up matching, capital-gains bands, MFS living apart), plus boundary tests at every phase-out edge, age threshold and contribution cap, a randomized sweep that checks no ineligible contribution is ever recommended, and closed-form checks (annuity formulas and exact bracket math) computed independently of the engine.

11. Official sources (tax year 2026)

Educational estimates only — not tax, legal or investment advice.