401k vs Roth 401k Calculator

The 401k and Roth 401k are two popular retirement savings plans offered by employers. Both plans offer tax benefits, but they differ in how those benefits are applied. It is important to understand the differences between 401k and Roth 401k plans. This calculator will help you compare the two plans and decide which one is right for you.

Traditional 401k

With a traditional 401k, you contribute pre-tax dollars to your account. This reduces your current taxable income, which can lower your tax bill. The money in your account grows tax-free until you withdraw it in retirement.

Roth 401k

With a Roth 401k, you contribute after-tax dollars to your account. This means you do not get a tax break on your contributions. However, the money in your account grows tax-free and you do not have to pay taxes on withdrawals in retirement.

Calculator

This calculator can help you compare the two plans and decide which one is right for you. Simply enter your information into the calculator and click "Calculate." The calculator will show you how much you can contribute to each plan, how much your money will grow over time, and how much you will pay in taxes in retirement.

Example

Here is an example of how to use the calculator:

• Age: 30
• Income: $50,000
• Contribution amount: $5,000

Results

Traditional 401k

• Contributions: $5,000
• Tax savings: $1,000
• Balance at retirement: $262,000
• Taxes paid in retirement: $78,000

Roth 401k

• Contributions: $5,000
• Tax savings: $0
• Balance at retirement: $327,000
• Taxes paid in retirement: $0

Which plan is right for you?

The best plan for you depends on your individual circumstances. If you are in a high tax bracket now, a traditional 401k may be a better choice for you. If you are in a low tax bracket now, a Roth 401k may be a better choice for you.

Additional information

Here are some additional things to consider when comparing 401k and Roth 401k plans:

• Income limits: There are income limits for both traditional 401k and Roth 401k plans. In 2023, the income limit for a traditional 401k is $138,000 for single filers and $218,000 for married couples filing jointly. The income limit for a Roth 401k is $153,000 for single filers and $228,000 for married couples filing jointly.
• Contribution limits: The annual contribution limit for traditional 401k and Roth 401k plans is $22,500 in 2023. If you are age 50 or older, you can make catch-up contributions of up to $7,500 per year.
• Withdrawals: Withdrawals from traditional 401k accounts are taxed as ordinary income. Withdrawals from Roth 401k accounts are tax-free if the account has been open for at least five years and the withdrawals are made after age 59½.
• Required minimum distributions: When you reach age 72, you must start taking required minimum distributions (RMDs) from your traditional 401k account. RMDs are not required for Roth 401k accounts.

Tips

Here are some tips for choosing the right 401k plan for you:

• Consider your current tax bracket and your expected tax bracket in retirement.
• Consider your investment goals and risk tolerance.
• Consider your income and your expected income in retirement.
• Talk to a financial advisor to get personalized advice.