Roth vs. Traditional Contribution Optimizer
Same paycheck, two tax treatments. See whether a Roth (tax now) or Traditional pre-tax (tax later) contribution leaves you with more spendable money in retirement — based on your tax rate today versus the rate you expect then.
How your balance grows, both ways
How this works
To compare fairly we start with the same pre-tax dollars — the income you'd otherwise have to spend. A Traditional (pre-tax) 401(k) lets the whole amount go in untaxed and grow, then taxes every dollar on the way out. A Roth contribution is made with money you've already paid tax on, so a smaller amount goes in, but it grows and comes out completely tax-free.
- Traditional invests the full contribution C. We grow it as a yearly annuity, then apply your expected retirement tax rate to the entire ending balance.
- Roth invests only C × (1 − your current rate), because tax is paid up front. That smaller amount grows the same way — and the ending balance is yours to keep, untaxed.
Each path grows by the same formula: a contribution made every year, compounded at your chosen annual return. The math reduces to a single rule of thumb — if your tax rate will be higher later, Roth wins; if it'll be lower later, Traditional wins. When the two rates are equal, the results tie almost exactly.
Roth vs. Traditional FAQs
Choose Roth if you expect a higher tax rate in retirement than today, and Traditional (pre-tax) if you expect a lower one.
Capture the full match before you optimize anything else — it's a guaranteed ~50–100% return. The match itself always goes in as pre-tax money, even when your own contributions are Roth.
Yes — split your contributions between Roth and pre-tax to hedge an unknown future tax rate. Your combined employee contributions just have to stay under the annual IRS limit.
Both grow tax-free. A Roth 401(k) sits in your employer plan with much higher limits and a possible match; a Roth IRA is opened on your own with lower limits but a far wider investment menu. Many people use both.