Roth vs Traditional 401(k) Calculator
Choosing between a Roth and a Traditional 401(k) is one of the most important retirement decisions you will make. The right answer depends on whether your current marginal tax rate is higher or lower than your expected retirement tax rate. With a Traditional 401(k), you get a tax deduction today but pay income tax on every dollar you withdraw. With a Roth 401(k), you contribute after-tax dollars today but every qualifying withdrawal in retirement is tax-free, including all the investment growth. This calculator grows both accounts at the same pre-tax rate and shows you the after-tax value at retirement so you can compare them on equal footing.
Roth vs Traditional 401(k) formula
FV = C * [((1+r)^n - 1) / r] (future value of annual contributions)
Traditional after-tax = FV * (1 - retirement tax rate)
Roth after-tax = [C * (1 - current tax rate)] * [((1+r)^n - 1) / r]
Both accounts are assumed to grow at the same pre-tax rate. The Traditional account is taxed at the retirement rate on withdrawal. The Roth account is funded with after-tax dollars (reduced by the current tax rate) but grows and withdraws tax-free.
Which should you choose?
- If your current tax rate is higher than your retirement rate, the Traditional 401(k) typically wins because you defer tax to a lower bracket.
- If your current tax rate is lower than your retirement rate, the Roth typically wins because you lock in the lower tax rate today.
- If both rates are equal, the two options produce the same result after tax, all else being equal.
- State taxes, RMDs (Traditional accounts require them at age 73), and Roth conversions in retirement also influence the comparison.
- Many advisors suggest diversifying across both account types to hedge against unknown future tax rates.
Frequently asked questions
What is the key difference between Roth and Traditional 401(k)?
Traditional 401(k) contributions reduce your taxable income now but withdrawals in retirement are taxed as ordinary income. Roth 401(k) contributions are made with after-tax dollars, but qualified withdrawals in retirement are completely tax-free.
When is a Roth 401(k) better?
A Roth 401(k) is generally better when your tax rate in retirement is expected to be higher than your current rate. If you are early in your career with a lower income now, paying tax today and enjoying tax-free growth can be advantageous.
When is a Traditional 401(k) better?
A Traditional 401(k) is generally better when your current marginal tax rate is higher than your expected retirement tax rate. The upfront deduction reduces current taxes and you can invest the savings, potentially coming out ahead even after paying taxes on withdrawal.
Are 2025 contribution limits the same for Roth and Traditional 401(k)?
Yes. The $23,500 elective deferral limit (2025) applies to the total of all your Roth and Traditional 401(k) contributions combined. You can split contributions between the two account types as you choose, as long as the combined total stays within the limit.
Does this calculator account for employer match?
Employer matching contributions always go into a pre-tax (Traditional) account regardless of whether your own contributions are Roth. This calculator focuses on comparing the employee contribution side only. Add your match separately when assessing total retirement wealth.
Official sources
- IRS: Roth vs Traditional IRA Comparison Chart
- IRS Publication 575: Pension and Annuity Income
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.