Roth 401(k) vs. Traditional 401(k) and your Paycheck
A 401(k) can be an effective retirement tool. As of January 2006, there is a new type of 401(k) contribution. Roth 401(k) contributions allow you to contribute to your 401(k) account on an after-tax basis and pay no taxes on qualifying distributions when the money is withdrawn. For some investors this could prove to be a better option than the Traditional 401(k) contributions, where deposits are made on a pre-tax basis, but are subject to taxes when the money is withdrawn. Use this calculator to help determine the option that could work for you and how it might affect your paycheck.
Your current age.
Age of retirement
Age you wish to retire.
Current tax rate
The current marginal income tax rate you expect to pay on your taxable income. Use the table below to assist you in determining your current federal tax rate.
|Filing Status and Income Tax Rates 2012
Caution: Do not use these tax rate schedules to figure 2011 taxes. Use only to figure 2012 estimates.
|Tax rate||Married filing jointly
or qualified widow(er)
|Single||Head of household||Married filing separately|
|10%||$0 – 17,400||$0 – 8,700||$0 – $12,400||$0 – 8,700|
|15%||$17,400 – 70,700||$8,700 – 35,350||$12,400 – 47,350||$8,700 – 35,350|
|25%||$70,700 – 142,700||$35,350 – 85,650||$47,350 – 122,300||$35,350 – 71,350|
|28%||$142,700 – 217,450||$85,650 – 178,650||$122,300 – 198,050||$71,350 – 108,725|
|33%||$217,450 – 388,350||$178,650 – 388,350||$198,050 – 388,350||$108,725 – 194,175|
|35%||over $388,350||over $388,350||over $388,350||over $194,175|
Retirement tax rate
The marginal federal income tax rate you expect to pay on your retirement account distributions. Keep in mind that the calculator does not factor in other taxes such as state taxes, which could affect the comparison.
Hypothetical rate of return
The hypothetical annual effective rate of return for your 401(k) account. This calculator assumes that your deposits are made at the beginning of each pay period. For annual pay frequencies, it assumes the contributions are made at the beginning of the year. The actual rate of return is largely dependent on the type of investments you select.
It is important to remember that future rates of return can’t be predicted and that investments that have a higher return potential are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time. This includes the potential loss of principal on your investment.
This is your current annual income.
The amount you expect to contribute to a 401(k) each year. This calculator assumes that new contributions to your account are made until you reach your retirement age. If you are currently age 29 and expect to retire at age 65, your first new contribution will happen at age 30 and continue until through age 65.
The annual maximum for 2012 is $17,000 (the 402(g) limit). If you are age 50 or over, a “catch-up” provision allows you to contribute even more to your 401(k). Employees over 50 can deposit an additional $5,500 into their 401(k) account. It is also important to note that employer contributions do not affect an employee’s maximum annual contribution limit. Both the annual maximum and “catch-up” provisions are indexed for inflation after 2006. Your plan may also impose limits on how much you can contribute.
It is important to note that some employees are subject to another form of contribution limits. Employees classified as “Highly Compensated” may be subject to contribution limits based on their employer’s overall 401(k) participation. You may need to contact your employer to see if these additional contribution limits apply to you.
Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.