What is the difference between Roth and Traditional 401(k)?

Traditional 401(k) contributions are pre-tax — they reduce your current taxable income but are taxed as ordinary income on withdrawal. Roth 401(k) contributions are after-tax — no current deduction but withdrawals in retirement are tax-free. Both have the same contribution limit and the same employer matching rules.

When is a Roth 401(k) better?

Roth is generally better when you expect your retirement marginal tax rate to be higher than your current rate. Common scenarios: early-career workers in low brackets, anyone in a temporarily low-income year, those expecting federal rates to rise, and anyone who values tax-free withdrawals for retirement income optionality.

Can I contribute to both?

Yes. Most employers allow splitting contributions between Roth and Traditional 401(k). The combined total cannot exceed the annual limit ($23,500 in 2025, $31,000 if age 50+, additional super-catch-up for ages 60–63). Many savers split contributions to build tax diversification for retirement.

Does the employer match go into Roth too?

No. Employer matching contributions are always made on a pre-tax basis, regardless of which type of contribution you make. The match grows tax-deferred in the Traditional portion of your account and is taxed as ordinary income on withdrawal. This means even pure-Roth contributors end up with some Traditional balance.

Do Roth 401(k)s have RMDs?

No, as of 2024 — SECURE 2.0 eliminated RMDs from Roth 401(k)s during the original owner's lifetime, matching the treatment of Roth IRAs. This is a meaningful advantage over Traditional 401(k)s, which require RMDs starting at age 73.

Roth vs Traditional 401(k) Calculator

Should you contribute pre-tax to a Traditional 401(k) or after-tax to a Roth 401(k)? Compare both options side by side based on your current tax rate, expected retirement tax rate, contribution amount, and time horizon to see which leaves you with more spendable income.

The Roth vs. Traditional 401(k) decision is the IRA decision at workplace-401(k) scale. Same mechanics: Traditional contributions reduce your current-year taxable income and grow tax-deferred (taxed on withdrawal in retirement); Roth contributions are made with after-tax dollars and grow tax-free (no tax on withdrawal). The right choice depends primarily on whether your marginal tax rate today is higher or lower than what you expect in retirement.

The 401(k) scale changes the stakes. The 2025 employee contribution limit is $23,500 ($31,000 if 50+, with super-catch-up for ages 60–63 raising it further). At those contribution levels, a 5–10 percentage point difference between current and retirement tax rates compounds into hundreds of thousands of dollars over a 25–30 year career. The decision matters more in a 401(k) than in an IRA simply because the dollars are larger.

This calculator handles the comparison carefully, including the often-overlooked "fair comparison" issue: if the Traditional path produces upfront tax savings (because $23,500 in Traditional costs less out of pocket than $23,500 in Roth), invest those savings in a taxable account at the same rate. Without that adjustment, the comparison is unfair — Traditional looks worse than it actually is. With it, the comparison shows the true mathematical equivalence (or lack thereof) between the two paths under your specific rate assumptions.

Inputs

Annual Contribution

Current Marginal Tax Rate

Expected Retirement Tax Rate

Expected Annual Return

Years Until Retirement

Invest Traditional Tax Savings

Results

Roth 401(k) After-Tax

$1,353,529

Traditional After-Tax

$1,386,014

Winner

Traditional

Difference

$32,485

After-Tax Retirement Value

Balance Growth Comparison

Year-by-Year Comparison

Year	Traditional Balance	Roth Balance	Taxable Savings
1	$21,400.00	$21,400.00	$5,136.00
2	$44,298.00	$44,298.00	$10,631.52
3	$68,798.86	$68,798.86	$16,511.73
4	$95,014.78	$95,014.78	$22,803.55
5	$123,065.81	$123,065.81	$29,535.80
6	$153,080.42	$153,080.42	$36,739.30
7	$185,196.05	$185,196.05	$44,447.05
8	$219,559.77	$219,559.77	$52,694.35
9	$256,328.96	$256,328.96	$61,518.95
10	$295,671.99	$295,671.99	$70,961.28
11	$337,769.03	$337,769.03	$81,064.57
12	$382,812.86	$382,812.86	$91,875.09

