Roth vs. Traditional 401(k): A Guide to Using Our Free Calculator

Choosing between a Roth 401(k) and a Traditional 401(k) is a critical retirement decision. The best choice depends on your current income and what you expect your financial situation to be in retirement. Our Free 401(k) Calculator is designed to help you make an informed decision by showing you a side-by-side comparison of how your savings might grow in each type of account.

Understanding the Calculator Fields

This 401(k) Calculator uses your personal financial data to create a detailed projection:

• Financial Details: Your current age, planned retirement age, annual income, and current 401(k) balance set the foundation for the calculation.
• Contribution & Growth: Your contribution percentage, expected annual raise, and estimated rate of return determine how quickly your account will grow.
• Tax Rates: This is the most important part of the comparison. Your current marginal tax rate affects the immediate take-home pay difference and the amount invested in a Roth 401(k). Your expected tax rate in retirement determines how much you'll keep from your Traditional 401(k) withdrawals.

How the 401(k) Calculator Formula Works

Our Free 401(k) Calculator performs two simultaneous, year-by-year calculations to project the potential outcomes of each account type.

1. Traditional 401(k): Contributions are made *before* taxes are taken out. This means your take-home pay is higher today, and the full contribution amount goes into your account to grow. The calculator compounds this growth year after year. However, when you withdraw the money in retirement, the entire amount (both contributions and earnings) is taxed at your retirement tax rate.
2. Roth 401(k): Contributions are made *after* taxes. This means the amount invested is your contribution minus your current taxes. While the account balance will appear smaller than the Traditional 401(k) during the growth phase, the key advantage is that all qualified withdrawals in retirement—including all the earnings—are 100% tax-free.

The most important comparison is the **"After-Tax Balance at Retirement."** This calculator determines that value for both scenarios, allowing you to see which option leaves you with more spendable money in retirement based on your tax assumptions. This data-driven insight is crucial for effective long-term planning.