Choosing Roth vs. traditional 401(k) contributions involves more than guessing your retirement tax bracket. Start with your pre-tax salary budget, today’s income-tax rate, and how much of a Traditional contribution’s tax savings you would actually reinvest.
This calculator holds that salary budget constant and recycles savings inside the Traditional 401(k). It compares hypothetical after-tax retirement investments, not the value of money you spend today. Employer matching contributions and investments outside the plan are excluded.
Roth versus Traditional: reinvestment test
Compare one annual pre-tax salary budget, with tax savings recycled inside the Traditional 401(k). All amounts are USD.
Assumes identical year-end contributions, investment growth after fees, and constant tax rates. Roth withdrawals must be qualified. No FICA tax saving, employer match, taxable side account, inflation adjustment, or progressive tax calculation. Spent cash is not invested: results compare retirement investments, not total lifestyle value.
This tool runs in your browser. Your entries are not sent or saved. All amounts are in US dollars (USD).
Load example fills hypothetical figures. They are not current rates or recommendations.
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What does the same salary budget mean?
The budget is the slice of annual gross pay allocated to this decision, not your entire income. In the Roth scenario, income tax comes out of that slice first. The remaining dollars become your employee contribution.
In the Traditional scenario, pre-tax deferrals reduce the modeled income tax. Reinvesting some of that saving means increasing your Traditional deferral. Any cash left after taxes and contributions is treated as spent, rather than quietly added to another investment account.
This avoids counting the same tax benefit twice. At full reinvestment, the entire gross budget becomes the Traditional contribution. Adding another tax-savings portfolio on top would exceed the budget used for the Roth comparison.
The IRS distinguishes pre-tax employee deferrals from designated Roth deferrals, which are included in current gross income. Its Roth comparison chart also explains that qualified designated Roth distributions are excluded from gross income. The calculator uses those basic distinctions, not a tax-return calculation.
Which tax rates and limits should you enter?
The current rate represents the assumed income tax saved on an additional pre-tax deferral. It is not your average tax rate on all income. Do not add payroll taxes to that number; this model only changes income tax. No FICA (Social Security or Medicare) tax saving is modeled.
The future rate applies proportionally to the modeled Traditional withdrawals. It is a scenario assumption, not a prediction of your retirement bracket. Try several possible rates rather than treating a single estimate as settled.
Enter your verified remaining annual employee elective-deferral room after other deferrals, including relevant personal and plan restrictions. The IRS explains that designated Roth and pre-tax elective deferrals share a combined limit. The employer-inclusive overall contribution limit is a different concept.
The tool rejects either contribution if it exceeds the room you enter. It does not determine eligibility, catch-up treatment, or your legal limit. Ask your plan administrator to confirm the relevant amount before changing payroll elections.
Why do full reinvestment and equal tax rates tie?
Consider a hypothetical annual gross budget of $6,000 USD and a 25% current income-tax rate. The Roth contribution is $6,000 × 75% = $4,500. With all tax savings reinvested, the Traditional contribution is $6,000.
Assume 20 identical year-end contributions, zero investment growth, and a 25% tax rate on the Traditional withdrawals. These are illustrative assumptions, not expected returns or a retirement tax forecast. The qualified Roth balance is $90,000; the Traditional after-tax balance is also $90,000.
The Traditional account holds $120,000 before withdrawal tax. Applying 25% leaves $90,000. The accounts therefore tie in after-tax investment dollars, even though their displayed pre-tax balances differ. Identical growth after fees preserves that equality under these constant-rate assumptions.
| Scenario | Annual employee contribution | After-tax retirement balance |
|---|---|---|
| Qualified Roth | $4,500.00 | $90,000.00 |
| Traditional, 100% reinvested | $6,000.00 | $90,000.00 |
| Traditional, 0% reinvested | $4,500.00 | $67,500.00 |
What changes if you spend the tax savings?
With the same hypothetical inputs but zero reinvestment, the Traditional contribution stays at $4,500. Its current tax saving is $1,125 each year. That cash is treated as spent, so it does not compound or appear in the retirement balance.
The Traditional after-tax balance is then $67,500, or $22,500 below the Roth balance. This is an investment-result difference, not a verdict that one person’s total lifestyle was worse. The comparison does not place a value on the annual $1,125 spent.
For a partial-reinvestment example, load the tool’s hypothetical values: $6,000 gross budget, 25% current tax, 50% reinvestment, a 10% withdrawal tax assumption, 20 years, zero growth, and an illustrative $8,000 input for available room.
