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Roth vs TraditionalMoney Decisions
Roth comes out ahead
$21,688 more after tax at retirement · pre-tax balance $661,226

After-tax value at retirement

Roth comes out ahead$21,688 more after tax
Roth · withdrawn tax-free$661,226
Traditional · incl. $123,781 from the invested deduction$639,537
Roth (tax-free)
$661,226
Traditional (after tax)
$639,537
Roth ahead by
$21,688
Pre-tax balance
$661,226

Details

Pre-tax balance at retirement$661,226
Roth — withdrawn tax-free$661,226
Traditional — after withdrawal tax$515,756
Traditional — invested tax savings$123,781
Roth advantage$21,688

About the roth vs traditional 401(k)

Both accounts get the same tax break — just at different times. A Traditional 401(k) or IRA deducts your contribution today and taxes your withdrawals in retirement. A Roth is the opposite: you pay tax now, then every dollar (including decades of growth) comes out tax-free. The winner depends almost entirely on your tax rate today versus in retirement.

This calculator makes the comparison fair by investing the Traditional’s up-front tax savings in a side account, then taxing everything appropriately at retirement. That way you’re comparing true after-tax wealth, not pre-tax balances that flatter the Traditional.

If you expect your tax rate to be higher in retirement (or the same), Roth usually wins because you lock in today’s lower rate and never pay tax on the growth. If you expect a lower rate in retirement — common if you’re a high earner now who’ll spend less later — Traditional often wins. When rates are equal, the two are mathematically identical before considering contribution limits.

Frequently asked questions

Is a Roth or Traditional 401(k) better?

Roth is generally better if your tax rate will be the same or higher in retirement, since you pay tax at today’s rate and withdraw everything tax-free. Traditional is better if you expect a lower tax rate in retirement. This calculator shows the after-tax value of each for your numbers.

Why compare after-tax value instead of the balance?

A Traditional account shows a bigger balance because it hasn’t been taxed yet. Comparing after-tax value — what you actually get to spend — is the only fair way. This tool also invests the Traditional’s up-front tax deduction so the comparison isn’t skewed.

Does Roth really grow tax-free?

Yes. Qualified Roth withdrawals in retirement are completely tax-free, including all investment growth, as long as you meet the age and holding-period rules. That is the Roth’s main advantage when your account grows for many years.

What tax rate should I enter for retirement?

Estimate the marginal rate you expect to pay on withdrawals in retirement. Many people use a rate slightly lower than their working years, but if you expect large retirement income or higher future tax rates, use a similar or higher rate — and test both to see how sensitive the result is.