🏖️ Which is better for HENRYs, Roth or trad 401k?
Determine the optimal timing for high-income earners to transition between Roth and Traditional 401k contributions for tax efficiency.
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Deciding between Roth and Traditional 401k contributions hinges on a key question: will your income tax rate be higher now or in retirement? For high earners, the immediate tax deduction from a Traditional 401k is often compelling. This calculator moves beyond generic advice to provide a quantitative comparison based on your numbers. The core trade-off is paying taxes now (Roth) versus paying them later (Traditional). With a Roth, you contribute after-tax dollars for tax-free growth and withdrawals. With a Traditional, you get an upfront tax deduction, but withdrawals are taxed as income. For more background, see this Reddit analysis.
These projections are estimates. Your actual returns and future tax rates will vary. A critical point for your situation is that any employer match you receive is always contributed on a pre-tax basis. This means you already have some tax diversification, regardless of your choice for your own contributions.
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For further related reading, check out:
⚖️ The Verdict
Roth 401k After-Tax Value
Trad 401k After-Tax Value
Annual Tax Savings Now (Trad)
Recommendation
Traditional
Last updated by mahmoud (v25.9.0)
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Disclaimer: This content and any calculations provided are for informational purposes only. The views, calculations, and methodologies expressed are those of the author and do not necessarily reflect those of this platform. Not financial advice. Users are solely responsible for any decisions made based on this information.
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