Comprehensive Guide
Learn more in our Business & Tax Guide.
How it works
roth vs traditional 401k calculator takes your inputs and produces traditional: after-tax value, roth: after-tax value, better option, advantage amount. Compare Roth 401K vs Traditional 401K — tax now vs tax later. The right choice depends on your current vs future tax rate. You provide 5 inputs: Current marginal tax rate (%) (percent, in percent) (default: 22 percent); Expected retirement tax rate (%) (percent, in percent) (default: 15 percent); Annual 401K contribution (currency, in dollars) (default: 10000 dollars); Years until retirement (number) (default: 25); Expected annual return (%) (percent, in percent) (default: 7 percent). The calculator returns 4 outputs: Traditional: after-tax value (the primary result); Roth: after-tax value (a secondary output); Better option (a secondary output); Advantage amount (a secondary output). Business tax and finance calculations combine multiple moving parts — revenue, expenses, depreciation, tax brackets, and timing — in ways that make back-of-envelope estimates unreliable. This calculator handles the interaction of those variables precisely, so your business decisions rest on real arithmetic. The underlying formula: Traditional value = Balance × (1 − Retirement tax rate). Roth value = Balance × (1 − Current tax rate) × (1 + Return)^years. With the default values, traditional: after-tax value is computed from the interaction of every input field — change any one of them and the result updates immediately, so you can stress-test different scenarios without re-entering the whole form. Adjust the inputs to match your real financial situation. The defaults are realistic starting points, but every person's circumstances differ — your actual income, expenses, rates, and timelines will produce a different answer. Use the tool iteratively: start with the defaults, then change one variable at a time to see which factor has the largest impact on your outcome.Formula
Traditional value = Balance × (1 − Retirement tax rate). Roth value = Balance × (1 − Current tax rate) × (1 + Return)^years.
Tips
- If current rate > retirement rate: Traditional wins (tax deduction now at higher rate).
- If current rate < retirement rate: Roth wins (pay tax now at lower rate).
- Uncertain? Split contributions 50/50 between Roth and Traditional.
- Roth has an extra advantage: no required minimum distributions (RMDs).
Frequently asked questions
Roth or Traditional 401K?
If you expect a LOWER tax rate in retirement: Traditional (deduct now at higher rate). If you expect a HIGHER tax rate: Roth (pay now at lower rate). If unsure: split 50/50 for tax diversification.
Can I have both Roth and Traditional 401K?
Yes — most employers allow split contributions between Roth and Traditional. This gives tax diversification: some money taxed now (Roth), some taxed later (Traditional).
What does the roth vs traditional 401k calculator calculate?
It takes current marginal tax rate (%), expected retirement tax rate (%), annual 401k contribution, years until retirement, expected annual return (%) as inputs and computes traditional: after-tax value, roth: after-tax value, better option, advantage amount. The primary output is traditional: after-tax value. Compare Roth 401K vs Traditional 401K — tax now vs tax later. The right choice depends on your current vs future tax rate.