Estimate your potential retirement savings and tax implications for each plan.
Comparison Results
Traditional 401(k) Projected Balance: $0.00
Estimated Taxes Paid Upon Withdrawal (Traditional): $0.00
Roth 401(k) Projected Balance: $0.00
Estimated Taxes Paid Upon Withdrawal (Roth): $0.00
Potential Tax Savings Advantage (Roth vs. Traditional): $0.00
This calculator provides an estimation and does not constitute financial advice. Actual results may vary.
Understanding Roth 401(k) vs. Traditional 401(k)
Choosing between a Roth 401(k) and a Traditional 401(k) is a critical decision for long-term financial planning. Both offer tax-advantaged ways to save for retirement, but they differ significantly in how and when your contributions and withdrawals are taxed. This calculator helps you visualize the potential impact of these differences based on your personal financial projections.
Traditional 401(k) Explained
With a Traditional 401(k), your contributions are made on a pre-tax basis. This means the money you contribute is deducted from your taxable income in the current year, reducing your immediate tax bill. Your investments grow tax-deferred, meaning you don't pay taxes on the earnings each year. However, when you withdraw the money in retirement, both your contributions and earnings are taxed as ordinary income.
Key Feature: Tax break now, pay taxes later.
Roth 401(k) Explained
A Roth 401(k) works in the opposite way. Your contributions are made with after-tax dollars. This means you don't get an upfront tax deduction in the current year. However, your investments grow tax-free, and qualified withdrawals in retirement (typically after age 59½ and after the account has been open for at least five years) are completely tax-free. This includes both your contributions and all the earnings.
This calculator estimates the future value of your 401(k) contributions for both Roth and Traditional plans. It then compares the estimated taxes you'll pay upon withdrawal to help you understand which might be more beneficial:
Annual Contribution: Calculated as Current Income * Contribution Percentage.
Future Value Calculation: We use the compound interest formula: FV = P * (1 + r)^n, where:
FV is the Future Value
P is the total annual contribution (after-tax for Roth, pre-tax for Traditional in terms of taxable income impact)
r is the expected annual investment return rate (as a decimal)
n is the number of years until retirement
This is applied to the annual contributions over the years to grow the total balance.
Traditional 401(k) Tax Impact: The entire projected balance in retirement is assumed to be taxed at your expected retirement tax rate. The tax amount is calculated as Traditional Projected Balance * (Retirement Tax Rate / 100).
Roth 401(k) Tax Impact: Qualified withdrawals are tax-free. Thus, the estimated taxes paid upon withdrawal is $0.00.
Tax Savings Advantage: This is the difference between the taxes paid on the Traditional 401(k) withdrawal and the taxes paid on the Roth 401(k) withdrawal. Total Taxes (Traditional) – Total Taxes (Roth). A positive number here indicates the Roth plan might offer a tax advantage at withdrawal.
Which is Right for You?
The best choice often depends on your current financial situation and your expectations for the future:
Choose Traditional 401(k) if:
You expect to be in a lower tax bracket in retirement than you are now.
You want the immediate tax deduction to lower your current tax liability.
You need to reduce your current taxable income significantly.
Choose Roth 401(k) if:
You expect to be in a higher tax bracket in retirement than you are now.
You prefer the certainty of tax-free income in retirement.
You are younger and have many years for your investments to grow tax-free.
It's also possible to contribute to both if your employer plan allows, allowing you to hedge your bets against future tax rate uncertainties.
Important Note: Contribution limits apply annually to 401(k) plans, and these limits are the same for both Traditional and Roth 401(k) contributions (combined). This calculator assumes you can contribute your desired percentage up to any legal limits.
