Roth vs Traditional calculator
Compare a tax-deferred account (RRSP, Traditional 401(k), pension) against a tax-free one (TFSA, Roth, ISA). For the same pre-tax contribution, see which leaves more after tax — it comes down to your tax rate now versus in retirement.
Your plan
Enter the same pre-tax amount for a fair comparison. The Roth figure assumes the same money is taxed at today's rate before it's invested; the Traditional (401k/IRA) figure is taxed when you withdraw it.
Traditional (401k/IRA) wins by $23,717.46. Because your expected retirement tax rate is lower than your rate today, deferring tax until withdrawal comes out ahead.
- Pre-tax balance at retirement
- $474,349.12
- Total contributed
- $180,000.00
Simplified model: it assumes one constant return and flat tax rates, and ignores contribution limits, employer matches, and government benefit clawbacks. If you'd invest any up-front tax refund from the pre-tax account, that narrows the gap further.
Tax-deferred vs tax-free: the core trade-off
Every country offers two flavours of tax-advantaged account, and the choice is the same everywhere. A tax-deferred account — an RRSP in Canada, a Traditional 401(k)/IRA in the US, a pension in the UK, or salary-sacrifice super in Australia — lets you contribute before tax and grow untaxed, but you pay income tax when you withdraw. A tax-free account — a TFSA, Roth, or ISA — is funded with money you've already paid tax on, and withdrawals are completely tax-free.
The rule that decides it
For the same pre-tax contribution, the winner depends only on your tax rate now versus in retirement:
- If your rate will be lower in retirement, the tax-deferred account wins — deduct at a high rate now, pay tax at a low rate later.
- If your rate will be higher in retirement, the tax-free account wins — pay tax at today's low rate, withdraw tax-free.
- If the rates are the same, the two are mathematically identical.
Worked example
Contributing $6,000 a year (pre-tax) for 30 years at 6% grows to about $474,000 before tax. At a 30% rate today and 25% in retirement, the tax-deferred account leaves roughly $355,000 after tax versus $332,000 for the tax-free one — the deferred account wins because the retirement rate is lower. Flip the rates and the tax-free account wins by the same margin.
What the simple rule leaves out
- The refund. A tax-deferred contribution generates a refund today. The comparison assumes you reinvest it; spending it erases much of the advantage.
- Limits and matches. Always capture an employer match first — see the pension / 401(k) calculator. Contribution limits differ by account and country.
- Benefit clawbacks. Tax-free withdrawals don't count as income, which can protect means-tested retirement benefits — a real edge the raw maths ignores.
Many people use both. To project the total pot, use the retirement calculator.
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Frequently asked questions
Should I choose RRSP or TFSA (or Roth or Traditional)?
Why does the comparison use the same pre-tax amount?
Can I use both accounts?
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