Retirement
Roth vs. Traditional 401(k): Which Contribution Costs More Today?
Compare the paycheck tradeoff between Roth and pre-tax retirement contributions before choosing a deferral strategy.
Nobody hands you a clean answer on Roth vs. traditional 401(k). They give you two buttons in your benefits portal and a tiny description written by someone who apparently bills by the fog.
Roth means you pay tax now. Traditional means you delay tax until later. That sounds simple. It is not simple when your paycheck, future tax rate, employer match, and retirement income all start arguing in the same room.
This calculator helps you compare the real tradeoff. Not the cute version. The real one.
Use it to answer one question first: if you put in the same paycheck cost today, which choice could leave you with more after tax later?
Quick answer: Roth wins when your tax rate is higher later
Choose Roth if you think your tax rate will be higher in retirement. You pay tax now, then qualified retirement withdrawals can come out tax-free.
Choose traditional if your tax rate is higher today. You get the tax break now, then pay tax when you take the money out later.
Here is the plain-English rule:
| Situation | Usually stronger choice | Why |
|---|---|---|
| You pay 12% tax now and expect 22% later | Roth 401(k) | Paying tax now is cheaper |
| You pay 22% now and expect 18% later | Traditional 401(k) | The tax break today is worth more |
| You are young and income may rise a lot | Roth 401(k) | Your tax rate may be low now |
| You are in a high-income year | Traditional 401(k) | You may need the tax cut now |
| You are unsure | Split both | Tax guesses are not magic. Sadly. |
With the calculator defaults, you earn 70,000 dollars, save 500 dollars per month as Roth, pay a 22% current tax rate, expect an 18% retirement tax rate, and invest for 30 years at 7%.
Those inputs show Roth growing to about 609,985 dollars. A traditional contribution with the same paycheck cost lets you save about 641 dollars before tax each month. After retirement tax, that traditional side is about 641,267 dollars.
In that example, traditional wins by about 31,281 dollars.
How to use the Roth vs. traditional 401(k) calculator
Start with the amount you can feel in your paycheck.
If 500 dollars per month is what you can live without, enter 500 dollars. The calculator treats that as the Roth paycheck cost.
Then it shows what traditional could contribute before tax for the same take-home hit. At a 22% tax rate, a 641 dollar traditional contribution costs about 500 dollars in take-home pay.
That is the part most people miss. A traditional 401(k) contribution lowers taxable income. Taxable income means the part of your pay the IRS can tax.
So traditional can often put more dollars into the account today for the same paycheck pain.
Use these inputs:
| Input | Example | What it means |
|---|---|---|
| Gross income | 70,000 dollars | Pay before taxes and deductions |
| Roth contribution | 500 dollars/month | Money after tax going into Roth |
| Current tax rate | 22% | Tax rate on the next dollar you earn |
| Retirement tax rate | 18% | Tax rate you expect later |
| Years to retirement | 30 | Time for growth |
| Expected return | 7% | Average yearly growth assumption |
Do not worship the 7% number. It is an estimate, not a prophecy with a spreadsheet.
Roth 401(k) vs. traditional 401(k): what changes today
Roth hurts your paycheck more for the same contribution amount.
If you put 500 dollars into Roth, your paycheck drops by about 500 dollars. You already paid tax on that money.
If you put 500 dollars into traditional at a 22% tax rate, your paycheck drops by about 390 dollars. That is because 110 dollars avoids tax today.
Same 500 dollar contribution. Different paycheck result.
| Monthly contribution | Current tax rate | Roth paycheck cost | Traditional paycheck cost |
|---|---|---|---|
| 500 dollars | 12% | 500 dollars | 440 dollars |
| 500 dollars | 22% | 500 dollars | 390 dollars |
| 500 dollars | 32% | 500 dollars | 340 dollars |
This is why the best comparison is not always “500 dollars Roth vs. 500 dollars traditional.” That compares account deposits, not paycheck cost.
A fair paycheck comparison asks: if I can afford a 500 dollar hit today, how much traditional could I save before tax?
At 22%, the answer is about 641 dollars per month.
What changes later in retirement
Roth money can come out tax-free if you follow the rules. Traditional money comes out taxable.
Taxable means it counts as income when you withdraw it. If you pull out 50,000 dollars from a traditional 401(k), the tax system sees income.
That is not evil. It is just the bill arriving late, wearing a tiny hat.
The calculator compares after-tax retirement value. That means it estimates what you may keep after retirement taxes.
