Choosing between a Roth 401(k) and a Traditional 401(k) often comes down to one key question: when do you expect to pay a lower tax rate? Use this calculator to compare the potential future values of each account type based on your contribution amount, time horizon, expected rate of return, and tax rates.
Inputs
Remember, these results are hypothetical and for illustrative purposes only and do not represent the performance of any specific investment.
Results
Once you reach age 73, you must begin taking required minimum distributions from your 401(k) or any other defined contribution plan in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
To qualify for tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a 5-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner's death. Employer matching is pretax and not distributed tax-free during retirement.
The annual rate of returns is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.
If you have questions about your current tax rate or your expected retirement tax rate, you're encouraged to speak with your tax, legal, or accounting professional.
Related Content
Life Insurance Myths: Debunked
Whether you have life insurance through your work or are retired it pays to know the truth about life insurance coverage.
Directors and Officers Liability Insurance
Not only can D&O insurance provide financial protection, but it can help improve an organization’s decision-making.
Your DNA Test
A Detailed Needs Analysis (DNA) can be a simple way to care for loved ones, no matter what the future may hold.