Roth Contributions Within Your Retirement Plan

Most retirement plans offer traditional contributions, which are made on a before-tax basis. Taxes are due on these contributions, and any earnings, when the money is withdrawn. Many plans are now offering Roth contributions as well. Roth contributions allow you to contribute to your retirement account on an after-tax basis. An advantage of this type of contribution is that you pay no taxes on the contributions - and any earnings - for qualifying distributions. Use this calculator to help compare how each type of contribution might affect your paycheck and your taxable situation at retirement.

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Roth Contributions Within Your Retirement Plan Definitions

Current age

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. **TAXTABLE_CURRENT_DEFINITION**

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 retirement 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.

Current income

This is your current annual income.

Annual contribution

The amount you expect to contribute to a retirement account 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 2018 is $18,500 (the 402(g) limit). If you are age 50 or over, a 'catch-up' provision allows you to contribute even more to your retirement account. In 2018, employees over 50 can deposit an additional $6,000 into their retirement 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 participation. You may need to contact your employer to see if these additional contribution limits apply to you.

Current contribution type

This is either Roth or Traditional. If you choose 'Roth' we will increase the assumed contribution to your 'Traditional' option to equal the same net take home pay. If you choose 'Traditional' we will decrease the assumed contribution to your 'Roth' option to equal the same net take home pay.

Pay frequency

How often you are paid. We use this entry to calculate the net impact on your paycheck.

Contribution type

This is either Roth or Traditional. Please note that while the actual amount coming out of your paycheck will not change based on your selection, the actual current "cost" of your contribution does change. For instance, a traditional contribution of $10,000 would actually equal a $7,500 in Roth contributions because you are taxed in the current year on Roth contributions (based on 25% tax rate). This calculator tries to show this tax impact. So, if you choose Roth the calculator will increase the comparable Traditional contribution to equal the same net take home pay. If you choose Traditional we will decrease the comparable contribution to your Roth option to equal the same net take home pay.

Qualified Distribution

There are two requirements to take a qualified distribution from a Roth sub-account. At least 5 taxable years must elapse from the initial contributions, and you must reach age 59 1/2, disability or death.

Hypothetical Value at Retirement Age after Taxes, Traditional contributions and After-Tax Amount Invested

For the Roth contributions, this is the total value of the account. For the traditional contributions, this is the sum of two parts: 1) The value of the account after you pay income taxes on all earnings and tax-deferred contributions and 2) The accumulated value of the income tax savings of any contributions that exceeded your contribution limit, if any, if you invested them as after-tax contributions to a tax-deferred vehicle. For these earnings, distributions are taxed at the same tax rate you indicate in the Retirement tax rate.