Roth and traditional accounts are taxed at different times: traditional now saves you tax and you pay later; Roth costs you tax now and the money comes out tax-free. Which leaves you more depends almost entirely on your tax rate today versus in retirement.
Here's the maths, the 2026 limits and a worked example.
2026 limits
| Account | 2026 limit | Age 50+ catch-up |
|---|---|---|
| 401(k), 403(b), 457 | $24,500 | $8,000 ($11,250 at ages 60–63) |
| Traditional and Roth IRA (combined) | $7,500 | $1,100 |
Why the lower tax rate wins
Traditional = P × growth × (1 − tax rate later)Roth = P × (1 − tax rate now) × growthIf you already contribute the maximum, a Roth effectively shelters more, because $7,500 in a Roth is worth more than $7,500 in a traditional account that still owes tax.
Worked example
Example: $7,500 a year for 30 years at 7%
Traditional: $7,500 a year grows to $758,048; after 12% tax in retirement, $667,082 to spend.
Roth: after 22% tax today, $5,850 a year goes in and grows to $591,277, tax-free.
Traditional wins by $75,805 because 12% later is lower than 22% now. If your rates were the other way round, Roth would win by the same amount.
To project a whole 401(k) with your employer's match, use the 401(k) calculator.
How to use this calculator
- Enter your income and filing status. We work out your current federal tax rate.
- Enter how much pay you set aside each year.
- Choose the years until you withdraw and a yearly return.
- Pick the tax rate you expect to pay when you withdraw.
FAQs
What are the 2026 contribution limits?
$24,500 for a 401(k), plus $8,000 catch-up at 50 or older ($11,250 at 60 to 63). $7,500 for an IRA, plus $1,100 catch-up at 50 or older.
Can anyone contribute to a Roth IRA?
No. In 2026 the amount you can put in phases out between $153,000 and $168,000 of income for single filers, and $242,000 to $252,000 for joint filers. Roth 401(k)s have no income limit.
When is a Roth better?
When you expect a higher tax rate in retirement than today, such as early in your career, or when you already contribute the maximum and want more sheltered from tax.
Can I do both?
Yes. Splitting contributions between Roth and traditional spreads your bets on future tax rates.
Sources
Results are estimates and aren't tax, legal or financial advice. For your own return, check with a CPA or enrolled agent. Spotted a mistake? Tell us.