Pre-Tax vs Roth 401(k)

• Configured strategy path: employee deferrals follow the traditional allocation percentage, and the current-year tax savings from the pretax portion are invested in a taxable brokerage sidecar.
• Roth path: employee deferrals go to a Roth 401(k), with tax-free qualified withdrawals in retirement.
• Retirement taxes: progressive mode applies federal ordinary brackets, Social Security benefit taxation, long-term capital-gains brackets with NIIT, optional resident-state tax, and traditional-account RMDs.

• Employee deferral limit: $24,500 for 2026. Historical limits from 2001–2025 are used for past years. Future years beyond 2026 hold the 2026 limit in real-dollar mode, or project it forward using the configured inflation rate in nominal mode (rounded to the nearest $500).
• Age-50 catch-up: $8,000 for 2026. Available when the participant is age 50 or older at year end. Historical values from 2002–2025 are used for past years.
• SECURE 2.0 age-60-to-63 catch-up: $11,250 for 2025–2026. Replaces the standard age-50 catch-up when the participant is age 60, 61, 62, or 63 at year end.
• Section 415(c) annual additions: $72,000 for 2026. Caps total employer plus employee contributions (excluding catch-up) per year. Employer match is reduced when this limit binds.
• Fixed Annual Contribution mode: applies a constant requested amount each year, capped to the applicable deferral limit including catch-up eligibility.
• Working Career mode: uses the projected IRS deferral limit for each year and age, so contributions follow the maximum allowable schedule.

• Progressive brackets: 2026 federal ordinary income brackets, inflation-adjusted for each retirement year using the configured inflation rate.
• Standard deduction: applied automatically before computing federal ordinary tax. The 2026 base amount is inflation-adjusted for each year.
• Social Security taxation: the federal provisional-income formula determines the taxable fraction (0%, up to 50%, or up to 85%) of benefits. Married Filing Separately is treated as 85% taxable.
• Capital-gains taxes: sidecar brokerage liquidations are taxed at federal long-term capital-gains rates, bracket-stacked on top of ordinary income. NIIT (3.8%) applies above the filing-status threshold.
• Required minimum distributions: traditional 401(k) balances are subject to RMDs using the IRS Uniform Lifetime Table (Pub. 590-B, Table III). RMD start age is determined by birth year: age 75 for birth years 1960+, 73 for 1951–1959, 72 for 1949–1950. Surplus RMD withdrawals beyond the spending target are reinvested in the taxable brokerage.
• Flat-rate mode: applies a single user-chosen tax rate to all traditional withdrawals instead of progressive brackets. Social Security and other retirement income are excluded.

By default the tool runs in real (inflation-adjusted) dollars: the annual return represents a real return and contribution limits hold constant at their 2026 values. In nominal mode, the configured inflation rate is used to project future contribution limits, tax brackets, and standard deductions forward from 2026 base values (rounded to the nearest $500 for limits). The annual return in nominal mode should include expected inflation.

• Employer match is modeled as always-pretax dollars added to both paths. Match dollars in the Roth path are subject to RMDs and ordinary income tax during retirement.
• Blended traditional/Roth allocations are supported via the traditional allocation percentage. The comparison always measures the configured strategy against a 100% Roth baseline.
• State tax uses the platform's state-bracket tables plus a federal-standard-deduction proxy. Modeled exclusions are: Social Security exempt in AK, AL, AR, AZ, CA, DC, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MO, MS, NC, ND, NE, NH, NJ, NV, NY, OH, OK, OR, PA, SC, SD, TN, TX, VA, WA, WI, and WY, plus CO at age 65+; broad retirement-income exclusions in IL, IA at 55+, MS at 59.5+, and PA at 59.5+.
• State tax filing status uses exact schedules where published and exact shared-schedule aliases where a state groups statuses under a common schedule.
• Partial AGI phaseouts and narrower state-specific pension rules are still approximated rather than modeled separately.

• Current marginal tax rate: used to value the immediate tax savings from traditional deferrals.
• Retirement start age: used to determine catch-up eligibility during accumulation and RMD timing in retirement.
• Other retirement income: ordinary income such as pensions or IRA withdrawals.
• Social Security benefits: annual gross benefits. The engine applies the federal taxable-benefit formula in progressive mode.
• Resident state: optional state-income-tax proxy for retirement withdrawals.
• Traditional allocation percentage: fraction of employee deferrals directed to pretax. The remainder goes to Roth within the same scenario.
• Employer match rate, match limit, and salary: used to compute employer match dollars added as pretax to both paths.
• Additional match tier: optional second band for common formulas like 100% on the first 3% of pay and 50% on the next 2%.

• The main chart shows after-tax remaining wealth. Traditional balances are discounted for estimated taxes instead of being compared raw against Roth balances.
• Configured strategy total value is cumulative retirement spending plus the estimated after-tax value of the remaining configured strategy portfolio.
• Configured strategy advantage is configured strategy total value minus Roth total value. Positive values favor the configured strategy.
• The advantage curve sweeps only other retirement income. Allocation mix, employer match, state treatment, Social Security, and spending assumptions remain fixed.

Traditional tends to benefit when the current marginal tax rate is materially above the retirement tax rate applied to withdrawals. Roth tends to benefit when retirement ordinary income, taxable Social Security, RMDs, or state taxes keep the retirement tax burden high.