Roth Or Traditional 401k Calculator

When planning for retirement, choosing between a Roth 401(k) and a Traditional 401(k) is a critical financial decision. Each option offers tax advantages, but the best choice for you depends on factors such as current income, tax bracket, and future earnings expectations.

Current Balance

Annual Contribution

Years to Grow

Expected Annual Growth Rate (%)

Current Tax Rate (%) (for Roth)

Retirement Tax Rate (%) (for Traditional)

What Is a Roth vs Traditional 401(k)?

Traditional 401(k): Contributions are made with pre-tax income, reducing your taxable income today. Taxes are paid upon withdrawal in retirement.
Roth 401(k): Contributions are made with after-tax income, meaning you pay taxes now but enjoy tax-free withdrawals later.

Purpose of the Roth or Traditional 401(k) Calculator

This calculator helps you determine which plan offers more net savings by comparing:

Tax impact now and during retirement
Future investment growth
Withdrawal strategies
Effective retirement income

By inputting a few key details, you can make an informed decision about how to maximize your retirement funds.

How to Use the Roth or Traditional 401(k) Calculator

Follow these steps to make the most of the calculator:

Enter Your Annual Income:
Input your current yearly income before taxes.
Contribution Amount:
Choose how much you plan to contribute annually to your 401(k).
Current Tax Rate:
Select your current marginal tax rate (used for Traditional 401(k) calculations).
Expected Retirement Tax Rate:
Estimate the tax rate you expect to pay during retirement (affects Traditional 401(k) withdrawals).
Investment Growth Rate:
Provide an expected annual return percentage to forecast your portfolio growth.
Years Until Retirement:
Enter how many years you plan to contribute before retiring.
Run the Comparison:
The calculator will compare your Roth and Traditional 401(k) balances at retirement and their effective value after taxes.

Formula Used in the Calculator

Here’s how the tool evaluates both options:

Traditional 401(k):

Contribution: Pre-tax
Final Balance: iniCopyEditFinal_Balance_Traditional = Contribution × (1 + r)^n
After-tax Value at Retirement: iniCopyEditAfter_Tax_Traditional = Final_Balance_Traditional × (1 - Retirement_Tax_Rate)

Roth 401(k):

Contribution: After-tax
Adjusted Contribution: iniCopyEditAdjusted_Contribution = Contribution × (1 - Current_Tax_Rate)
Final Balance: iniCopyEditFinal_Balance_Roth = Adjusted_Contribution × (1 + r)^n
After-tax Value: No further tax; withdrawals are tax-free.

Where:

r = annual investment return
n = years until retirement

Example Calculation

Let’s assume the following inputs:

Annual Income: $80,000
Contribution: $10,000
Current Tax Rate: 24%
Retirement Tax Rate: 22%
Investment Return: 7%
Years Until Retirement: 30

Traditional 401(k):

Contribution stays $10,000 (pre-tax)
Grows to ≈ $76,122
After 22% tax = $76,122 × 0.78 ≈ $59,376

Roth 401(k):

After-tax contribution = $10,000 × (1 – 0.24) = $7,600
Grows to ≈ $57,855 (tax-free)

Result:
The Traditional 401(k) comes out ahead in this scenario. But if you expect your future tax rate to rise, Roth may be better.

When to Choose Roth vs Traditional 401(k)

Roth 401(k) is better if:

You are early in your career and in a low tax bracket
You expect tax rates to rise
You want tax-free income in retirement

Traditional 401(k) is better if:

You’re in your peak earning years
You expect a lower tax bracket in retirement
You want upfront tax savings

Helpful Tips

Mix and Match: Some employers allow you to split contributions between both accounts.
401(k) Limits: Total contribution limit (Roth + Traditional) is $23,000 for those under 50 and $30,500 for those 50+ in 2025.
Employer Match: Employer contributions always go into a traditional 401(k), even if you choose Roth.

20 Frequently Asked Questions (FAQs)

What is the main difference between Roth and Traditional 401(k)?
Roth uses after-tax dollars; Traditional uses pre-tax.
Can I contribute to both Roth and Traditional 401(k)?
Yes, as long as your total contribution doesn’t exceed the annual limit.
Do Roth 401(k) withdrawals affect taxes in retirement?
No, qualified withdrawals are tax-free.
What is the contribution limit for 2025?
$23,000 for individuals under 50; $30,500 for those 50 or older.
Are employer matches taxed?
They are pre-tax and taxed upon withdrawal.
Which 401(k) helps reduce taxable income today?
The Traditional 401(k).
Which one is better for high-income earners?
Usually the Traditional 401(k) for immediate tax savings.
Can I switch between Roth and Traditional?
Yes, if your employer plan allows it.
What happens if I withdraw early from a Roth 401(k)?
You may owe income tax and a 10% penalty on earnings.
Is a Roth 401(k) the same as a Roth IRA?
No. They have different rules and income limits.
Can I roll over my Roth 401(k)?
Yes, into a Roth IRA upon leaving your job.
Will taxes be higher or lower in retirement?
That depends on your future income and tax laws.
What happens at age 73?
Required Minimum Distributions (RMDs) apply to both types of 401(k), though Roth IRAs are exempt.
Do investment earnings grow tax-free?
Yes for Roth (withdrawals tax-free); Traditional earnings are taxed upon withdrawal.
What if I retire early?
Early withdrawal penalties apply unless exceptions are met.
Are there income limits to contribute?
No for 401(k)s. Income limits only apply to Roth IRAs.
Can I max out both Roth and Traditional 401(k)?
No, the combined contribution limit still applies.
Is Roth better for young investors?
Often yes, because they benefit from decades of tax-free growth.
Does my employer match Roth contributions?
Yes, but their match goes into a Traditional account.
How can this calculator help me?
It shows which account will give you the most money after taxes in retirement.

Conclusion

The Roth or Traditional 401(k) Calculator is an invaluable financial planning tool for anyone saving for retirement. By inputting your personal tax rates, income, and growth assumptions, you’ll get a clear picture of which account aligns better with your long-term goals.