Traditional vs Roth: Which Saves More After Tax?

You're 28, earning $70,000, and your 401(k) enrollment form asks: Traditional or Roth? You pick Traditional because the tax deduction sounds good now. Twenty years later, your income has tripled, tax rates have risen, and you realize you locked in a 22% deduction to pay 35% in retirement. That choice cost you tens of thousands.

The Traditional vs Roth decision comes down to one question: will your tax rate be higher now or in retirement? Traditional contributions reduce your taxes today but are taxed as ordinary income when you withdraw. Roth contributions are taxed upfront, but withdrawals are completely tax-free—including decades of investment growth.

This calculator compares the after-tax value of each strategy based on your current rate, expected retirement rate, contribution amount, and time horizon. If rates are equal, the math is identical. The advantage comes from correctly predicting which direction rates will move.

• Choose Roth if: You're early in your career (lower brackets), expect income growth, believe tax rates will rise, want tax-free withdrawals in retirement, or want to avoid RMDs. Roth locks in today's known tax rate.
• Choose Traditional if: You're in your peak earning years (32%+ bracket), expect lower retirement income, plan to retire in a no-income-tax state, or need the tax deduction now to afford max contributions.
• Consider both (tax diversification): Splitting between Traditional and Roth gives you flexibility to manage taxable income in retirement. Your employer match goes Traditional anyway, so Roth contributions balance that out.
• Red flag: Don't assume retirement tax rates are always lower. Social Security, pensions, RMDs, and investment income can push retirees into higher brackets than expected.

Example 1: Early Career, Expecting Income Growth

Situation: Alex is 27, earns $55,000, and is in the 22% federal bracket. She expects to retire with $120,000+ annual income (24% bracket or higher). She contributes $10,000/year for 35 years at 7% return.

Result: Roth wins by $331,000 because Alex paid 22% upfront instead of 24% in retirement.

Example 2: Peak Earner, Planning to Retire Modestly

Situation: David is 52, earns $250,000, and is in the 35% federal bracket. He plans to retire at 62 with ~$80,000 annual spending (22% bracket). He can contribute $30,500 (with catch-up) for 10 years at 6% return.

Result: Traditional wins because David deducts at 35% and withdraws at 22%—a 13% rate arbitrage.

We project both Traditional and Roth outcomes using the same pre-tax contribution amount. For Traditional, the full amount grows tax-deferred, then we apply your retirement tax rate at withdrawal. For Roth, we reduce the contribution by your current tax rate (since it's after-tax), grow it tax-free, and show the full balance as spendable.

What we include: Federal marginal rates, compound growth over your time horizon, and after-tax final values for direct comparison.

What we don't include: State taxes (though you can add them to your rate inputs), RMD impacts, Social Security taxation, IRMAA Medicare surcharges, or employer match (which always goes Traditional). This is a simplified comparison—consult a financial advisor for complex scenarios.