Roth vs Traditional IRA / 401(k)
Pay tax now or later? Roth contributions are taxed today and grow tax-free; Traditional contributions are deducted today and taxed when you withdraw. This puts the same dollars into each and shows what you actually keep at the end of retirement, after tax - plus what each costs you in take-home pay today.
2025 contribution limits. IRA: $7,000/yr ($8,000 if 50+) combined across Roth + Traditional. The Roth IRA phases out at higher income (~$150k single / $236k married); a Traditional IRA is always allowed, but its deduction phases out if you (or a spouse) have a workplace plan. 401(k): $23,500/yr ($31,000 if 50+) - both Roth and Traditional versions, with no income limit.
What you can hold. An IRA can hold almost anything a brokerage can - stocks, ETFs, mutual funds, bonds, CDs (and, through a self-directed custodian, even real estate or crypto) - but not life insurance or collectibles (art, gems, most coins). A 401(k) is limited to the plan's menu, usually a short list of index and target-date funds, unless it offers a self-directed brokerage window.
Roth (after tax)
$0
Traditional (after tax)
$0
Winner
-
Total contributed
$0
$
yrs
yrs
%
%
%
After-tax value in retirement
Roth advantage vs your retirement tax rate
The higher your retirement tax rate, the more Roth's tax-free withdrawals are worth versus Traditional - the dot marks your assumption.
Both paths contribute the same dollar amount each year from your current age to your retirement age. Roth is funded with after-tax dollars and withdrawn tax-free; Traditional is contributed pre-tax (so it costs less take-home today), grows tax-deferred, and is taxed as ordinary income on withdrawal. We show the actual after-tax balance each leaves you at retirement - no hypothetical side account. Ignores income limits, employer match, required minimum distributions, state taxes and future tax-law changes. An employer match (free money) makes capturing the 401(k) match worth it regardless of which type you choose.