An illustrative equal-budget comparison
An illustrative equal-budget comparison
The model uses the same pretax annual budget for both alternatives. An assumed current tax saving reduces the Roth deposit, so both alternatives cost the same after-tax household amount. Growth occurs before each end-year deposit. Traditional contributions are assumed fully deductible and Roth withdrawals qualified and tax-free; eligibility is not determined.
The result compares hypothetical after-tax values at the selected completed-year horizon, including assumed tax on the whole Traditional withdrawal. Equal displayed cents are a tie. The fixed 2026 base input cap is a reference bound, not a promise about future limits or personal eligibility. Compensation, MAGI, filing rules, deduction phaseouts, other contributions, catch-up amounts, RMDs, fees, penalties and inflation are excluded.
Reference year 2026: the base IRA contribution ceiling is $7,500, shared across a person’s Traditional and Roth IRAs. This comparison uses alternative accounts, with one constant assumed budget over the horizon. The ceiling is a reference input bound, not your allowed contribution or a future statutory limit; catch-up contributions are excluded.
Same annual pretax savings budget $6,500.00: Traditional receives $6,500.00; Roth receives $4,940.00 after the assumed current income-tax cost $1,560.00. A fully deductible Traditional contribution has the same after-tax household cost $4,940.00. The tax saving reduces cost; no separate reinvested tax-refund account is added.
Contributions occur at the end of each complete year, after growth, and earn no return in that same year. Exact canonical effective annual returns compound between deposits without intermediate portfolio rounding. Cash tax savings, gross valuations and assumed withdrawal taxes use half-up cents. Signed growth can be negative; investment returns and future tax rates are not guaranteed.
Traditional contributions are assumed fully deductible and Roth distributions qualified and tax-free. The model does not determine taxable compensation, income eligibility, deduction phase-outs, filing status, workplace coverage, other IRA contributions, age or catch-up eligibility, Roth distribution qualification, required distributions, penalties, fees, inflation or future policy. Taxes shown at each checkpoint are hypothetical full withdrawals and do not reduce the underlying portfolio during growth. This is an illustration, not personalized tax advice.
IRS 2026 IRA limits and deduction conditions
