401(k) vs Roth IRA Calculator

401(k) vs Roth IRA Comparison Calculator

Your Information

Rates & Assumptions

About This Calculator

This calculator helps you compare the potential benefits of investing in a Traditional 401(k) versus a Roth IRA based on your personal financial situation. It factors in current and future tax rates, investment returns, and your time horizon to retirement.

Key Differences

Traditional 401(k)

  • Contributions are pre-tax (reduce your current taxable income)
  • Investment growth is tax-deferred
  • Withdrawals in retirement are taxed as ordinary income
  • Often includes employer matching contributions
  • 2025 contribution limit: $22,500 ($30,000 if age 50+)
  • Required Minimum Distributions (RMDs) begin at age 73

Roth IRA

  • Contributions are after-tax (no immediate tax benefit)
  • Investment growth is tax-free
  • Qualified withdrawals in retirement are completely tax-free
  • 2025 contribution limit: $7,000 ($8,000 if age 50+)
  • Income limits may restrict ability to contribute
  • No Required Minimum Distributions (RMDs)
  • More flexibility for early withdrawals of contributions

When Each Option Might Be Better

Traditional 401(k) might be better if:

  • You expect to be in a lower tax bracket during retirement
  • You want to reduce your current taxable income
  • Your employer offers matching contributions
  • You want to contribute more than the Roth IRA limits

Roth IRA might be better if:

  • You expect to be in a higher tax bracket during retirement
  • You want tax-free withdrawals in retirement
  • You want to avoid Required Minimum Distributions
  • You might need access to your contributions before retirement
  • You want to leave tax-free assets to heirs

How to Use This Calculator

  1. Enter your current age and expected retirement age
  2. Input your current annual salary and how much you plan to contribute each year
  3. Estimate your expected annual investment return (7% is a common long-term stock market average)
  4. Enter your current tax rate and what you expect your tax rate to be in retirement
  5. Include your expected annual salary increase
  6. Click "Compare Options" to see the results

Disclaimer: This calculator provides estimates based on the information you provide and makes several assumptions for simplicity. It doesn't account for all possible factors that might affect your retirement savings, such as changes in tax laws, varying contribution amounts over time, or investment performance fluctuations. Consider consulting with a financial advisor for personalized retirement planning advice.