👵 Roth or traditional 401(k)?

Deciding between a Roth and traditional 401(k) comes down to whether your taxes will be higher today or in retirement. This calculator compares one year of contributions to show which path leaves you with more spendable cash later.

By holding your out-of-pocket sacrifice equal, you can clearly see the long-term mathematical impact of your current and future tax brackets.

According to the IRS's Roth comparison chart, traditional pre-tax elective contributions are made with before-tax dollars, meaning withdrawals are taxed as income. Designated Roth 401(k) contributions use after-tax dollars, but qualified withdrawals are completely tax-free. An IRS qualified distribution requires the account to be held at least 5 years and withdrawn at age 59 1/2, on disability, or after death.

Both plans share one aggregate elective deferral limit per person. You can split funds between them, but the combined total cannot exceed your annual limit.

Traditional accounts generally win for peak-earning-years savers who expect to drop into a lower bracket in retirement. Roth accounts favor early-career workers in low brackets, act as a hedge against future tax increases, and effectively squeeze more value into your account if you contribute at the IRS maximum.

This model simplifies the math by using single flat marginal rates instead of progressive tax brackets. It also ignores state tax differences, employer match treatments (which are pre-tax either way), and required minimum distribution differences.

For further related reading, check out:

• Roth comparison chart | Internal Revenue Service