The Traditional annual contribution becomes $5,142.86, while the Roth contribution remains $4,500.00. Annual cash treated as spent is $642.86. The tool uses unrounded contributions internally; displayed cents are rounded only for readability.
After 20 years, the qualified Roth balance is $90,000.00 and the Traditional after-tax balance is $92,571.43. The $2,571.43 difference depends on the entered 10% withdrawal rate and reinvestment behavior. It is not a claim about likely returns or future tax policy.
What does the break-even tax rate tell you?
Under this model, the future break-even withdrawal tax rate equals the current tax rate multiplied by the reinvestment fraction. Reinvesting 50% with a 25% current rate therefore produces a 12.5% break-even rate.
Below that threshold, Traditional has the larger modeled after-tax investment balance; above it, Roth does. At the threshold, they tie. The common investment growth factor cancels, so changing the same growth assumption in both accounts does not change this threshold.
The tool also reverses the question: how much reinvestment would tie at your assumed withdrawal rate? With a 25% current rate and a 10% future rate, the answer is 40%. Greater reinvestment favors Traditional investments within the model.
Some scenarios cannot reach a tie. A hypothetical 12% current rate and 30% future rate would require 250% reinvestment, outside the allowed range. Even full reinvestment produces $84,000 after tax versus $105,600 in Roth over 20 zero-growth years with the same $6,000 gross budget.
When the current tax rate is zero, there is no current tax saving to recycle. A positive future withdrawal tax rate cannot be offset by moving the reinvestment slider. If both tax rates are zero, every reinvestment percentage ties.
Calculation method, timing, and rounding
Let B be the annual gross salary budget, t the current income-tax rate, q the reinvestment fraction, and f the future withdrawal tax rate, each rate expressed as a decimal. Annual Roth contribution R = B × (1 − t). Annual Traditional contribution T = R ÷ (1 − q × t).
The gross-up includes the additional tax saving created by larger deferrals: T − R = q × T × t. Cash treated as spent is (B − T) × (1 − t), equivalently T × t × (1 − q). No separate tax-savings investment is added.
For n identical year-end contributions and nominal annual growth g after fees, the accumulation factor is n when g = 0, otherwise ((1 + g)^n − 1) / g. Roth balance is R × factor; Traditional after-tax balance is T × factor × (1 − f).
Break-even f = q × t. Required q = f ÷ t when t is positive; a result above 1 is unreachable within 0% to 100%. Full-precision arithmetic precedes USD cent rounding. Future dollars are nominal, not inflation-adjusted.
When does this comparison not fit?
The Roth result assumes a qualified distribution. The IRS describes a five-taxable-year requirement plus a distribution after age 59½, due to disability, or after death. Check your account’s applicable rules; an early or nonqualified withdrawal needs a different calculation.
Both accounts use identical investments and growth after fees. Traditional growth is tax-deferred here; qualified Roth withdrawals are tax-free. The tool assumes no intermediate withdrawals, penalties, or taxes on annual account growth, and does not model market volatility.
It does not calculate progressive retirement taxes, required distributions, Social Security taxation, conversions, changing contribution levels, or employer matches. Those factors can change a real decision. A single proportional withdrawal rate cannot replace a year-by-year retirement tax plan.
If you are already at the employee deferral limit, you may not have room for the modeled Traditional increase. Investing the difference in a taxable account would require separate dividend, capital-gains, fee, and timing assumptions. This tool makes no projection for that alternative.
Designated Roth employee deferrals are also different from non-Roth after-tax contributions used in some conversion strategies. Our mega backdoor Roth contribution-room guide addresses that separate question; do not substitute its employer-inclusive room for this tool’s employee deferral input.
Quick decision checklist
- Confirm both contribution types and your remaining employee deferral room with the plan.
- Use a gross salary budget you can sustain and an income-tax assumption, not payroll withholding alone.
- Test realistic reinvestment behavior and several future withdrawal rates; distinguish spent cash from investments.
- Check qualified Roth withdrawal conditions and seek appropriate tax guidance for factors outside this model.
Which official sources support the rules?
- IRS: Roth comparison chart, for pre-tax versus Roth contributions, qualified withdrawal treatment, and combined employee limits.
- IRS: Designated Roth account, for current income inclusion, qualified distributions, and allocating employee deferrals between contribution types.
Sources checked October 7, 2026. This article does not use the older annual limit figures shown in portions of those pages. Confirm current limits and individual plan terms separately.
Prepared with AI-assisted research, drafting, and calculation checks. Not independently reviewed by a human financial professional.