Using the default numbers:
| Account type | Monthly amount going in | Value before retirement tax | Tax rate later | Value after tax |
|---|---|---|---|---|
| Roth 401(k) | 500 dollars | 609,985 dollars | 0% on qualified withdrawals | 609,985 dollars |
| Traditional 401(k) | 641 dollars | 782,033 dollars | 18% | 641,267 dollars |
Traditional wins here because the tax rate drops from 22% now to 18% later.
If the retirement tax rate were 25% instead, the answer could flip. That is why the tax-rate input matters so much.
Is Roth or traditional better if I make 70,000 dollars?
At 70,000 dollars, the better choice depends on your current tax rate and future income.
If you are single, a 70,000 dollar salary may put your next dollars around the 22% federal bracket before deductions. If your retirement tax rate is lower, traditional can make sense.
But if you expect your income to grow, Roth deserves a serious look. Paying 22% now may feel annoying. Paying more later may feel like buying the same sandwich after airport security.
Use the calculator this way:
| Scenario | Current tax rate | Retirement tax rate | Likely winner |
|---|---|---|---|
| Income peaks now | 22% | 12% | Traditional |
| Income stays similar | 22% | 22% | Often close |
| Income rises later | 12% | 22% | Roth |
| Unsure | 22% | Unknown | Split contributions |
A split means you put some money in Roth and some in traditional. It is not fancy. It is just refusing to pretend you know future tax law.
What about the 2026 401(k) contribution limit?
The employee 401(k) limit is a big deal because Roth and traditional share the same employee limit.
For 2025, the employee elective deferral limit is 23,500 dollars for many workers. That is about 1,958 dollars per month. IRS limits can change, so check the current limit before maxing out.
Elective deferral means the money you choose to put in from your paycheck. Employer match is separate.
If you max Roth at 23,500 dollars, you put in after-tax dollars. If you max traditional at 23,500 dollars, you put in pre-tax dollars.
That makes Roth feel more expensive today. It can also make Roth powerful if you can afford it, because the full limit is after-tax money.
Example:
| Choice | Employee contribution | Current tax treatment | Paycheck feel |
|---|---|---|---|
| Roth max | 23,500 dollars/year | Tax paid now | More painful today |
| Traditional max | 23,500 dollars/year | Tax delayed | Easier today |
| Split | 12,000 Roth + 11,500 traditional | Mixed | Balanced |
Do not max out just because the limit exists. A limit is not a dare.
Does the employer match change the answer?
Usually, employer match should be taken first. Free money is rare. When it appears, do not make it sit in the lobby.
If your employer matches 100% of the first 4% of pay, and you earn 70,000 dollars, that match could be 2,800 dollars per year.
That match often goes into a traditional pre-tax bucket, even if your own contribution is Roth. Some plans now allow Roth treatment for employer money, but not all plans do.
Plain English: your Roth choice may not make every dollar Roth.
Ask your plan these three things:
| Question | Why it matters |
|---|---|
| Does the match go to Roth or traditional? | It changes future taxes |
| What percent do I need for the full match? | Missing match is leaving pay behind |
| Do I vest right away? | Vest means when the match is truly yours |
If you cannot afford much, start with the match. Then decide Roth vs. traditional on the next dollar.
When traditional 401(k) is the smarter move
Traditional can be stronger when your tax rate is high today.
Say you are in a 32% bracket now and expect 22% in retirement. A 1,000 dollar traditional contribution could save about 320 dollars in federal tax today.
That is not pocket lint. That is a bill, groceries, or part of rent.
Traditional may fit if:
- You need more take-home pay now.
- You are in a high-income year.
- You expect lower income in retirement.
- You want the tax break to help you save more.
The uncomfortable truth: sometimes the “best” retirement choice is the one you can keep doing.
A perfect Roth plan that makes your monthly budget collapse is not a plan. It is a finance cosplay outfit.
When Roth 401(k) is the smarter move
Roth can be stronger when your tax rate is low today.
Say you pay 12% now and expect 22% later. Paying tax now may be cheap compared with paying it after years of raises, career growth, or higher tax rates.
Roth may fit if:
- You are early in your career.
- Your income is lower this year.
- You expect higher earnings later.
- You want tax-free retirement income.
- You already have a lot of traditional money.
Roth can also give you more control later. If part of your retirement income is tax-free, you may have more room to manage tax bills.
