<script async src="https://digital.finance/embed-loader.js"></script> <div data-df-widget="calc" data-id="401k-roth"></div>
Paste this anywhere in your site's HTML. The widget will auto-resize to fit its content — no fixed height needed.
About the 401k vs Roth IRA
Retirement accounts are among the most powerful wealth-building tools available to working Americans, combining the benefits of tax-advantaged growth with compounding over decades. This calculator models your projected account balance at retirement based on your current savings, contribution rate, employer match, expected returns, and time horizon.
How the calculation works
The calculator projects your retirement balance by applying compound growth to your existing savings plus future annual contributions. Each year, your balance grows by the assumed return rate and new contributions are added. Employer matching contributions — typically 50%–100% of your contributions up to 3%–6% of salary — are factored in as additional annual deposits.
Traditional 401(k) vs. Roth IRA: tax treatment
The fundamental difference is when you pay taxes. Traditional 401(k) contributions are pre-tax — they reduce taxable income today but withdrawals in retirement are taxed as ordinary income. Roth contributions are made with after-tax dollars — you pay taxes now, but all qualified withdrawals in retirement are completely tax-free, including decades of investment growth. The Roth advantage is most pronounced when you expect to be in a higher tax bracket in retirement than today.
Contribution limits and employer matching
For 2024, the 401(k) employee contribution limit is $23,000, with an additional $7,500 catch-up contribution allowed for those 50 and older. IRA contribution limits are $7,000 ($8,000 with catch-up). Employer matching is essentially free money — failing to contribute enough to capture the full match is equivalent to leaving part of your compensation on the table.
Investment returns and asset allocation
Historical long-run returns for a diversified equity portfolio have averaged approximately 7%–10% annually before inflation. A common planning assumption is 7% nominal (or 4%–5% real, after inflation). More conservative allocations that include significant bond exposure will produce lower expected returns with lower volatility.
Required minimum distributions and Roth conversions
Traditional 401(k) and IRA accounts require minimum distributions (RMDs) beginning at age 73. These mandatory withdrawals are taxed as income and can push retirees into higher brackets. Roth IRAs have no RMD requirement during the account holder's lifetime, making them useful for estate planning. Converting traditional balances to Roth during low-income years — for example, early retirement before Social Security begins — is a common strategy to reduce future RMDs.
Frequently Asked Questions
Should I prioritise my 401(k) or a Roth IRA?
A general framework: first, contribute to your 401(k) up to the employer match. Second, fund a Roth IRA if your income qualifies (phase-outs begin at $146,000 for single filers in 2024). Third, return to your 401(k) and maximise contributions. This sequence captures free employer money, maximises tax-free growth, and then benefits from the higher 401(k) limit.
What happens to my 401(k) if I change jobs?
You have four options: leave the money in the old plan, roll it into your new employer's 401(k), roll it into an IRA, or cash it out. Cashing out triggers income taxes plus a 10% early withdrawal penalty if you're under 59½ and is almost always the worst choice. Rolling into an IRA gives you the widest investment selection and keeps the money growing tax-deferred.
Can I contribute to both a 401(k) and a Roth IRA in the same year?
Yes. Contributing to a workplace 401(k) does not affect your ability to contribute to a Roth IRA, as long as your income falls within the Roth IRA eligibility limits. If your income is too high for direct Roth contributions (above $161,000 for single filers in 2024), you may still be able to use a backdoor Roth strategy.
How much should I have saved by retirement?
A widely used benchmark is to have 10–12x your final annual salary saved by retirement to support a 30-year retirement with a 4% withdrawal rate. Fidelity's milestones suggest having 1x salary saved by 30, 3x by 40, 6x by 50, and 8x by 60. Your actual need depends on your expected Social Security benefit, other income sources, and planned lifestyle.
Disclaimer
Past performance does not guarantee future returns. Investment markets carry risk including potential loss of principal.
This calculator is for informational and educational purposes only. Results are estimates based on the inputs you provide and assumptions that may not reflect your actual situation. It does not constitute financial, investment, tax, legal, or accounting advice. Verify results independently and consult a qualified professional before making financial decisions. Digital.Finance makes no guarantee of accuracy or completeness.