Two retirement accounts can both show $1 million and still represent very different amounts of spendable money.
But that does not automatically mean the Roth IRA is the better deal.
In this video, Steady Wealth puts a traditional 401(k) and Roth IRA on the same starting line: the same reduction in take-home pay today. We follow the math over 30 years, compare the results after taxes, and test what happens when the retirement tax rate is lower, equal to, or higher than the tax benefit received while contributing.
You’ll see why a larger pretax account balance can be misleading, why equal contributions are not necessarily an equal-cost comparison, and why the future tax rate can change the result.
We also look at several factors that the simple 401(k)-versus-Roth debate often leaves out: employer matching, Roth 401(k)s, contribution limits, what happens to the traditional tax savings, investment fees, required minimum distributions, Social Security and Medicare interactions, and the value of having both pretax and Roth money available in retirement.
