Roth or Traditional 401(k)?: the facts

1. A traditional 401(k) dollar is taxed when it comes out, at whatever rate applies then. A Roth dollar is taxed before it goes in, at today's rate, and never again. Same return, same years, same plan limit: the only difference is which rate applies.
2. Held to the same cost in take-home pay, the two accounts end equal when the rate in retirement equals the rate today. A lower rate later favors the traditional account; a higher rate later favors the Roth. The return and the years scale both alike and do not change the answer.
3. Example: $10,000 a year at 22% today and 12% in retirement, 25 years at 6%. The traditional account leaves about $37,768 after tax. The Roth, costing the same $7,800 of take-home, leaves about $33,477. The traditional account is ahead by about $4,292.
4. The rate in retirement is often lower than the marginal rate today, because withdrawals fill the standard deduction and the low brackets first. A pension, a large balance, or required distributions can push it up. The federal brackets for 2026 run from 10% to 37%, and state tax sits on top.
5. The plan limit is the same for both accounts, $24,500 for 2026 before any catch-up. A full Roth contribution therefore shelters more after-tax money than a full traditional one, and it costs more take-home in the year it is made, by the tax the traditional saver defers.
6. The rate in retirement is a guess about a return filed decades from now. Splitting contributions between the two accounts hedges the guess, and most plans that offer a Roth option allow both in the same year.

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