The Only Difference Is When You Pay Tax
A traditional 401k takes the money out of your paycheck before income tax. You get the deduction now and pay tax on every dollar you withdraw later. A Roth 401k takes it out after tax. You get no deduction now, and qualified withdrawals come out tax-free.
The 2026 limit is $24,500, or $32,500 if you are 50 or older. Roth and traditional share it. A Roth 401k also has no income limit, which a Roth IRA does.
Here is the key fact. If your tax rate is the same on both ends, the two accounts finish with the same after-tax money. The decision is only about which way your rate moves.
The Math at Three Salaries
The model: a single filer, the $16,100 standard deduction and federal tax only. A $10,000 traditional contribution is compared with the Roth contribution that costs the same take-home pay, which is $10,000 minus the tax the deduction would have saved. Both grow 7% a year for 30 years. The traditional balance is withdrawn evenly over 25 years on top of other taxable retirement income.
| Salary | Rate now | Other retirement income | Rate in retirement | Traditional, after tax | Roth | Better |
|---|---|---|---|---|---|---|
| $50,000 | 12% | $30,000 | 12% | $66,988 | $66,988 | Tie |
| $50,000 | 12% | $100,000 | 22% | $59,376 | $66,988 | Roth |
| $100,000 | 22% | $30,000 | 12% | $66,988 | $59,376 | Traditional |
| $100,000 | 22% | $100,000 | 22% | $59,376 | $59,376 | Tie |
| $200,000 | 24% | $30,000 | 12% | $66,988 | $57,853 | Traditional |
| $200,000 | 24% | $100,000 | 22% | $59,376 | $57,853 | Traditional |
Read the $100,000 rows. With $30,000 of other income, the deduction saves tax at 22% and withdrawals are taxed at 12%. Traditional wins by $7,612. With $100,000 of other income, both rates are 22% and the result is a tie.
Now the $50,000 rows. Today's rate is 12%. A retiree with $100,000 of other income withdraws into the 22% bracket, and Roth wins by $7,612.
The $100,000 Example, Step by Step
1. The deduction. A $10,000 traditional contribution cuts taxable income from $83,900 to $73,900. Federal tax falls by $2,200.
2. The matching Roth. To keep take-home pay equal, the Roth contribution is $10,000 minus $2,200, or $7,800. You put less in, because you are not getting the deduction.
3. Growth. At 7% for 30 years, $10,000 grows to $76,123. The $7,800 grows to $59,376, and none of it is taxed.
4. Retirement. Withdrawing the traditional balance over 25 years adds $3,045 a year to $30,000 of other income. Tax on that slice leaves $66,988, which is $7,612 more than the Roth.
The traditional account won because the deduction saved tax at 22% and the withdrawals paid tax at 12%. Swap those two rates and the result flips.
Common Mistakes
Comparing equal contributions. Putting $10,000 in each account makes Roth look better, because the Roth costs you more take-home pay. The fair test holds your take-home pay equal, as the table does.
Using your average rate. The deduction saves tax at your marginal rate, the rate on your last dollar of income. Use the bracket, not the overall percentage.
Ignoring where you live. State income tax adds to both sides. Moving from a high-tax state to a no-tax state in retirement favors traditional. The reverse favors Roth.
What Pushes Your Rate Up or Down
Your rate tends to rise if you are early in your career, expect big raises, or will have a pension, rental income or large required withdrawals. It tends to fall if you are at your peak earnings now and plan a modest retirement.
Two caveats apply. Brackets can change by law, and the current ones are set by Congress. Nobody knows what rates will be in 30 years. That uncertainty is the main reason to split between both accounts.
Rules That Can Tip the Choice
Employer match. Matching contributions have usually gone into the traditional side. Some plans now allow the match as Roth, but the plan has to offer it. Take the full match first either way.
No required withdrawals. Since 2024, Roth 401k balances are no longer subject to required minimum distributions. Traditional balances still are.
The Roth catch-up rule. Starting in 2026, if your prior-year FICA wages were above $150,000, your $8,000 catch-up contribution has to go in as Roth. Your plan must offer a Roth option for this to work.
Qualified withdrawals. Roth earnings come out tax-free once you are 59½ and the account has been open at least 5 years. Check your plan for the exact rule.
A Simple Way to Decide
Find your marginal rate in the Tax Bracket Calculator. If it is 22% or higher and you expect a lower bracket in retirement, lean traditional. If it is 12% or lower and your income is likely to grow, lean Roth. If you sit between those and cannot tell, split the contribution.
The wrong choice is rarely costly compared with the cost of not contributing. Getting the match and saving $24,500 beats any optimizing between the two types.
See how your contribution and employer match grow over time:
401k Calculator →Looking at an IRA instead? See Roth IRA vs Traditional IRA.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal or financial advice. Figures use 2026 federal rules, a simplified single-filer model and an assumed 7% return. Your results depend on your state, income and plan rules. Consult a qualified tax professional.