401(k) vs Roth IRA Calculator
The core question is simple: will your tax rate be higher now or in retirement? If it's higher now, a Traditional account saves you money. If it'll be higher in retirement, a Roth wins. This calculator runs both projections side-by-side and shows you the after-tax break-even tax rate — the retirement tax rate at which both accounts produce identical results.
Educational estimate. Calculator results are for planning and information only, not financial, tax, medical, legal, or engineering advice. Verify important decisions with official sources or a qualified professional.
401(k) vs Roth IRA Calculator
After-Tax Break-Even & Wealth Comparison
📐 Formula & Method
Traditional 401(k) / IRA — After-Tax at Retirement
You contribute pre-tax dollars (C), so the full contribution compounds. At retirement you pay ordinary income tax at T_retirement on every withdrawal.
Roth IRA / Roth 401(k) — After-Tax at Retirement
You contribute post-tax dollars (C × (1 − T_now)), so less money goes in — but all growth and withdrawals are completely tax-free.
Break-Even Retirement Tax Rate
When both accounts use the same annual return, the break-even is exactly your current marginal tax rate. If your retirement rate will be BELOW your current rate → Traditional wins. If it will be ABOVE → Roth wins.
📋 How to Use
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1
Enter your planned annual contribution (up to the 2024 limits: $23,000 for 401k, $7,000 for IRA).
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2
Enter your current marginal federal + state tax rate. This is the rate on your last dollar of income today.
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3
Estimate your expected retirement tax rate — factor in RMDs, Social Security, pension income, and state taxes.
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4
Enter how many years until you retire.
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5
Set your expected annual investment return — 7% is a standard conservative assumption.
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6
Click Calculate to see both accounts side-by-side plus the break-even tax rate.
💡 Key Insights
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If your retirement tax rate equals your current rate, Traditional and Roth produce identical after-tax wealth. The decision is entirely about which direction tax rates move.
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Roth wins if you expect higher rates in retirement (early-career savers, high-saver households, tax-rate-increase scenarios).
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Traditional wins if you expect lower rates in retirement (late-career professionals planning to retire to a low-tax state).
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Tax diversification is real — having both account types gives you flexibility to manage taxable income year-by-year in retirement.
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US Roth IRAs have a $7,000/yr limit ($8,000 over 50); Roth 401(k)s share the $23,500 401(k) limit ($31,000 over 50).
🧮 Worked Examples
Same tax rate (24% both)
$10k/yr, 25 years, 7% return, 24% rate now and at retirement.
Lower rate at retirement
$10k/yr, 32% now → 15% at retirement.
📊 How to Interpret Your Result
Expected retirement rate > current rate
Lean Roth — pay tax now at the lower rate.
Expected retirement rate ≈ current rate
Mathematical tie. Pick based on flexibility (Roth has no RMDs at 73, easier withdrawals).
Expected retirement rate < current rate
Lean Traditional — defer tax to the lower bracket.
⚠️ Common Mistakes to Avoid
Forgetting to invest the tax savings from Traditional.
Fix: Traditional only wins if you invest the tax refund. Otherwise, Roth's after-tax contribution is effectively higher.
Ignoring state taxes.
Fix: Moving from a high-tax state (CA 13.3%) to a no-tax state (FL, TX) in retirement makes Traditional very attractive.
Skipping the employer 401(k) match for a Roth IRA.
Fix: Always capture the full employer match first. Match-then-Roth-IRA-then-more-401(k) is the standard priority.
🎯 Who This Calculator Is For
Early-career professionals
Currently in a low bracket — Roth locks in the low tax rate.
Peak earners (35–55)
Compare today's marginal rate with realistic retirement rates.
FIRE / early retirees
Roth conversions let you withdraw tax-free decades before 59½.
401(k) vs Roth IRA: Which Account Leaves You Richer?
The single most important variable in the 401(k) vs Roth IRA decision is whether your tax rate will be higher now or in retirement. If you are in a high tax bracket today (32%+) and expect to be in a lower bracket in retirement, a Traditional 401(k) or IRA is almost always the better choice — you defer taxes when rates are high and pay them when rates are low. If you are early in your career, in a low tax bracket now, or expect significant income in retirement (from Social Security, pensions, RMDs, or rental income), a Roth account typically comes out ahead.
The break-even analysis is the mathematical heart of this decision. Because both accounts invest the same pre-tax earnings, the only difference is timing: Traditional accounts pay tax at your retirement rate, Roth accounts pay tax at your current rate. This means the break-even retirement tax rate equals your current marginal tax rate — exactly. If your retirement rate will be lower than today's rate, Traditional wins by the exact same percentage by which the rates differ. If it will be higher, Roth wins by the same logic.
The Roth IRA has unique advantages beyond pure tax math. There are no Required Minimum Distributions (RMDs) during the account owner's lifetime — meaning your money can continue growing tax-free indefinitely, making it an excellent estate planning tool. Roth accounts also give more flexibility in retirement: you can choose exactly when to withdraw, potentially staying in lower tax brackets by drawing down Traditional accounts first and letting Roth accounts grow. You can also withdraw Roth contributions (not earnings) at any time without tax or penalty.
2024 contribution limits: 401(k) contributions are capped at $23,000/year ($30,500 if age 50+). Roth IRA contributions are limited to $7,000/year ($8,000 if age 50+), but are phased out for high earners — single filers with MAGI above $161,000 and joint filers above $240,000 cannot contribute directly. High earners can use the "backdoor Roth" strategy: contribute to a non-deductible Traditional IRA, then immediately convert to Roth.
🔬 Methodology & Accuracy
Formula: Both accounts grow with the same nominal contribution and return. Traditional grows untaxed and is taxed at withdrawal (FV × (1 − retirement rate)). Roth grows post-tax (contribution × (1 − current rate), no tax at withdrawal). Mathematically equivalent when rates are equal.
Data sources: IRS Publication 590-A & 590-B (2025); IRS contribution limits for 2025; UK HMRC pension tax relief rules.
Last reviewed: January 2026 · Accuracy: Results are precise to two decimal places using IEEE-754 double-precision arithmetic. Intended for educational and planning use only.
For informational purposes only. Results are estimates based on the inputs and formulas provided. For financial, tax, medical, or legal decisions, consult a qualified professional. Rates and regulations change — always verify current figures with official sources.
Accuracy & Feedback
❓ Frequently Asked Questions
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