Roth IRA vs 401(k)

Roth IRA vs 401(k): which wins for you?

The answer depends on three numbers — current tax bracket, retirement bracket, and time.

The Roth-vs-401(k) debate has a clean answer: whichever has the lower tax rate at the moment of contribution OR withdrawal wins. Below, type your numbers and we'll show you the end balance net of tax for each — using the same pre-tax cash going in.

Head-to-head calculator

Four inputs. We'll compute end-of-retirement balance net of tax for each, assuming the same gross pre-tax dollars contributed.

Annual gross pre-tax contribution

Same starting dollars going into each. We'll handle the tax math.

Your current marginal tax bracket

Federal only for this calculator. Most owners are 22-37%.

Expected retirement marginal tax bracket

A guess. Most retirees land 10-24% depending on income. If you don't know: assume 22%.

Years until retirement

yrs

Expected annual return (nominal %)

Long-run public equity averages 7-10% nominal.

Source: Cornell LII — 26 U.S.C. §408A (Roth IRAs) · Cornell LII — 26 U.S.C. §401(k) · IRS — Roth Comparison Chart

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The simple decision rule

Strip away the noise and there are exactly three drivers:

Your tax rate today — what you save by deferring (Traditional 401(k)) or what you pay to lock in (Roth).
Your tax rate at withdrawal — what you pay later (Traditional) or what you don't (Roth).
Time — the compounding period that magnifies whichever side you're on.

The single rule: Whichever rate is LOWER (today vs retirement) decides which to use. Current rate low → Roth (pay tax now). Current rate high → Traditional (defer to lower retirement rate). For most owners 30-50: current is higher than retirement, so Traditional wins.

When Roth almost always wins

Young earners (20s-30s) in the 12-22% bracket. Low current rate; high future earnings ahead.
Anyone expecting higher future tax rates. Political risk: rates may rise; locking in today is insurance.
People who will have large RMDs. Roth has no RMDs; Traditional forces taxable income at 73+.
Estate planning — Roth balances pass tax-free to heirs; Traditional forces 10-year drain with full taxation.
Anyone with high state tax now planning to retire in a no-tax state. Roth pays the state tax now; you avoid it later when income would otherwise be taxed.

When Traditional 401(k) wins

High current bracket (32%+) with much lower retirement bracket. Owner or executive earning $400K+ planning to retire and live on $80-150K.
You need the deduction this year. The Traditional deduction reduces AGI, which can reduce phase-outs (QBI, ACA subsidies, IRMAA).
Employer match. Always capture the full match first — that's a 50-100% guaranteed return, independent of Roth vs Traditional.
You'll convert in retirement. The Roth Conversion Ladder strategy: defer with Traditional now, convert during the low-bracket window between retirement and RMD start.

The "both" strategy

Most high earners (32%+ bracket) should do BOTH: max the Traditional 401(k) for the deduction + employer match, AND fund a Roth IRA via the Backdoor Roth ($7K/yr for 2026). This diversifies tax exposure and creates flexibility in retirement to control AGI year-by-year.

Differences beyond the tax math

Feature	Traditional 401(k)	Roth IRA
2026 contribution limit	$23,500 (+$7,500 catch-up at 50+)	$7,000 (+$1,000 catch-up at 50+)
Income limit to contribute	None	$153K single / $228K MFJ phase-out
Tax on contribution	Deductible (pre-tax)	Post-tax (already paid)
Tax on growth	Tax-deferred	Tax-free
Tax on withdrawal	Ordinary income	Tax-free (if 59½+ and 5-yr rule met)
Required Minimum Distributions	Yes, starting at 73	None
Early-withdrawal access to contributions	Penalty + tax	Contributions any time, tax/penalty-free
Loans	Up to 50% of balance / $50K	None
Employer match	Common (50-100% on first 3-6%)	None — separate from employer plan
Investment options	Employer-chosen menu	Any brokerage allows full flexibility
Beneficiary treatment	10-year drain rule for non-spouse heirs	Same 10-year rule but tax-free distributions

Common questions

What about Roth 401(k)?

Roth 401(k) combines the best of both: post-tax in (like Roth IRA), but $23,500 contribution limit (like Traditional 401(k)) and employer match. Drawback: employer match still goes into pre-tax bucket (unless your plan allows in-plan Roth conversions of the match — increasingly common). For high earners, Roth 401(k) is often better than Traditional 401(k) IF you expect higher retirement rates.

I make too much for direct Roth IRA. What do I do?

The Backdoor Roth: contribute $7,000 non-deductible to a Traditional IRA, then convert to Roth IRA the next day. Works at any income level. Watch the pro-rata rule: if you have existing Traditional IRA balances, the conversion is partially taxable. Clean workaround: roll existing Traditional IRA into a 401(k) first.

I'm self-employed. Solo 401(k) or Roth IRA?

BOTH. Solo 401(k) has up to $70,000 contribution capacity (2026) — much higher than Roth IRA's $7,000. Max Solo 401(k) (Traditional + Roth split as you prefer) AND fund a Roth IRA for an extra $7,000 of tax-free space. See the Solo 401(k) calculator.

What's the Roth Conversion Ladder?

In retirement (after wage income stops, before Social Security + RMDs at 73), there's a low-bracket window — often 5-10 years. During this window, convert Traditional 401(k)/IRA dollars to Roth at lower tax rates. Pay 12-22% now instead of 24-32% later. For pre-retirees with large Traditional balances, this saves $100K-$500K of lifetime tax.

What about the Mega Backdoor Roth?

If your 401(k) allows after-tax (non-Roth) contributions PLUS in-service distributions or in-plan Roth conversions, you can sneak up to ~$46,500 additional Roth contributions per year (2026: $70K total 401(k) limit − $23,500 employee deferral − employer match = remaining space for after-tax → Roth). Specialty Solo 401(k) plans support this; Fidelity/Schwab/Vanguard standard plans don't.

Does Roth or Traditional do better for estate planning?

Roth wins. Non-spouse heirs must drain inherited retirement accounts within 10 years. Inherited Traditional = 10 years of forced taxable income (often at heir's peak earning years). Inherited Roth = 10 years of tax-free distributions. For high-net-worth households, Roth dominance compounds in legacy math.

I have access to a Trump IRA when it launches — is it Roth or Traditional?

TrumpIRA platform offers both Roth and Traditional IRAs (you choose). The Federal Saver's Match applies to either. For most lower-income workers eligible for the match (under ~$70K MFJ), Roth is the better choice — current rates are low, future rates likely higher. See the TrumpIRA guide.

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About Good Deals

Good Deals is the planning workbook + advisory practice of Andrew Escher, CFA Charterholder + Investment Adviser Representative based in Austin, TX. Independent stack: Altruist for investment custody, BackNine for insurance placement, Good Deals for the planning layer that ties them together.