Roth vs Traditional 401k
Compare a Roth and a traditional 401(k) for your own tax rates: after-tax value at retirement, take-home cost today, the 2026 limits, and the simple rule that decides which one wins.
Roth vs traditional 401k calculator
Roth vs traditional 401k: the one rule that decides it
Traditional (pre-tax) 401(k) contributions cut your taxable income now, and withdrawals are taxed later. Designated Roth 401(k) contributions are taxed now, and qualified withdrawals (at least 5 years after your first Roth contribution and after age 59½, disability or death) are tax-free (IRS). For the same take-home cost, the math reduces to one comparison: if your tax rate in retirement will be lower than it is now, traditional wins; if it will be higher, Roth wins; if it's the same, they tie.
Example: $10,000 a year for 30 years at 6% grows to $790,582. Pre-tax, taxed at 12% in retirement, that's $695,712 to spend. The Roth version with the same take-home cost (22% tax now, so $7,800 goes in) grows to $616,654, tax-free. Traditional wins here because 12% later beats 22% now.
When a Roth 401(k) makes more sense
- You're early in your career or in a low bracket (10% or 12%) and expect higher income later.
- You expect tax rates to rise, or want tax-free income to manage future brackets, Medicare premiums and the taxation of Social Security.
- You can afford to contribute the full amount as Roth: a Roth dollar is worth more than a pre-tax dollar because the tax is already paid.
When traditional is usually better
- You're in the 22% bracket or higher now and expect lower income in retirement.
- You need the lower taxable income now (for example to qualify for credits or income-driven loan payments).
2026 limits and splitting your contributions
Roth and pre-tax contributions share one limit: $24,500 for 2026, plus an $8,000 catch-up at 50 or older ($11,250 at ages 60 to 63). You can split between the two to hedge; many people put part in each.
Comparing a 401(k) with a Roth IRA instead? See the 401k or Roth IRA comparison, or project your balance with the 401(k) calculator.
Common questions
Is Roth or traditional 401(k) better?
Traditional if your tax rate will be lower in retirement than now; Roth if it will be higher; the same take-home cost ties when the rates match.
Can I contribute to both a Roth and traditional 401(k)?
Yes, if your plan offers both; the total counts toward one limit ($24,500 in 2026, plus catch-ups).
Are Roth 401(k) withdrawals tax-free?
Qualified ones are: at least 5 years after your first Roth contribution and after 59½, disability or death.
Do Roth 401(k) contributions lower my taxes now?
No. They're made with after-tax pay; traditional contributions lower taxable income now.
Sources
More retirement calculators: Qualified Charitable Distributions · Roth Conversion · Social Security Death Benefit · Social Security Spousal Benefits
Related
General information, not financial, tax or legal advice. Check important numbers with the official source before acting on them.