401(k) vs Roth 401(k): We Calculated the 30-Year Difference

Traditional 401(k) or Roth 401(k)? Everyone has an opinion. We ran the actual numbers using our Investment Returns Calculator over 30 years to find the real answer.

The Fundamental Difference

Both have the same contribution limit: $23,000 in 2024 ($30,500 if 50+).

The 30-Year Comparison

Let's compare $500/month invested for 30 years at 7% annual return.

Scenario 1: 22% Tax Bracket Now and in Retirement

Traditional 401(k):

• You invest: $500/month pre-tax
• Portfolio after 30 years: $566,764
• After 22% tax in retirement: $441,876 spendable

Roth 401(k):

• Your $500 is taxed first: $390 actually invested
• Portfolio after 30 years: $442,076
• Tax in retirement: $0
• Spendable: $442,076

Result: Virtually identical. When tax rates are the same, it's a wash.

Model your own investment growth →

Scenario 2: 22% Now, 12% in Retirement (Lower Income Later)

Traditional 401(k):

• Portfolio: $566,764
• After 12% tax: $498,752 spendable

Roth 401(k):

• Portfolio: $442,076
• Tax-free: $442,076 spendable

Traditional wins by $56,676 when you're in a lower tax bracket later.

Scenario 3: 22% Now, 32% in Retirement (Higher Income Later)

Traditional 401(k):

• Portfolio: $566,764
• After 32% tax: $385,400 spendable

Roth 401(k):

• Portfolio: $442,076
• Tax-free: $442,076 spendable

Roth wins by $56,676 when you're in a higher tax bracket later.

The Hidden Roth Advantage

Here's what most comparisons miss: if you max out both accounts, Roth is worth more.

Why?

$23,000 in a Traditional 401(k) is really only worth $17,940 after tax (at 22%).

$23,000 in a Roth 401(k) is worth the full $23,000.

If you can afford to max out:

Roth wins by $480,000 if you max out and can afford the higher effective contribution.

***** The real comparison: Can you afford to put $23,000 of after-tax money into a Roth? If yes, Roth wins. If the tax break helps you invest more, Traditional might be better.

The Decision Framework

Choose Traditional 401(k) if:

1. You're in a high tax bracket now (32%+) and expect lower income in retirement
2. You need the tax break to afford maxing out
3. You'll retire in a low-tax state (Florida, Texas, Nevada, etc.)
4. Your employer match is significant (matches always go Traditional)

Choose Roth 401(k) if:

1. You're early career with lower income now
2. You expect higher income/tax rates in retirement
3. You can afford the higher effective contribution
4. You want tax diversification in retirement
5. Tax rates might rise in the future

Choose Both (Split) if:

1. You're unsure about future tax rates
2. You want flexibility in retirement
3. You're in a middle tax bracket (22-24%)

Tax Diversification: The Underrated Strategy

Having both Traditional and Roth money gives you control in retirement:

Retirement scenario: You need $60,000/year

With a mix, you can manage your taxable income to:

• Stay below Medicare premium thresholds
• Minimize Social Security taxation
• Control your tax bracket year-by-year

The Employer Match Factor

Your employer match ALWAYS goes into a Traditional account (even if you choose Roth). This gives you automatic tax diversification.

Example: 6% match on $100K salary

• Your Roth contribution: $23,000
• Employer Traditional match: $6,000
• Total: $29,000 invested annually

After 30 years at 7%:

• Your Roth: $2,180,000 (tax-free)
• Employer Traditional: $568,000 (taxable)
• Total: $2,748,000

Age-Based Strategy

Here's a common approach:

What About the Roth IRA?

If you have both options:

Optimal strategy (if eligible): Max Roth 401(k) + Backdoor Roth IRA for complete Roth coverage.

The Mega Backdoor Roth

Some 401(k) plans allow after-tax contributions beyond the $23K limit, which can be converted to Roth (up to $66K total).

Check if your plan offers:

• After-tax contributions
• In-plan Roth conversions

This is the ultimate tax-free wealth building strategy.

Calculate Your Scenario

Use our calculators to model your specific situation:

• Investment Returns Calculator - Project 30-year growth
• US Salary Calculator - See take-home with different contributions
• FIRE Calculator - Plan your retirement timeline

Calculate your investment growth →

The Bottom Line

The "right" answer depends on your tax bracket now, expected tax bracket in retirement, and ability to max out contributions.

If you're unsure, split 50/50. Tax diversification is never wrong.

Model your investment growth over time:

<div style="margin: 1.5rem 0; padding: 1.5rem; background: linear-gradient(to right, #f0f9ff, #eff6ff); border: 2px solid #bfdbfe; border-radius: 0.75rem;"> <a href="/us/calculators/investment-returns" style="text-decoration: none; color: inherit; display: block;"> <div style="display: flex; align-items: flex-start; gap: 1rem;"> <span style="font-size: 2.5rem;">📈</span> <div style="flex: 1;"> <h4 style="margin: 0 0 0.5rem 0; font-size: 1.125rem; font-weight: 600; color: #1f2937;"> Investment Returns Calculator → </h4> <p style="margin: 0; font-size: 0.875rem; color: #4b5563;"> Calculate the potential returns on your investments with compound interest </p> </div> </div> </a> </div>

The most important thing? Contributing something—anything—and letting compound interest work for 30 years. Traditional vs Roth is optimization. Contributing at all is survival.