Roth 401(k) vs Traditional 401(k) Calculator
Compare Roth vs Traditional 401(k) after-tax wealth and retirement income.
How to Use the Roth 401(k) vs Traditional 401(k) Calculator
The fundamental dilemma between a Roth 401(k) and a Traditional 401(k) boils down to a single mathematical variable: your tax rate today versus your effective tax rate during retirement. With a Traditional 401(k), you make pre-tax contributions that reduce your adjusted gross income today, but every dollar withdrawn in retirement is taxed as ordinary income. In contrast, Roth 401(k) contributions are made with after-tax dollars, guaranteeing that both your contributions and all future compounding growth can be withdrawn completely tax-free.
Formula and Calculation Methodology
- PMT: Annual employee contribution up to IRS elective deferral limits ($23,500)
- r: Expected annual investment rate of return
- n: Total investment horizon in years
- Tax Rate: Current tax rate for Roth upfront deduction vs retirement tax rate on Traditional distributions
If you anticipate being in a higher marginal tax bracket in retirement—or if future federal tax rates increase—the Roth structure provides substantial compounding leverage. Furthermore, the SECURE 2.0 Act eliminated Required Minimum Distributions (RMDs) for designated Roth accounts, giving savers unprecedented flexibility to allow tax-free assets to compound indefinitely or pass to heirs tax-sheltered.
Roth vs Traditional 401(k) Structural Comparison
| Account Feature | Roth 401(k) | Traditional 401(k) |
|---|---|---|
| Tax Deduction Timing | Post-Tax (No upfront deduction) | Pre-Tax (Reduces current year taxable income) |
| Growth & Compounding | 100% Tax-Free Earnings | Tax-Deferred until distribution |
| Retirement Withdrawals | Completely Tax-Free | Taxed as ordinary income at withdrawal tax bracket |
| Required Minimum Distributions (RMDs) | None (SECURE 2.0 Act) | Mandatory starting age 73/75 |
| Best Suited For | Early/mid-career, anticipating higher future tax rates | Peak earning years, anticipating lower tax bracket in retirement |
Frequently Asked Questions
Can I split contributions between Roth and Traditional 401(k)?
Yes, most employer plans allow you to allocate your elective deferral limit across both accounts in any ratio, such as 50% Roth and 50% Traditional.
How do employer match contributions work with Roth 401(k)?
Historically, employer matching funds were placed in a pre-tax Traditional 401(k). Under SECURE 2.0, employers may offer Roth matching, though it is treated as taxable income to the employee in the year granted.
What is the elective deferral contribution limit?
For 2026, the employee elective deferral limit for 401(k) accounts is $23,500, with an additional catch-up contribution for individuals aged 50 and older.