You aren’t accounting for the opportunity cost of the taxes paid in the initial investment year.

If you’re maxing out your contributions, it won’t matter, except in so far as what you can earn on taxed income outside of the IRA account. That’s going to be marginal relative to the contribution. And the compound returns inside the IRA make it meaningless.

What this means is Roth is the preferable savings method if you are in a lower marginal tax rate than you expect to be in retirement.

Unless you’re going straight into a white shoe law firm or extraordinary paying tech job after you graduate, that’s pretty much everyone. But even folks going into Fortune 500 companies typically start in the $60-80k/year range and climb up from there.

If the marginal tax rate was the same when you invest and retire then the difference between Roth and traditional would be nil.

The amount of money you have in the fund is going to be much larger.

Say I invest $5000/year up front and get a 10% return for 40 years. I’m looking at putting in $200,000 over that time and taking out $2.2M.

Assuming the tax rate is 25% for each of those years, I paid $50k in taxes to invest that initial $200k. But I get the $2.2M back tax-free.

If I put the $200k in tax-deferred, I have to pay $550k to get my balance out again.

Now, we can argue that I could put the $400/year in deferred taxes into a taxable savings account. And maybe we get clever by shielding that investment from taxation annually because we just shove it all in Microsoft or Berkshire B and let it ride. That nets me another $177k over 40 years, assuming the same rate of return (for which I’m still on the hook at 15% long term gains rate - so really only $150k).

The ROTH is $350k better. That’s the whole reason the fund exists. It’s another accounting gimmick to give wealthy people a stealth tax cut. Only suckers put their money in Trad IRAs.