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This calculator compares the results of contributing to a regular 401(k) versus a Roth 401(k) (a designated Roth account).
Example
A taxpayer is offered an opportunity to contribute to a Roth 401(k) at his current employer. What tax savings are available?
| Field | Input |
|---|---|
| Monthly gross pay | $7,200 |
| Employee contribution rate | 14.00% |
| Employer match rate | 4.00% |
| Federal tax rate | 25.0% |
| State tax rate | 4.00% |
| State tax deducted on federal return? | Yes |
| Years of contributions | 26 |
| Annual rate of return | 8.00% |
| Combined tax rate during retirement | 25.00% |
| Years of retirement | 30 |
| Annual rate of return during retirement | 4.00% |
In this example, the results show that the individual would have a combined total of $1,553,944 if they contributed to a 401(k) and taxable account at retirement. If the individual contributed to a Roth 401(k) they would have a combined total of $1,350,964 at retirement. During retirement they would have a higher combined after-tax monthly income of $6,091 from the Roth 401(k) versus $5,706 from the Regular 401(k).
Footnotes
- The tax savings related to making a pre-tax contribution to a regular 401(k) is assumed to be invested in a taxable account.
- An employer match to a Roth 401(k) contribution must be contributed to a regular 401(k) account.
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