401(k) vs. Roth IRA - Annual Contribution

You can use this calculator to compare a 401(k) plan with a Roth IRA.

To open this calculator, click Calculators in the toolbar, and then click Retirement > 401(k) vs. Roth IRA - Annual Contribution in the left panel.

You can export the data as a PDF file or clear all data that you entered. For more information, see Financial calculators.


Your client can afford $300 per month toward retirement. Should the client contribute to an employer's 401(k) or to a Roth IRA?

Field Input
Annual Roth IRA contribution $3,600
Federal tax rate 28%
State tax rate 4%
State tax deducted on federal return? Yes
Years of contributions 10
Annual rate of return 8%
Average tax rate during retirement 20%
Years of retirement 20
Annual rate of return during retirement 7%

In this example, if your client makes contributions to the employer's 401(k) account, monthly retirement income after taxes is $467.98. If your client makes contributions to the Roth IRA, monthly income after taxes is $404.33. The 401(k) amount is higher by $63.95 per month.


  • The Roth IRA would only have a contribution of $3,600 because there are no tax savings at the point of contribution. The $3,600 reduction in take-home pay is identical for the two options in this example, however, the 401(k) produces a larger contribution amount.
  • The federal and state tax rates applied to contributions is usually the marginal tax rate. During retirement, the distributions from a retirement account are often a major source of taxable income. This is why the average tax rate, rather than the marginal tax rate, is used to calculate the after tax income. For example, if the retirement income is the only source of income, some of the income will not be taxed at all, some will be taxed at a lower rate, and so on. This averaging of tax rates is usually not required for contributions.

Internal notes


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