Roth vs Traditional 401(k) Break-Even Tool

The tool assumes you contribute the same tax-adjusted, pre-tax-equivalent dollars to either account: Traditional pays taxes later, Roth pays taxes now. It grows the Traditional contribution to retirement using a real return assumption, then taxes it at your assumed retirement marginal rate. For Roth, it treats retirement withdrawals as tax-free and taxes the “funding taxes” today at your current marginal rate, then solves for the retirement rate that makes both tax totals equal.

A higher real return increases the value of tax deferral, which can shift the break-even retirement rate in favor of Traditional. If your current marginal tax rate is high relative to what you expect in retirement, the break-even moves so Roth is more likely to win. Because the calculator uses a single constant “marginal rate” in both places, it won’t capture progressive bracket effects, deductions, or credits.

If your current marginal tax rate is 0%, the calculator implies there’s little/no tax cost to choosing Roth versus Traditional (Roth tends to look better or near-equal). With a 0-year horizon, compounding is essentially none, so the tool is mainly comparing taxes today vs taxes assumed at retirement—useful as a quick sanity check. If the real return assumption is set very low or negative (but above -100%), results can swing sharply because compounding changes how much Traditional’s deferred taxes end up applying later.

This is a marginal-rate, constant-assumption model: it ignores progressive tax brackets, employer match differences, Roth conversion strategies, and changes in tax law. It also assumes Roth withdrawals are qualified/tax-free and that both options earn the same net investment return. Use it as a decision-support estimate, not as a promise of actual tax outcomes.