function calculateSavings() {
var currentIncome = parseFloat(document.getElementById("currentIncome").value);
var contributionPercentage = parseFloat(document.getElementById("contributionPercentage").value);
var yearsToRetirement = parseFloat(document.getElementById("yearsToRetirement").value);
var expectedReturnRate = parseFloat(document.getElementById("expectedReturnRate").value);
var currentTaxRate = parseFloat(document.getElementById("currentTaxRate").value);
var retirementTaxRate = parseFloat(document.getElementById("retirementTaxRate").value);
var resultTraditionalBalance = document.getElementById("resultTraditionalBalance").querySelector('.result-value');
var resultTraditionalTaxesPaid = document.getElementById("resultTraditionalTaxesPaid").querySelector('.result-value');
var resultRothBalance = document.getElementById("resultRothBalance").querySelector('.result-value');
var resultRothTaxesPaid = document.getElementById("resultRothTaxesPaid").querySelector('.result-value');
var resultTaxSavingsAdvantage = document.getElementById("resultTaxSavingsAdvantage").querySelector('.result-value');
// Clear previous results
resultTraditionalBalance.textContent = "$0.00";
resultTraditionalTaxesPaid.textContent = "$0.00";
resultRothBalance.textContent = "$0.00";
resultRothTaxesPaid.textContent = "$0.00";
resultTaxSavingsAdvantage.textContent = "$0.00";
// Input validation
if (isNaN(currentIncome) || isNaN(contributionPercentage) || isNaN(yearsToRetirement) || isNaN(expectedReturnRate) || isNaN(currentTaxRate) || isNaN(retirementTaxRate) ||
currentIncome <= 0 || contributionPercentage 100 || yearsToRetirement <= 0 || expectedReturnRate < 0 || currentTaxRate < 0 || retirementTaxRate < 0) {
alert("Please enter valid positive numbers for all fields. Contribution percentage must be between 0 and 100.");
return;
}
// Calculations
var annualContributionAmount = currentIncome * (contributionPercentage / 100);
var annualReturnRateDecimal = expectedReturnRate / 100;
// Future Value of an Ordinary Annuity formula: FV = P * [((1 + r)^n – 1) / r]
// This assumes contributions are made at the end of each year for simplicity in this model.
// A more complex model would consider monthly contributions and differing tax treatments of the initial contribution.
var traditionalProjectedBalance = 0;
var rothProjectedBalance = 0;
var annualRothContribution = annualContributionAmount; // Roth contributions are after-tax
var annualTraditionalContributionPreTax = annualContributionAmount; // The amount that grows is the same pre-tax value
// Simplified calculation: we assume the 'amount' that grows is the same for both plans,
// and the difference is purely in the tax treatment of withdrawals.
// The key is the *effective* amount invested after considering tax savings from traditional.
// For simplicity, we'll calculate the growth of the gross contribution amount for both.
if (annualReturnRateDecimal === 0) {
traditionalProjectedBalance = annualTraditionalContributionPreTax * yearsToRetirement;
rothProjectedBalance = annualRothContribution * yearsToRetirement;
} else {
traditionalProjectedBalance = annualTraditionalContributionPreTax * (Math.pow(1 + annualReturnRateDecimal, yearsToRetirement) – 1) / annualReturnRateDecimal;
rothProjectedBalance = annualRothContribution * (Math.pow(1 + annualReturnRateDecimal, yearsToRetirement) – 1) / annualReturnRateDecimal;
}
// — Tax Implications —
// Traditional 401(k): Entire withdrawal is taxed as income
var estimatedTaxesPaidTraditional = traditionalProjectedBalance * (retirementTaxRate / 100);
// Roth 401(k): Qualified withdrawals are tax-free
var estimatedTaxesPaidRoth = 0;
// Tax Savings Advantage
var taxSavingsAdvantage = estimatedTaxesPaidTraditional – estimatedTaxesPaidRoth; // Positive means Roth has an advantage (lower total taxes)
// — Formatting Results —
var formatCurrency = function(amount) {
return "$" + amount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
};
resultTraditionalBalance.textContent = formatCurrency(traditionalProjectedBalance);
resultTraditionalTaxesPaid.textContent = formatCurrency(estimatedTaxesPaidTraditional);
resultRothBalance.textContent = formatCurrency(rothProjectedBalance);
resultRothTaxesPaid.textContent = formatCurrency(estimatedTaxesPaidRoth);
resultTaxSavingsAdvantage.textContent = formatCurrency(taxSavingsAdvantage);
}