Control is underrated. Money is stressful enough without every withdrawal arriving with paperwork and attitude.
The break-even tax rate
The break-even tax rate is the future tax rate where Roth and traditional are roughly tied.
Plain English: it is the “no clear winner” line.
If your future tax rate is above that line, Roth gets stronger. If it is below that line, traditional gets stronger.
In a clean math world, the break-even point is close to your current tax rate. If you pay 22% now and expect 22% later, the result can be close.
Real life adds noise. State taxes, Social Security, required withdrawals, Medicare premiums, and changing tax laws can all move the answer.
So do not ask the calculator to know the future. Ask it to show what happens if your guess is wrong.
Run three versions:
| Version | Current tax rate | Retirement tax rate | Why to run it |
|---|---|---|---|
| Low future tax | 22% | 12% | Tests traditional advantage |
| Same tax | 22% | 22% | Tests the tie zone |
| High future tax | 22% | 28% | Tests Roth advantage |
If one choice wins in every version, that is useful. If the answer flips, split contributions may be the adult in the room.
Common mistakes people make
The first mistake is comparing 500 dollars Roth to 500 dollars traditional and calling it fair.
It is not always fair. Roth uses after-tax money. Traditional uses pre-tax money.
The second mistake is ignoring retirement tax rate. That one is the whole game. If taxes are lower later, traditional often improves. If taxes are higher later, Roth often improves.
The third mistake is skipping cash flow. Cash flow means the money left after bills.
If Roth cuts your paycheck so hard that you build credit card debt, the tax strategy failed. The spreadsheet may clap. Your Visa bill will not.
The fourth mistake is forgetting the employer match. Get the match before getting philosophical.
What to check next
After you run the calculator, check these items before changing your 401(k):
- Your plan match rate and match cap.
- Whether employer match goes to Roth or traditional.
- Your current federal and state tax rates.
- Your emergency fund.
- Any high-interest debt above 10% APR.
- Whether you can keep the contribution for 12 months.
APR means annual percentage rate. It is the yearly cost of debt. If a credit card charges 24% APR, that debt can grow faster than your retirement account.
If your budget is tight, do not use shame as a calculator. Use numbers.
Start with the match. Then raise your contribution by 1% at a time. A small move you keep beats a heroic move you quit in February.
Frequently asked questions
Is Roth 401(k) better than traditional 401(k)?
Roth is better if your tax rate is higher when you retire. Traditional is better if your tax rate is higher today.
If you are in the 22% bracket now and expect 12% later, traditional may give more value today. If you expect higher retirement taxes, Roth may be worth paying tax now. If you do not know, splitting money between both can reduce the risk of being wrong with confidence.
Does Roth 401(k) reduce my taxable income?
No. Roth contributions do not lower taxable income today.
If you put $500 into Roth, your paycheck usually falls by about $500 before other payroll details. The tradeoff is later: qualified withdrawals can be tax-free, which future-you may find charming.
Does traditional 401(k) reduce my paycheck less?
Yes, usually. A $500 traditional contribution at a 22% federal tax rate may reduce take-home pay by about $390.
That does not mean traditional is always better. It means the government is helping with part of today’s contribution because it plans to discuss taxes with you later.
Can I contribute to both Roth and traditional 401(k)?
Yes, if your plan allows both. Your combined employee contributions share the same annual employee limit.
You might split $500 per month as $250 Roth and $250 traditional. Not glamorous. Very useful. The tax future is foggy; a split keeps both headlights on.
Should high earners use Roth or traditional 401(k)?
High earners often benefit from traditional contributions because their current tax rate may be high.
But Roth can still make sense if they expect high retirement income, want tax-free withdrawals later, or already have a lot of pre-tax money. The right answer depends on today’s bracket, future income, and how much tax flexibility you want.
What calculator result should I trust most?
Look at two numbers together: after-tax retirement value and paycheck cost.
One tells you what future money may be worth. The other tells you whether today’s budget can survive the contribution. A beautiful future projection is less useful if it makes this month’s rent start sweating.
Bottom line
Roth vs. traditional is not a personality test. You are not “a Roth person” or a “traditional person.” You are a person trying to keep more of your own money.
Use the calculator with your real numbers. Try a low, middle, and high retirement tax rate. Check the paycheck cost.
Then choose the option you can keep funding.
Because the best 401(k) choice is not the one that sounds smartest at open enrollment. It is the one that still works after rent, groceries, taxes, and life do what they always do: show up uninvited.