Taxed now or taxed later. The two rates decide.

The facts, in one place.

Six quotable sentences on Roth against traditional.

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.

By the rate in retirement.

How the answer moves with the one assumption that decides it.

How the comparison works.

A traditional contribution goes in before tax and is taxed on the way out; a Roth contribution is taxed on the way in and never again. Multiplication commutes, so a dollar grown and then taxed at a rate equals a dollar taxed at that rate and then grown, and the two accounts differ only where the rates differ. The tool makes that visible by holding the cost to the paycheck equal: the traditional contribution in full, and the Roth contribution less today's tax, both grown at one return for the same years, the traditional result then taxed at the retirement rate.

Held equal that way, the two tie exactly when the rate in retirement equals the rate today, and the break-even rate the tool reports is simply today's rate. A second framing puts the full contribution into either account: the Roth then ends larger after tax, because the plan limit is the same for both and the Roth shelters after-tax dollars, but it costs the saver more take-home in the year, by the tax the traditional saver defers. The tool states that cost and does not invest it; a taxable side account at the return less a drag would narrow the gap without closing it.

Methodology.

1. Inputs. The yearly contribution before tax, capped at the plan's elective deferral limit from the annual record; the marginal rate today; the rate expected on withdrawals; the years; and one return for both accounts.
2. Equal take-home cost. Traditional: the contribution times the growth factor, times one less the retirement rate. Roth: the contribution times one less today's rate, times the growth factor. The difference is the Roth less the traditional, and the break-even retirement rate is today's rate.
3. Equal contribution. The full contribution into either: the Roth result untaxed, the traditional result as above, and the tax the traditional saver keeps in take-home in the year, stated and not invested.
4. Validation. The identity that equal rates tie; a lower retirement rate where the traditional leads by the grown contribution times the rate gap; a no-growth case; and the cap at the plan limit. A transcription error fails the build.
5. Not modeled. Employer matching (pre-tax on either election), state tax differences between now and retirement, the taxable investment of the deferred tax, the income-based Roth catch-up rule for high earners, required minimum distributions, and changes in the law. Hypothetical throughout. Educational, not advice.

Revision history.

The assumption tools' history.

September 7, 2026

Added should you buy points (the bought-down loan against the plain one on the same principal and term, so the position is the interest saved less the cost of the points; true break-even as the first month at or above zero beside the simple rule; the horizon verdict; the return the points earn to the horizon as the monthly-compounded rate at which their cost equals the present value of the saving plus the lower balance owed, by bisection; the largest points count that pays off within the horizon; and the seller-paid case set against the same dollars off the price).

September 7, 2026

Added two mortgage assumption tools: refinance break-even (the simple rule, closing costs over the monthly saving, beside the month-by-month count of interest paid on each loan, where total cost is the balance plus the closing costs plus the interest so far, so the new loan's position is the interest saved less the costs; the reset-the-clock effect flagged when a longer term catches up), and 15-year or 30-year mortgage (the same cash on both paths, the 15-year payment invested after the loan is gone against the difference invested for thirty years, compared at year 15, year 30, and a chosen horizon, with the break-even return by bisection).

September 7, 2026

Added three assumption tools: Roth or traditional 401(k) (the same take-home cost grown at one return and taxed at each end, so the answer turns on the two rates; the plan limit from the annual record), pay off the mortgage or invest (two month-by-month paths, the extra to the mortgage and then the freed payment invested, against the extra invested throughout, with the optional interest deduction), and how much life insurance (the present value of the income to replace as a growing annuity, plus debts, final expenses, and education, less existing coverage and savings, beside the ten-times-income rule).

September 6, 2026

Added two assumption tools: sell or keep the house (carrying costs and appreciation against rent and the return on freed equity, with the home-sale exclusion), and the long-term care cost projection (today's rate at care inflation to the start year, summed over the years of care, with the set-aside today).

September 4, 2026

First release of the longevity projection (year-by-year, spending and outside income indexed to inflation, a fixed return on the remainder, with the sustainable-spending solver) and the pension-versus-lump-sum comparison (the lump sum invested and paying the pension, with the break-even return solver).

Canonical address: https://consideratecapital.com/tools/roth-or-traditional-401k