From 24/7 Wall St. · Gerelyn Terzo · · 1m 10s
Roth vs Traditional 401(k) Retirement Balance
A $900,000 Roth 401(k) avoids federal taxes while a traditional 401(k) leaves $198,000 in taxes.
In brief
A $900,000 Roth 401(k) avoids federal taxes while a traditional 401(k) leaves $198,000 in taxes. A $900,000 Roth 401(k) provides full $900,000 spendable money versus $702,000 from a traditional 401(k) after 22% federal taxes. Originally reported by 24/7 Wall St..
Matching Retirement Balances
Two retirees see identical $900,000 balances in traditional and Roth 401(k) accounts.
Tax Impact on Withdrawals
Traditional withdrawals cost 22% federal tax, leaving $702,000 spendable versus $900,000 for Roth.
Roth Tax-Free Advantage
Roth withdrawals qualify as tax-free after age 59½ and five tax years.
Traditional Account Deductions
Traditional contributions provide upfront tax deductions, increasing spendable money over time.
Roth Conversion Timing
Converting to Roth works best when tax rates today are lower than future Medicare costs.
Low-Income Window Strategy
The years after retirement and before Social Security begin are cheapest for traditional withdrawals.
Roth's Flexibility Benefit
Roth withdrawals don't count as taxable income, avoiding higher Medicare premiums.
Long-Term Retirement Planning
Run the tax map annually to maximize retirement savings before conversion windows close.
The takeaway
A $900,000 Roth 401(k) provides full $900,000 spendable money versus $702,000 from a traditional 401(k) after 22% federal taxes.
