Question 1

Is Roth 401k or Traditional 401k better?

Accepted Answer

It depends on one number: your retirement tax rate versus your current tax rate. If your tax rate will be lower in retirement, Traditional 401k wins because you defer taxes to a lower bracket. If your tax rate will be higher in retirement, Roth 401k wins because you pay taxes now at the lower rate. The calculator above shows you the exact break-even point.

Question 2

What is the break-even tax rate?

Accepted Answer

The break-even tax rate is the retirement tax rate at which both accounts produce the same after-tax wealth. If your actual retirement tax rate is above the break-even, Roth wins. Below it, Traditional wins. For a 30-year-old contributing $23,000/year at a 22% current tax rate with 7% real returns, the break-even is typically around 22%. The calculator computes this precisely for your inputs.

Question 3

Can I split my contributions between Roth and Traditional?

Accepted Answer

Yes. Most 401k plans allow you to split contributions between Roth and Traditional in any percentage. This is called tax diversification. A common strategy: use Traditional for the portion that keeps you in a lower bracket now, and Roth for the rest. The calculator helps you find the optimal split by showing the exact dollar difference.

Question 4

Should I choose Roth if I expect taxes to go up?

Accepted Answer

Expecting higher future tax rates is the primary argument for Roth 401k. But be specific: are your personal taxes going up (higher income, less deductions), or are federal rates going up? Your personal tax bracket matters more than hypothetical rate changes. If you are currently in a 22% bracket and expect to withdraw in a 12% bracket in retirement, Traditional saves you 10 percentage points on every dollar.

Question 5

Does the 401k contribution limit apply to Roth and Traditional combined?

Accepted Answer

Yes. For 2025, the total 401k contribution limit is $23,500 (or $31,000 if age 50+). This limit applies to the combined total of Roth and Traditional contributions. You cannot contribute $23,500 to each. The calculator uses your contribution amount to project both account types.

Question 6

What if my employer offers a Roth 401k match?

Accepted Answer

Employer matches are always pre-tax (Traditional), even if your contributions are Roth. This means your match will be taxed as income when you withdraw it in retirement. Factor this into your planning — if your employer matches $5,000/year, that portion is effectively Traditional regardless of your election.

Question 7

How does inflation affect the Roth vs Traditional decision?

Accepted Answer

Inflation does not change the break-even math. Both accounts invest in the same assets and earn the same returns. The difference is purely about tax timing. The calculator uses real return (nominal return minus inflation) to show purchasing power, but the Roth vs Traditional comparison remains the same whether inflation is 2% or 5%.

Question 8

What are the withdrawal rules for Roth vs Traditional 401k?

Accepted Answer

Traditional 401k withdrawals are taxed as ordinary income. Required Minimum Distributions (RMDs) start at age 73. Roth 401k withdrawals are tax-free if the account is at least 5 years old and you are 59.5+. Roth 401ks also have RMDs, but you can roll a Roth 401k into a Roth IRA to avoid RMDs entirely. This flexibility is an additional advantage of Roth that the calculator does not quantify.

Roth vs 401k Calculator

Roth 401k vs Traditional 401k: Key Differences

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