Roth vs Traditional 401(k)
Taxes now or taxes later? Compare lifetime after-tax value.
Verdict
Estimates for planning only, not financial or tax advice.
How to Use This Calculator
Enter your ages, what you can contribute each year, the return you expect, and your tax rates now versus in retirement. The calculator grows both paths year by year and shows which leaves you with more spendable money.
Enter your current age and the age you plan to retire. The gap between them is your compounding window.
Enter your annual contribution and expected annual return. Seven percent is a common long-run planning figure for a stock-heavy portfolio, before inflation.
Enter your current marginal tax rate (the rate on your last dollar of income, not your effective rate) and your best guess at your retirement tax rate.
Read the verdict, the side-by-side table, and the breakeven retirement tax rate: the rate at which the two choices tie.
The Math Behind It
Both paths use the future value of an annuity: each yearly contribution compounds for the remaining years. The Roth path is simple because withdrawals are tax-free. The Traditional path grows the same way but the IRS takes its cut at withdrawal. The third row answers the fairest version of the question: if you choose Traditional, you also save taxes today, and a disciplined investor puts that tax saving to work in a taxable account.
Worked Example
Contribute $10,000 per year for 30 years at 7 percent, taxed 24 percent now and 22 percent in retirement. The FV factor is ((1.07^30) - 1) / 0.07 = 94.4608, so both accounts grow to $944,608 before tax. Roth keeps all of it: $944,608 after tax. Traditional pays 22 percent at withdrawal: $944,608 x 0.78 = $736,794. But Traditional also saved $2,400 in taxes each year; invested at the same return and with gains taxed at 22 percent at the end, that side account is worth about $192,671 after tax, bringing Traditional's total to about $929,465. Roth still wins by roughly $15,000. The breakeven retirement tax rate here is about 20.6 percent: retire into a bracket below that and Traditional pulls ahead.
When Each Choice Wins
Roth tends to win for younger workers, people early in their careers, and anyone who expects to be in a higher bracket later, or who simply wants tax-free income and no required minimum distributions to manage. Traditional tends to win for peak earners who will clearly drop brackets in retirement, and for anyone who values the deduction today to free up cash flow. The employer match is always pre-tax regardless of your choice, so most people end up with a mix anyway. Splitting contributions between the two is a reasonable hedge when future tax rates are unknowable, which, honestly, they are.
Estimates for planning only, not financial or tax advice. Tax law changes, and this model simplifies reality: it ignores state taxes, required minimum distributions, Roth conversion strategies, and Social Security taxation. Run big decisions past a tax professional.
Frequently Asked Questions
What is the real difference between Roth and Traditional?
It is all about when you pay tax. With Roth, you contribute after-tax dollars, the money grows tax-free, and qualified withdrawals in retirement are tax-free. With Traditional, you contribute pre-tax dollars (lowering today's taxable income), the money grows tax-deferred, and you pay ordinary income tax on withdrawals in retirement. Same account mechanics, opposite tax timing.
When does Roth win?
Roth wins when your tax rate in retirement stays the same or rises, which is common early in a career or when income is still climbing. Traditional only pulls ahead when your retirement rate drops clearly below today's rate, past the breakeven point the calculator shows for your numbers. Because the Traditional side account in this comparison pays some tax on its gains, Roth keeps a small edge even at equal rates.
What about my employer match?
Employer matching contributions always go in pre-tax, even if your own contributions are Roth. The match and its growth are taxed when you withdraw them. So a "100% Roth" 401(k) still has a Traditional-style slice from the match. This calculator models your contributions; treat the match as a bonus Traditional balance on top.
Are there contribution limits I should know?
Yes. The IRS sets annual employee contribution limits for 401(k) plans and adjusts them most years. For 2025 the employee limit was $23,500, plus a $7,500 catch-up if you are 50 or older. Limits for 2026 are announced each fall, so check irs.gov for the current figure before maxing out. IRA limits are separate and lower.
Can I split contributions between Roth and Traditional?
Yes, most employer plans let you split each paycheck between Roth and Traditional contributions, as long as the combined total stays under the annual limit. Splitting is a legitimate hedge when you are unsure about future tax rates: you lock in some tax-free growth now and keep some deduction now. Many people tilt Roth early in their career and shift toward Traditional as their income peaks.