Last updated: May 25, 2026Reviewed by the CalcMountain editorial team

Formula

Traditional 401(k) future after-tax value: Trad_FV = C × [(1 + r)^n − 1] / r Trad_After_Tax = Trad_FV × (1 − t_r) Where: C = Annual contribution (pre-tax) r = Annual return n = Years to retirement t_r = Marginal tax rate in retirement Roth 401(k) future value (no tax owed): Roth_FV = C × [(1 + r)^n − 1] / r (Note: the same $C goes in, but Roth costs C × (1 − t_c) less out of pocket isn't available — you commit C of take-home pay.) Wait — the proper apples-to-apples comparison depends on whether you're comparing equal contribution dollars or equal out-of-pocket cost. Method 1: Equal contribution (most common framing) Trad: C goes in pre-tax. After 25 years at 7%, withdrawn at retirement tax rate t_r. Roth: C goes in after-tax. After 25 years, withdrawn tax-free. Trad_after_tax = FV × (1 − t_r) Roth_after_tax = FV Roth wins if t_r > 0 (always nominally larger after-tax, given equal contributions). But this ignores that the Trad path required less out-of-pocket cost — C dollars went in, but only C × (1 − t_c) of after-tax money was forgone. The tax savings C × t_c are available to invest elsewhere. Method 2: Equal out-of-pocket (fair comparison) Trad: C pre-tax goes in. C × t_c tax savings invested in a taxable account at the same rate. Roth: C after-tax goes in (you forgo C of take-home pay, no tax savings to redirect). Trad_after_tax_full = [C × (1+r)^n × (1 − t_r)] + [C × t_c × (1+r)^n × (1 − tax_drag)] Roth_after_tax = C × (1+r)^n Now the comparison reveals: Roth wins if t_r > t_c. Traditional wins if t_c > t_r. Quick rule: Higher current rate → Traditional Higher retirement rate → Roth Same rates → mathematically equivalent (after fair comparison) Example: $20,000/year contribution for 25 years at 7%. Current rate 24%, retirement rate 18%. Equal contribution view: FV = $20,000 × [(1.07^25 − 1)/0.07] ≈ $1,264,650 Traditional after-tax: $1,264,650 × 0.82 ≈ $1,037,000 Roth after-tax: $1,264,650 Fair-comparison view (Trad tax savings invested in taxable): Trad full path: $1,037,000 + $4,800/yr in taxable × 25yr ≈ $303,500 (after assuming 15% tax drag) → total $1,340,500 Roth: $1,264,650 Traditional wins by ~$75,850 because current rate (24%) > retirement rate (18%).

How to use this calculator

Enter your annual 401(k) contribution. The 2025 limit is $23,500 ($31,000 if 50+, more for ages 60–63 super-catch-up).
Enter your current marginal tax rate — the federal bracket your last dollar falls into. Add state income tax if your state has one (state matters as much as federal for this decision).
Enter your expected retirement marginal tax rate. Most retirees see a lower rate, but those with large taxable balances, generous pensions, or expectations of rising federal rates should use higher estimates.
Enter expected annual return. 6–7% real (inflation-adjusted) or 7–10% nominal for a diversified equity portfolio.
Enter years until retirement. Longer horizons amplify the differences between Roth and Traditional.
Toggle "Invest Traditional Tax Savings" ON for the fair comparison. This invests the upfront tax savings in a taxable brokerage account at the same return rate, allowing apples-to-apples comparison. Without this toggle, the calculator compares unequal out-of-pocket costs and unfairly favors Roth.
Compare the projected after-tax retirement balances. The larger number wins for your specific assumptions.
Run sensitivity tests on the retirement tax rate. If both options come out close, doing some of each (tax diversification) is usually the safest choice.

Worked examples

Young high-earner, lower future bracket expected

Age 30, $23,500/year for 35 years, 7% return. Current marginal rate: 32% (federal) + 5% (state) = 37% Expected retirement rate: 22% Roth projected after-tax: $3,475,000 Traditional projected after-tax (with tax-savings invested): $3,920,000 Traditional wins by ~$445,000. The 15-point rate gap (37% now → 22% later) makes Traditional dominate. This counterintuitive result (Roth often favored for young people) flips here because the current bracket is unusually high.

