Which option is best for you?

If your 401(k) or 403(b) retirement plan accepts both traditional and Roth contributions, you have two ways to save for your retirement. Both offer federal income tax advantages.

Traditional accounts provide a tax break now. Traditional 401(k)/403(b) contributions are not taxed at the time of investment. Instead, taxes are paid on withdrawals, including any earnings. Getting a tax break at the time of investment will leave more money in your pocket now — money that you can invest, save or spend.

Roth accounts provide a tax advantage later. Roth 401(k)/403(b) contributions are made with money that’s already been taxed, so you won’t have to pay taxes on qualified withdrawals, including earnings.

Enter your personal information to compare the results of traditional before-tax savings and Roth after-tax savings. Click on each question for help and additional information.

Contribution limits

The annual IRS contribution limit is $23,000 for 2024 ($30,500 for investors 50 and older).

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Withdrawing money soon? Go traditional

Roth accounts must be at least five years old before tax-free withdrawals can be taken. Traditional accounts don’t have a holding requirement.

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Federal Tax Bracket

Not sure what your client’s tax bracket is? Refer to our tax table.

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Life Expectancy

You may need your retirement savings to last 20 years or more. Look at a life expectancy table.

Enter “1” for a lump-sum distribution.

If you entered “1” for the previous question, your entire account is withdrawn when you retire, so a return in retirement is not applicable.

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Future taxes: the key factor

Are you expecting to be in a lower tax bracket in retirement? Or do you think tax rates overall will be higher?

You can use current tax brackets as a guide, but they may change in the future. Consider how much you’ll withdraw each year when you estimate your tax rate in retirement.

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Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Participants in 401(k) and 403(b) plans that accept both Roth and traditional contributions can contribute either type or a combination of both. With traditional accounts, withdrawals of pretax contributions and earnings are taxable and may be subject to a 10% early withdrawal penalty if taken before age 59-1/2. Qualified distributions from Roth accounts are tax- and penalty-free if the first Roth contribution was made at least five years before, and if the participant is at least 59-1/2 years old, is disabled or has died. For nonqualified distributions from Roth accounts, earnings are taxable and may be subject to a 10% early withdrawal penalty. IRS contribution limits are adjusted for inflation in $500 increments.

Future tax rates may change. The analyzer applies tax rates to all taxable income. When estimating your future tax rate, you should consider whether the amount of taxable distributions might push you into a higher tax bracket.

Regular investing does not ensure a profit or protect against loss. Hypothetical annual rates of return are not intended to reflect actual results; your results may vary based on market conditions. The analyzer compounds earnings monthly and assumes that withdrawals are made at the beginning of the year. The analyzer does not take certain factors into account, including state and local taxes, required minimum distributions and holding periods, early withdrawal penalties, matching contributions, previous retirement plan contributions and IRS withdrawal rules. Be sure to consult with a financial professional or tax adviser to discuss your specific situation.

This analyzer is intended for use in making a rough comparison of Roth and traditional retirement plan accounts. We do not guarantee the accuracy of the results or their relevance to your particular circumstances. Results shown are hypothetical and are not intended to portray actual results. Your results will differ. We encourage you to seek the assistance of your financial professional.