Traditional vs. Roth 401(k): when do you pay the tax?

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.

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.

Check the traditional vs roth 401k inputs before acting

traditional vs roth 401k record 1. In record 1, keep Employee contribution at $1,000 beside Illustrative current rate at 22%. At check 1, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated employee contribution and illustrative current rate.

traditional vs roth 401k record 2. In record 2, keep Illustrative current rate at 22% beside Traditional current taxable reduction at $1,000. At check 2, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated illustrative current rate and traditional current taxable reduction.

traditional vs roth 401k record 3. In record 3, keep Traditional current taxable reduction at $1,000 beside Illustrative current tax timing at $220. At check 3, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated traditional current taxable reduction and illustrative current tax timing.

traditional vs roth 401k record 4. In record 4, keep Illustrative current tax timing at $220 beside Roth current taxable reduction at $0. At check 4, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated illustrative current tax timing and roth current taxable reduction.

traditional vs roth 401k record 5. In record 5, keep Roth current taxable reduction at $0 beside Employee contribution at $1,000. At check 5, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated roth current taxable reduction and employee contribution.

traditional vs roth 401k record 6. In record 6, keep Employee contribution at $1,000 beside Illustrative current rate at 22%. At check 6, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated employee contribution and illustrative current rate.

traditional vs roth 401k record 7. In record 7, keep Illustrative current rate at 22% beside Traditional current taxable reduction at $1,000. At check 7, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated illustrative current rate and traditional current taxable reduction.

traditional vs roth 401k record 8. In record 8, keep Traditional current taxable reduction at $1,000 beside Illustrative current tax timing at $220. At check 8, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated traditional current taxable reduction and illustrative current tax timing.

traditional vs roth 401k record 9. In record 9, keep Illustrative current tax timing at $220 beside Roth current taxable reduction at $0. At check 9, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated illustrative current tax timing and roth current taxable reduction.

traditional vs roth 401k record 10. In record 10, keep Roth current taxable reduction at $0 beside Employee contribution at $1,000. At check 10, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated roth current taxable reduction and employee contribution.

traditional vs roth 401k record 11. In record 11, keep Employee contribution at $1,000 beside Illustrative current rate at 22%. At check 11, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated employee contribution and illustrative current rate.

traditional vs roth 401k record 12. In record 12, keep Illustrative current rate at 22% beside Traditional current taxable reduction at $1,000. At check 12, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated illustrative current rate and traditional current taxable reduction.

traditional vs roth 401k record 13. In record 13, keep Traditional current taxable reduction at $1,000 beside Illustrative current tax timing at $220. At check 13, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated traditional current taxable reduction and illustrative current tax timing.

traditional vs roth 401k record 14. In record 14, keep Illustrative current tax timing at $220 beside Roth current taxable reduction at $0. At check 14, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated illustrative current tax timing and roth current taxable reduction.

traditional vs roth 401k record 15. In record 15, keep Roth current taxable reduction at $0 beside Employee contribution at $1,000. At check 15, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated roth current taxable reduction and employee contribution.

traditional vs roth 401k record 16. In record 16, keep Employee contribution at $1,000 beside Illustrative current rate at 22%. At check 16, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated employee contribution and illustrative current rate.

traditional vs roth 401k record 17. In record 17, keep Illustrative current rate at 22% beside Traditional current taxable reduction at $1,000. At check 17, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated illustrative current rate and traditional current taxable reduction.

traditional vs roth 401k record 18. In record 18, keep Traditional current taxable reduction at $1,000 beside Illustrative current tax timing at $220. At check 18, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated traditional current taxable reduction and illustrative current tax timing.

traditional vs roth 401k record 19. In record 19, keep Illustrative current tax timing at $220 beside Roth current taxable reduction at $0. At check 19, the worksheet tests this pair before changing another assumption, so the observed difference remains attributable to the stated illustrative current tax timing and roth current taxable reduction.

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

State income taxes, future income, plan distributions, conversions, employer match treatment, and individual tax returns are outside this illustration. Recalculate the traditional vs roth 401k case when its listed input changes.