Mid-career professional in moderate bracket

Age 40, $23,500/year for 25 years, 7% return. Current marginal rate: 22% (federal) + 5% (state) = 27% Expected retirement rate: 22% Roth projected after-tax: $1,485,500 Traditional projected after-tax (with tax-savings invested): $1,535,000 Essentially a tie ($50K difference on $1.5M). At similar rates, the mathematical advantage is negligible. The tiebreaker often comes down to non-mathematical factors: optionality of tax-free Roth in retirement, RMD avoidance, estate planning.

Lower-income early-career — Roth advantage

Age 25, $15,000/year for 35 years, 7% return. Current marginal rate: 12% federal + 4% state = 16% Expected retirement rate: 24% federal + 4% state = 28% Roth projected after-tax: $2,215,000 Traditional projected after-tax: $1,755,000 (even with tax-savings invested) Roth wins by ~$460,000. The low current rate (16%) gives up only a small tax break now, while the higher retirement rate (28%) makes the Traditional withdrawal much more expensive later. Classic young-low-bracket Roth case.

When to use this calculator

Use this calculator at every annual benefits enrollment to confirm your 401(k) contribution type still matches your tax situation. The right answer can shift over time: a Roth choice that made sense at age 25 (low bracket) may no longer be optimal at 40 (higher bracket). Reviewing annually catches drift.

Also use it when planning major income changes: promotions that push you into a higher bracket, sabbaticals or partial retirement that drop you into lower brackets, geographic moves that change state tax rates. Any meaningful change to current or future tax rate makes the calculation worth re-running.

Pair this with the 401(k) calculator (the broader retirement projection including employer match), the IRA calculator (which has its own Roth-vs-Traditional decision), the Roth-vs-Traditional calculator (the simpler comparison without specific 401(k) limits), and the income-tax-estimator (to confirm your current marginal rate).

A subtle but important point about the employer match: matching contributions are always made on a pre-tax basis, regardless of whether your contribution is Roth or Traditional. The match grows tax-deferred and is taxed on withdrawal. This means even pure-Roth contributors end up with some Traditional balance (the match portion). Total retirement balance is usually a hybrid by default.

Tax diversification is the often-overlooked best practice. Doing 50/50 (or some other split) between Roth and Traditional creates two buckets in retirement. In low-tax years (early retirement before Social Security, gap years), withdraw from Traditional to fill low brackets. In high-tax years (big RMDs, large purchases, expected rate increases), withdraw tax-free from Roth. The flexibility is worth more than perfectly optimizing one bucket given uncertain future rates.

Common mistakes to avoid

Comparing pre-tax Traditional balance to tax-free Roth balance directly. Apples to oranges. Always compare after-tax dollars at retirement.
Using effective rate instead of marginal rate. Marginal rate is the bracket your last dollar of income is in (and the one your 401(k) contribution would otherwise be taxed at). Effective rate (average across all income) is usually lower and not relevant to this decision.
Ignoring state income tax. State rates from 0% to 13% materially affect the calculation. The Roth-vs-Traditional decision is a combined federal-plus-state calculation, not federal alone.
Forgetting the employer match is always pre-tax. Even pure-Roth contributors end up with some Traditional balance from the matched portion. This automatically creates tax diversification.
Assuming current federal rates persist. The current rates expire after 2025 under existing law and could revert higher unless extended. Tax policy uncertainty is one strong argument for Roth contributions even at current rates.
Not adjusting for the unequal-out-of-pocket-cost issue. If you only contribute the same dollar amount to both, Roth always nominally wins. The fair comparison invests Traditional's tax savings — without this adjustment, the math is misleading.

Frequently Asked Questions

Sources & further reading

Designated Roth Accounts — official IRS overview — U.S. Internal Revenue Service
401(k) Contribution Limits — current year and future — U.S. Internal Revenue Service
SECURE 2.0 Act — Summary of changes affecting 401(k) plans — U.S. Congress

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