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Roth vs Traditional 401(k) Calculator

Roth against traditional 401(k) contributions. At the same tax rate they are mathematically identical, so the entire question is whether your rate will be higher or lower in retirement.

Also called: roth or traditional 401k, pretax vs roth.

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Better choice
The traditional comes out ahead

The traditional comes out ahead. The Roth is worth $1,353,529.41 after tax and the traditional $1,389,148.60, a difference of $35,619.19. Your rate falls in retirement, which favours the traditional contribution.

Roth, after tax
$1,353,529.41
Traditional, after tax
$1,389,148.60
Difference
$35,619.19
Traditional balance before tax
$1,780,959.75
Value of the invested tax saving
$427,430.34
Tax saved each year by going traditional
$6,315.79
On when they are equal
Your rate falls in retirement, which favours the traditional contribution.
How this is calculated

Computed from the published rates for the tax year you selected, which is not necessarily the current year. A calculation, not tax advice, and it does not know anything about your circumstances beyond the figures entered.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for United States change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

A Roth contribution is made after tax and withdrawn untaxed; a traditional is made pre-tax and taxed on withdrawal. Because multiplication commutes, taxing before growth and taxing after growth produce the same number at an unchanged rate. The genuine asymmetry is that a traditional contribution frees up tax money now, and whether you invest that saving or spend it decides the comparison in practice. Modelling it as invested is the fair version, which is what this does by default.

the two are identical when the tax rates are equal, because multiplication commutes
t_1, t_2
Rates now and in retirement

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a falling rate favours traditional

Annual amount you can afford, after tax
$20,000.00
Years to retirement
25
Annual return
7%
Marginal rate now
24%
Expected rate in retirement
22%
Invest the traditional tax saving separately
Yes

Better choiceThe traditional comes out ahead

20,000 after tax buys 26,315.79 pre-tax at a 24% rate

Open this example

equal rates make them identical

Annual amount you can afford, after tax
$20,000.00
Years to retirement
25
Annual return
7%
Marginal rate now
24%
Expected rate in retirement
24%
Invest the traditional tax saving separately
Yes

Better choiceThey are exactly equal

boundary: the case that shows the choice is only about rates

Open this example

Method and limits

What it assumes

  • A single marginal rate applies to the whole withdrawal, which understates the traditional side slightly.

What it deliberately does not model

  • Withdrawals in retirement fill lower brackets first, so the effective rate on a traditional balance is usually below the marginal rate.
  • Required minimum distributions apply to traditional balances and not to Roth.
  • Future tax law is unknowable, which is the real argument for holding both.

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

Why are they equal at the same tax rate?
Because the order of multiplication does not matter. Taking twenty-four percent off before growth or after growth leaves the same amount.
What actually decides it?
Whether your rate in retirement is higher or lower, and whether you invest the tax money a traditional contribution frees up. Spending that saving is what makes traditional lose in practice.