Traditional 401(k) elective deferrals are generally made before current federal income tax, while designated Roth 401(k) deferrals are currently included in gross income and may be tax-free when distributed if the qualified-distribution rules are met. A $1,000 contribution changes current taxable-pay timing, not the investment selected or the employer's written match formula.
What traditional vs roth 401k means
A traditional 401(k) uses pre-tax employee deferrals; a designated Roth 401(k) uses after-tax employee deferrals inside an employer plan. This is a tax-timing choice inside a workplace plan; Roth IRA versus traditional IRA includes individual-account eligibility and deduction questions.
| Employee contribution | $1,000 |
|---|---|
| Illustrative current rate | 22% |
| Traditional current taxable reduction | $1,000 |
| Illustrative current tax timing | $220 |
| Roth current taxable reduction | $0 |
Traditional vs. Roth 401(k): when do you pay the tax?: worked numbers
Assume $1,000 is contributed and the worker's illustrative current marginal federal rate is 22%. A traditional contribution can reduce current federal taxable income by $1,000, a $220 timing difference before other payroll effects. A Roth contribution leaves that $1,000 currently taxable. Future tax outcomes depend on rules and future facts, not the 22% example alone.
How to calculate traditional vs roth 401k
Compare the same contribution amount, current tax treatment, future qualified-distribution conditions, plan investment menu, and match rules. The IRS states the employee elective-deferral limit is shared across designated Roth and pre-tax 401(k) deferrals.
Use related Calculatort tools when the inputs are known: 401(k) contribution model; retirement projection; gross-to-net pay tool.
Common mistakes
Do not assume Roth means tax-free in every withdrawal, treat a payroll withholding estimate as a final tax calculation, or add two separate employee limits for Roth and traditional deferrals.
Where the calculation stops
State income taxes, future income, plan distributions, conversions, employer match treatment, and individual tax returns are outside this illustration.
traditional vs roth 401k: source and verification
The IRS states that designated Roth contributions are currently includible in gross income and may be tax-free when distributed if requirements are met. Read the named source. This source names the transaction-specific employee contribution and the conditions that qualify it.
Use the result as a dated scenario
Recalculate the traditional vs roth 401k case when its listed input changes.