Roth vs traditional

How this Roth vs traditional compare is built

Traditional and Roth use the same contribution slot with different tax timing. A fair compare does not put equal dollar deposits in both accounts. Roth deposits are after-tax; traditional deposits are pre-tax. This page uses the same pre-tax paycheck dollars.

• Traditional: invest the full pre-tax amount; pay tax at the future rate on withdrawals.
• Roth: pay tax now at the current rate; invest what remains; qualified withdrawals are tax-free in this model.

The rule that falls out

Roth wins when you expect a higher tax rate in retirement than today. Traditional wins when you expect a lower rate later. If the two rates match, the after-tax nest eggs match here (before state tax, NIIT, RMDs, and Roth conversion brackets, which are omitted).

Equal account deposits would make Roth look better because you paid tax outside the account. That is an accounting trick, not a conclusion.

Worked sketch

$10,000 of pre-tax pay, 24% current rate, 24% future rate, same return: traditional invests $10,000; Roth invests $7,600. After growth, taxing the traditional account at 24% lands in the same after-tax place as the Roth pile. Raise the future rate to 32% and Roth wins; drop it to 12% and traditional wins.

Set deferral size in the 401(k) & IRA calculator, then compare timing here. Limits: This year — retirement. Guide: Roth vs traditional — same paycheck dollars.