Roth vs Traditional 401(k) Calculator

Better Choice

Roth After-Tax Value

Traditional After-Tax Value

How do you compare Roth vs Traditional accounts?

For Roth, tax the contribution today, then grow the after-tax amount tax-free. For Traditional, grow the full pre-tax amount, then tax the withdrawal at your expected retirement rate. Compare the two final after-tax values.

Roth = Contribution×(1-CurrentRate) grown tax-free; Traditional = Contribution grown, then ×(1-RetirementRate)

The Core Trade-Off: Tax Now or Tax Later

Traditional retirement accounts (401(k), IRA) let you contribute pre-tax dollars, reducing your taxable income today, but every dollar withdrawn in retirement is taxed as ordinary income. Roth accounts flip this: you contribute after-tax dollars now, but qualified withdrawals in retirement, including decades of investment growth, are completely tax-free.

Why the Comparison Comes Down to Tax Rates

Mathematically, if your tax rate is identical at contribution and at withdrawal, Roth and Traditional produce the exact same after-tax result. The decision only tilts one way or the other because tax rates typically differ between your working years and retirement. If you expect a lower tax bracket in retirement (a common assumption for many savers), Traditional often wins; if you expect a higher bracket (early-career savers, or those expecting future tax law changes), Roth often wins.

Beyond the Pure Math

Several other factors can favor Roth even when the pure tax-rate math is close: Roth accounts have no Required Minimum Distributions (RMDs) during the original owner's lifetime, offer more flexibility for early withdrawals of contributions, and provide valuable tax diversification since you won't know your exact future tax bracket decades in advance. Some savers deliberately split contributions between both account types for this flexibility.

This Calculator's Simplification

This tool assumes contributions and investment returns are identical between the two account types and applies a single tax rate at each point in time. In reality, tax brackets are marginal (not flat), and state taxes, Social Security taxation interactions, and Medicare premium thresholds can add complexity. Use this as a directional guide, not a precise projection.

Frequently Asked Questions (FAQ)

1. What is the difference between Roth and Traditional retirement accounts?

Traditional accounts give you a tax deduction now, with withdrawals in retirement taxed as ordinary income. Roth accounts use after-tax contributions now, with qualified withdrawals in retirement completely tax-free, including all investment growth.

2. Should I choose Roth or Traditional?

If you expect to be in a higher tax bracket in retirement than you are now, Roth is generally more advantageous. If you expect a lower tax bracket in retirement, Traditional is generally more advantageous. If tax rates are the same both times, the two options produce mathematically identical after-tax results.

3. Can I contribute to both Roth and Traditional accounts?

Yes, many people split contributions between Roth and Traditional accounts to diversify their tax exposure in retirement, since future tax rates are uncertain and having both types of accounts provides flexibility.

Estimate your retirement corpus with the Retirement Corpus Calculator, or check your current tax bracket with the Tax Bracket Calculator.