Roth vs Traditional 401(k) Calculator
Compare the after-tax retirement balance of Roth vs Traditional 401(k) contributions. The winner depends on whether your tax rate at retirement will be higher or lower than today.
How the math works
Both accounts grow tax-free, but the timing of tax matters:
- Traditional: $10,000 contribution costs $7,600 out of pocket (at 24% tax rate). The full $10,000 grows. At retirement, you pay tax on every dollar withdrawn.
- Roth: $10,000 contribution costs $10,000 out of pocket (no tax deduction). The full $10,000 grows. At retirement, every dollar comes out tax-free.
Mathematically: if your tax rate is the same now and at retirement, Roth and Traditional produce identical net retirement income. The difference is purely a function of whether your tax rate changes.
When Roth wins
- You're early in your career with lower current tax rates
- You expect to be in a higher tax bracket at retirement (or worry about future tax increases)
- You want tax-free legacy for heirs (Roth heirs pay no income tax on inherited Roth)
- You want to avoid Required Minimum Distributions (Roth 401(k) RMDs were eliminated under SECURE 2.0 for 2024+, though current law may still require them for some plans)
- You're a high earner phased out of Roth IRA (Roth 401(k) has no income limit)
When Traditional wins
- You're in a high tax bracket now (32%+) and expect lower bracket at retirement
- You're maxing out elsewhere and want the immediate tax deduction
- You plan to retire in a state with no income tax (FL, TX, etc.) — tax deferral until you're a non-resident of high-tax state
- You need the cash flow now and can invest the tax savings elsewhere
FAQs
What's the difference between Roth and Traditional 401(k)?
Traditional: Contribute pre-tax (lower paycheck taxes now), pay tax when you withdraw in retirement. Roth: Contribute after-tax (no immediate deduction), withdrawals in retirement are tax-free. The key question: do you expect your tax rate to be higher or lower in retirement?
Which is better — Roth or Traditional?
Roth wins if your retirement tax rate will be HIGHER than today. Traditional wins if your retirement tax rate will be LOWER. For most people, the rates are similar enough that other factors matter: Roth offers tax diversification (hedge against future tax increases), no Required Minimum Distributions (RMDs), and tax-free legacy for heirs. Traditional offers immediate tax savings useful in high-earning years.
What are the 2026 contribution limits?
$23,500 (under 50) or $30,500 (age 50+ catch-up) — combined across Roth and Traditional 401(k). Plus $7,500 IRA contribution limit (Roth IRA has income phase-outs starting at $150K single / $236K married).
Can I contribute to both Roth and Traditional 401(k)?
Yes, if your employer's plan allows both options. The combined annual contribution is capped at $23,500 / $30,500 (2026). Many savers split contributions for tax diversification — e.g., 50% Roth, 50% Traditional.
What about employer matching?
Employer matching contributions are ALWAYS Traditional (pre-tax) regardless of whether you contribute Roth or Traditional. The match goes into a separate Traditional sub-account within your 401(k). At retirement, employer matches are taxed at withdrawal.
Does Roth 401(k) have income limits?
No — unlike Roth IRA, Roth 401(k) has NO income limits. High earners can contribute the full $23,500 regardless of income. This makes Roth 401(k) particularly valuable for high earners who are phased out of Roth IRA contributions.
Are Roth 401(k) withdrawals always tax-free?
Yes, IF you meet two conditions: (1) you've held the Roth 401(k) for at least 5 years, AND (2) you're age 59½+ or it's a qualified distribution (disability, death, first-home purchase up to $10K). Early non-qualified withdrawals can trigger taxes on the earnings portion plus 10% penalty.