Roth vs Traditional 401(k)

Pay tax now, or pay tax later? It depends on the brackets.

Roth wins if your retirement bracket will be higher than today's. Traditional wins if it'll be lower. Most early-career people are in their lowest lifetime bracket — which is why “always Roth in your 20s” gets repeated. Run your numbers.

Annual contribution
$

2026 limit is $24K. Most people start at the match.

Current marginal tax bracket
%

22–24% for most full-time-employed new grads.

Expected retirement tax bracket
%

Educated guess. Bracket structure changes; this is directional.

Annual growth assumption
%

7% is the long-run real return on broad equities.

Years to retirement
yr
Net of taxes, at retirement

Roth at retirement

$1.58M

$11,400/yr post-tax · tax-free withdrawal

Traditional at retirement

$1.62M

$2.07M pretax · taxed at 22.0%

Verdict

Traditional wins by $41,471 after taxes.

Doesn't include employer match (always take it), state taxes, or the option to mix. Most people should take the match first, then Roth in low-bracket years, then split. Not tax advice — that requires a CPA.

Match, brokerage, the whole stack

The 401(k) is one piece. Let's map the full picture.

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