Pre-Tax vs Roth 401(k)

• Side-by-side pre-tax vs Roth terminal value comparison
• Real vs nominal dollar comparison to account for inflation
• Retirement tax bracket modeling
• The tool applies current-year contribution limits
• Employer match modeling, including a second match tier and annual-additions caps

• Configured strategy path: employee deferrals follow the traditional allocation percentage. The tool invests current-year pretax savings in a taxable brokerage sidecar.
• Roth path: employee deferrals go to a Roth 401(k), with tax-free qualified withdrawals in retirement.
• Retirement taxes: progressive mode applies federal ordinary brackets, Social Security benefit taxation, long-term capital-gains brackets with NIIT, optional resident-state tax, and traditional-account RMDs.

• Employee deferral limit: $24,500 for 2026. Past years use the historical limits from 2001–2025. In real-dollar mode, future years beyond 2026 hold the 2026 limit. In nominal mode, the tool projects the limit forward with the configured inflation rate, rounded to the nearest $500.
• Age-50 catch-up: $8,000 for 2026. Available when the participant is age 50 or older at year end. Historical values from 2002–2025 apply to past years.
• SECURE 2.0 age-60-to-63 catch-up: $11,250 for 2025–2026. Replaces the standard age-50 catch-up when the participant is age 60, 61, 62, or 63 at year end.
• High-earner Roth catch-up rule: beginning in 2026, the tool models catch-up deferrals as Roth when two conditions hold. Prior-year FICA wages from the plan sponsor exceed the IRS threshold ($150,000 for 2026), and the rule applies to the plan.
• Section 415(c) annual additions: $72,000 for 2026. Caps total employer plus employee contributions (excluding catch-up) per year. The tool reduces the employer match when this limit binds.
• Fixed annual contribution mode: applies a constant requested amount each year, capped to the applicable deferral limit including catch-up eligibility.
• Working career mode: uses the projected IRS deferral limit for each year and age, so contributions follow the maximum allowable schedule.

• Progressive brackets: 2026 federal ordinary income brackets, inflation-adjusted for each retirement year using the configured inflation rate.
• Standard deduction: applied before computing federal ordinary tax. The 2026 base amount is inflation-adjusted for each year.
• Social Security taxation: the federal provisional-income formula determines the taxable fraction (0%, up to 50%, or up to 85%) of benefits. The tool treats Married Filing Separately as 85% taxable.
• Capital-gains taxes: the tool applies federal long-term capital-gains rates to sidecar brokerage liquidations, bracket-stacked on top of ordinary income. NIIT (3.8%) applies above the filing-status threshold.
• Required minimum distributions: traditional 401(k) balances are subject to RMDs using the IRS Uniform Lifetime Table (Pub. 590-B, Table III). Birth year sets the RMD start age: age 75 for birth years 1960+, 73 for 1951–1959, 72 for 1949–1950. The tool reinvests surplus RMD withdrawals beyond the spending target in the taxable brokerage.
• Flat-rate mode: applies a single user-chosen tax rate to all traditional withdrawals instead of progressive brackets. Flat-rate mode excludes Social Security and other retirement income.

By default the tool runs in real (inflation-adjusted) dollars: the annual return represents a real return and contribution limits hold constant at their 2026 values. In nominal mode, the tool projects future contribution limits, tax brackets, and standard deductions forward from 2026 base values. It uses the configured inflation rate and rounds limits to the nearest $500. The annual return in nominal mode should include expected inflation.

• The tool models employer match as always-pretax dollars added to both paths. Match dollars in the Roth path are subject to RMDs and ordinary income tax during retirement.
• The traditional allocation percentage supports blended traditional/Roth allocations. The comparison always measures the configured strategy against a 100% Roth baseline.
• State tax uses exact modeled state schedules for 1998-2026 and projects later years by inflation-scaling the 2026 schedule. Modeled exclusions include full Social Security exemptions and broad retirement-income exemptions in IL, IA at 55+, MS at 59.5+, and PA at 59.5+. They also include selected capped retirement deductions in CO, KY, and SC.
• State tax filing status uses exact schedules where published and exact shared-schedule aliases where a state groups statuses under a common schedule.
• Projected years are estimates, not published future state tables. The tool approximates partial AGI phaseouts, spouse caps, military exclusions, and narrower pension rules. It does not model them separately.

• Current marginal tax rate: used to value the immediate tax savings from traditional deferrals.
• Retirement start age: used to determine catch-up eligibility during accumulation and RMD timing in retirement.
• Other retirement income: ordinary income such as pensions or IRA withdrawals.
• Social Security benefits: annual gross benefits. The engine applies the federal taxable-benefit formula in progressive mode.
• Resident state: optional state-income-tax proxy for retirement withdrawals.
• Traditional allocation percentage: fraction of employee deferrals directed to pretax. The remainder goes to Roth within the same scenario.
• Employer match rate, match limit, and salary: used to compute employer match dollars added as pretax to both paths.
• Additional match tier: optional second band for common formulas like 100% on the first 3% of pay and 50% on the next 2%.
• Prior-year sponsor FICA wages: used only for the high-earner Roth catch-up rule. The engine does not substitute current salary for this value.

• The main chart shows after-tax remaining wealth. The chart discounts traditional balances for estimated taxes instead of comparing them raw against Roth balances.
• Configured strategy total value is cumulative retirement spending plus the estimated after-tax value of the remaining configured strategy portfolio.
• Configured strategy advantage equals configured strategy total value minus Roth total value. Positive values favor the configured strategy.
• The advantage curve sweeps only other retirement income. Allocation mix, employer match, state treatment, Social Security, and spending assumptions remain fixed.

Traditional tends to benefit when the current marginal tax rate is materially above the retirement tax rate applied to withdrawals. Roth tends to benefit when retirement ordinary income, taxable Social Security, RMDs, or state taxes keep the retirement tax burden high.