Updated
The choice between a traditional and a Roth account is a choice between paying tax now and paying it later, not between two returns. A traditional 401(k) or IRA contribution reduces taxable income today and the withdrawal is taxed as ordinary income, so it favours anyone whose rate in retirement will be lower. A Roth account gives no deduction but grows and pays out tax free, and it is not subject to required minimum distributions during the owner's lifetime, which matters for estate planning. One thing outranks both: an employer match in a 401(k) is an immediate return no market can promise, and contributing less than the match forfeits it. This simulator compares the two on the same contributions and assumed return; contribution limits and income phase-outs are individual and change annually.
Simulator Retirement Savings United States
Project your American retirement savings: 401(k) with employer matching and IRA. Compare risk profiles and estimate your capital.
Your situation & savings
Summary
Capital at retirement
$2,168,659
net after taxes
Possible monthly income
$9,216
per month in withdrawals
You save
$1,100
per month (401(k) + IRA)
In practice: By saving $1,100/mo for 32 years (plus $313/mo from your employer in matching), you will have a capital of $2,563,427. After taxes, you keep $2,168,659 net. Your investments earned you $1,586,067 more than what you contributed.
Your employer contributes $313/mo in employer match (5% of your salary) -- that's free money! With systematic withdrawals, that represents about $9,216/mo of supplemental income.
Total capital
$2,563,427
401(k) + IRA
Monthly income
$9,216
Estimated monthly withdrawal
Tax benefits
$92,928
Cumulative tax savings
Net after tax
$2,168,659
Net available capital
401(k)
Final capital
$2,018,754
Total contributions
$457,392
Interest earned
$1,561,362
Tax savings
$67,584
Exit tax
-$310,888
Net after tax
$1,707,866
IRA (Traditional)
Final capital
$544,673
Total contributions
$125,200
Interest earned
$419,473
Tax savings
$25,344
Exit tax
-$83,880
Net after tax
$460,793
Capital growth
- 401(k)
- IRA
- Total
Cumulative withdrawals vs Remaining capital
- Cumulative withdrawals
- Remaining capital
Questions fréquentes
What is the 401(k) contribution limit for 2026?
Should I choose Roth or Traditional 401(k)/IRA?
What is an employer 401(k) match and how does it work?
When can I withdraw from my IRA without penalty?
How much should I save for retirement in the US?
Simulateurs associés
Understanding American retirement savings
The 401(k): the cornerstone of retirement savings
The 401(k) is an employer-sponsored retirement savings plan, named after section 401(k) of the Internal Revenue Code. It is the most common retirement savings vehicle in the United States.
- 2026 contribution limit: $24,500/yr for the employee (+ $8,000 "catch-up" if age 50 and older). The total employee + employer cannot exceed $72,000.
- Employer match: Most employers match your contributions. A typical match is 50% to 100% of your contributions, up to 3-6% of your salary. It's free money -- always maximize it!
- Pre-tax (Traditional): Contributions reduce your taxable income now. Tax is paid upon withdrawal.
- Vesting: Employer contributions may be subject to a vesting schedule (gradual rights acquisition over 3-6 years).
Example: Salary of $80,000, employer match of 5%. You contribute $400/mo, your employer adds $333/mo. Over 30 years at 7% return, that amounts to about $880,000 -- of which only $265,000 comes from your contributions.
Traditional vs Roth: the great debate
The "Traditional or Roth?" question is one of the most important financial choices. Here is the comparison:
| Criteria | Traditional (401k/IRA) | Roth (401k/IRA) |
|---|---|---|
| Tax at entry | Deductible (pre-tax) | Not deductible (after-tax) |
| Tax at withdrawal | Taxed as ordinary income | Tax-free |
| RMD (Required Minimum Distributions) | Yes, starting at age 73 | No (Roth IRA), Yes (Roth 401k) |
| Ideal if | High tax bracket now, low in retirement | Low tax bracket now, high in retirement |
| General advice | Mid/late career employees | Young workers, early career |
Optimal strategy: Diversify between Traditional and Roth. Having both types of accounts gives you tax flexibility in retirement to optimize your withdrawals based on your tax bracket each year.
The IRA: Individual Retirement Account
The IRA is an individual retirement account, independent of your employer. There are two main types:
Traditional IRA
- Potentially deductible contributions
- Tax-deferred growth
- Taxed at withdrawal (ordinary income)
- RMD starting at age 73
- 2026 limit: $7,500 ($8,600 if 50+)
Roth IRA
- Non-deductible contributions
- Tax-free growth
- Qualified withdrawals are tax-free
- No RMD for life
- Income limit: $161k (single) / $240k (couple)
Backdoor Roth IRA: If your income exceeds the Roth IRA limits, you can contribute to a non-deductible Traditional IRA then convert it to Roth (the "backdoor"). This strategy is legal and widely used by high earners.
Early withdrawal rules
American retirement accounts are designed for long-term savings. Withdrawing before the designated age can be costly:
- 10% penalty: Any withdrawal from a 401(k) or IRA before age 59 and a half is subject to a 10% penalty on top of ordinary income tax.
- 401(k) exceptions: Financial hardship (hardship withdrawal), 401(k) loan (max $50,000 or 50% of balance), separation after age 55 (Rule of 55).
- IRA exceptions: First-time home purchase ($10,000 max), education expenses, medical expenses exceeding 7.5% of AGI, disability.
- Roth IRA special rule: You can always withdraw your Roth IRA contributions (not gains) without penalty or tax, at any time.
Example: $50,000 withdrawal from a Traditional 401(k) at age 50, in the 22% tax bracket. You pay $11,000 in tax + $5,000 penalty = $16,000. You only receive $34,000 out of the $50,000.
The Rule of 55 and penalty-free withdrawals
The Rule of 55 is an important exception to the 10% penalty that can facilitate early retirement:
- Principle: If you leave your job (layoff, resignation, retirement) in the year you turn 55 or later, you can withdraw from THAT employer's 401(k) without the 10% penalty.
- Limitation: Only applies to the last employer's 401(k), not to previous 401(k)s or IRAs. Consider rolling over your old accounts into your current 401(k) before leaving.
- SEPP / Rule 72(t): Alternative for any age: "Substantially Equal Periodic Payments" withdrawals over 5 years or until age 59.5. Complex calculation but penalty-free.
- Roth Conversion Ladder: Popular FIRE strategy. Convert from Traditional to Roth each year, then withdraw the conversions penalty-free after 5 years.
Target Date Funds and automatic management
Target Date Funds (TDF) are the default investment option in most 401(k) plans. They simplify managing your retirement savings:
- Principle: Choose a fund based on your expected retirement year (e.g., "Target 2055 Fund"). The fund automatically adjusts its allocation.
- Glide path: Starts aggressive (90% stocks) when you're young, then gradually reduces risk as retirement approaches (40-50% stocks).
- Advantages: Zero management effort, automatic diversification, rebalancing included. Ideal for passive investors.
- Fees: Vanguard Target Date Funds: ~0.12%/yr. Fidelity Freedom Index: ~0.12%/yr. Some funds are more expensive (~0.50-0.75%).
At age 30 (Target 2060)
At age 50 (Target 2040)
At age 65 (Target 2025)