Should I do Roth or Traditional 401(k) contributions?

It comes down to one comparison: your marginal tax rate now versus in retirement. Pay 22% now and 12% later and Traditional wins -- worked example: $15,000 a year for 33 years at 7% ends at about $109,106 spendable in Roth versus $123,094 in Traditional, a $13,988 edge for Traditional. Expect your retirement rate to be higher than today's and Roth takes it. Same rate both times and the two tie exactly.

When do Roth and Traditional deliver the same result?

When your marginal tax rate is identical now and in retirement, the two are mathematically tied. The growth factor cancels out: Roth multiplies after-tax dollars by the growth and pays nothing later; Traditional multiplies pre-tax dollars by the growth and takes the same percentage off at the end. At a 22% rate both ways, $15,000 a year for 33 years at 7% leaves $109,106 spendable on either side.

Do I use my marginal or effective tax rate for the Roth vs Traditional decision?

Use the marginal rate -- the tax on your next dollar, not your average across all dollars. The contribution replaces (or adds to) your top dollars of income, so the correct comparison is what those dollars would be taxed at. Most workers comparing 401(k) contributions use the bracket their salary's top dollar sits in today and their best guess of their top bracket in retirement.

Where does my employer match go in a Roth 401(k)?

The employer match always goes in pre-tax, even if your contributions are Roth -- the law requires it. So a 3% match on $15,000 a year grows like Traditional money and gets taxed on the way out. At 7% over 33 years, that match is worth about $3,693 in after-tax spending power at a 12% retirement rate.

Should young earners choose Roth?

Often yes, and the math explains why: early in a career you are usually at the lowest tax rate you will ever see, and decades of growth amplify the payoff. Worked example: $7,000 a year at a 12% rate today versus 28% in retirement, 8% returns over 40 years, ends at $133,823 tax-free in Roth versus $109,492 spendable in Traditional -- a $24,331 win for Roth.

Entry № 22 · logged Oct 10, 2026Free, no sign-upMoney · Retirement

Should you pay the tax now or later?

Roth means the tax bill comes today and retirement is free; Traditional means the deduction comes today and retirement pays the bill. Post the numbers and this choice slip prices both paths dollar for dollar — the answer is one rate comparison.

Prefilled at $15,000 a year for 33 years at 7%, a 22% rate now versus 12% in retirement: $109,106 tax-free in Roth against $123,094 spendable in Traditional — Traditional wins by $13,988.

The retirement-account choice, Form RV-22. Post what you can put in each year, the tax rate on those dollars today, the rate you expect on them in retirement, and how long they grow. The slip posts Roth on the left, Traditional on the right, and stamps the winner.

The money

Yearly contribution (pre-tax dollars) Before tax. For 2026 the employee deferral limit is $24,500 (under 50); Roth IRA limits are separate. Expected annual return (%)

Your age now Retirement age

Employer match (% of your contribution) Match dollars are nearly always pre-tax — even in a Roth 401(k) — and are taxed on the way out.

The tax rates

Your tax rate today (marginal)

22%

The rate on your top dollars of income — the bracket your last dollar sits in — not your average across all dollars.

Your expected tax rate in retirement (marginal)

12%

Your best guess of the bracket your retirement withdrawals land in. Lower income, no mortgage, no salary — often lower than today’s.

The winner’s edge, in spendable dollars $13,988 Traditional ends $13,988 ahead after tax · the tie rule: equal rates means a dead tie

Roth

Pay the tax now. Retirement takes nothing.

Goes inafter today’s tax$11,700
Tax paid today$3,300
Grows to$109,106
Tax in retirement$0
Spendable$109,106

Traditional

Take the deduction now. Retirement takes its cut.

Goes inbefore today’s tax$15,000
Tax saved today$3,300
Grows to$139,880
Tax in retirementat 12%$16,786
Spendable$123,094

Employer match: $450 a year from the match grows to about $3,693 in after-tax spending power — it arrives pre-tax in nearly every plan and is taxed at your retirement rate.

The tie rule: If your rate is the same today and in retirement, Roth and Traditional are mathematically identical — the growth factor cancels out and both leave you exactly $109,106 to spend.

TRADITIONAL At 22% today versus 12% in retirement, the deduction wins: paying the lower rate on the withdrawal beats paying the higher rate now. Flip the rates and the stamp flips too.

Figures are estimates for illustration only — not tax or financial advice. Uses flat marginal rates and one assumed return; real brackets move, and your state taxes are not included. The 2026 employee deferral limit is $24,500 (under 50); contribution limits for IRAs are separate.

Posted at the bottom of the sheet

Should I do Roth or Traditional 401(k) contributions?: It comes down to one comparison: your marginal tax rate now versus in retirement. Pay 22% now and 12% later and Traditional wins — worked example: $15,000 a year for 33 years at 7% ends at about $109,106 spendable in Roth versus $123,094 in Traditional, a $13,988 edge for Traditional. Expect your retirement rate to be higher than today’s and Roth takes it. Same rate both times and the two tie exactly.
When do Roth and Traditional deliver the same result?: When your marginal tax rate is identical now and in retirement, the two are mathematically tied. The growth factor cancels out: Roth multiplies after-tax dollars by the growth and pays nothing later; Traditional multiplies pre-tax dollars by the growth and takes the same percentage off at the end. At a 22% rate both ways, $15,000 a year for 33 years at 7% leaves $109,106 spendable on either side.
Do I use my marginal or effective tax rate for this decision?: Use the marginal rate — the tax on your next dollar, not your average across all dollars. The contribution replaces (or adds to) your top dollars of income, so the right comparison is what those dollars would be taxed at. Most workers use the bracket their salary’s top dollar sits in today and their best guess of their top bracket in retirement.
Where does my employer match go in a Roth 401(k)?: Employer matching contributions are nearly always pre-tax, even when your contributions are Roth. So a 3% match on $15,000 a year grows like Traditional money and gets taxed on the way out. At 7% over 33 years, that match is worth about $3,693 in after-tax spending power at a 12% retirement rate.
Should young earners choose Roth?: Often yes, and the math explains why: early in a career you are usually at the lowest tax rate you will ever see, and decades of growth amplify the payoff. Worked example: $7,000 a year at a 12% rate today versus 28% in retirement, 8% returns over 40 years, ends at $133,823 tax-free in Roth versus $109,492 spendable in Traditional — a $24,331 win for Roth.

Should you pay the tax now or later?

Roth

Traditional

Posted at the bottom of the sheet

Filed under retirement taxes