Roth vs. Traditional 401(k): How to Compare Them
Roth and Traditional 401(k) contributions differ mainly in when federal income tax is paid. The better choice depends heavily on today’s marginal tax rate versus the rate that applies to future withdrawals.
Change the inputs and compare scenarios with the related RetirementMetric calculator.
Open the calculatorTraditional contribution
A Traditional contribution generally reduces current taxable income, while distributions are generally taxable later. This can be attractive when the current marginal rate is relatively high.
Roth contribution
A Roth contribution uses after-tax dollars, while qualified withdrawals can be tax-free. This can be attractive when today’s tax rate is relatively low or future tax flexibility is valuable.
Tax diversification
Some savers split contributions between tax treatments rather than making an all-or-nothing prediction about future tax rates. Employer-plan rules and tax law can change, so verify current rules.
How to use this number responsibly
Use the result as a planning range rather than a forecast. Re-run the calculation when your balance, contribution rate, debt, retirement date, tax situation or spending target changes. For investment projections, compare multiple return assumptions because future market returns are unknown.
What this calculator does not know
RetirementMetric does not know your complete tax situation, benefits, investment holdings, insurance needs or household expenses. The tools are educational estimates, not individualized investment, tax or legal advice.
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