sherr - I think your missing one potentially important piece of the roth vs traditional decision. Once you hit 59.5, all of the money in the roth account can be withdrawn tax free. This includes earnings. So, say you, overall, contributed $100,000 to traditional and $100,000 to a roth. The traditional would have saved you $25,000 in taxes at the 25% bracket. Both grew at 7% per year for 25 years (I'm assuming you contributed it all by 35, retired, and never touched it or contributed until 60 to simplify the math of dealing with the money being in there for different amounts of time) to $540,000. You now withdraw it all (again to simplify) at your retirement effective tax rate of 10%. The traditional costs you $54,000 in taxes while the roth costs you nothing. Granted, the $54,000 isn't quite comparable to $25,000 25 years earlier - but I think that keeps the difference from being quite as dramatic as you think it is.

I still recommend the traditional route for anyone in the 25%+ bracket with MMM/ERE intentions (especially if you plan on using SEPP or roth pipelines to withdraw it earlier than 59.5), but agree that everyone should run the math themselves for their specific situation.

I did not miss this, this is exactly what my second-to-last paragraph was addressing. Let's use your numbers and go through the examples again.

Assumptions: a person has $125,000 to invest this year, they are in a 25% tax bracket.

Option #1: Imaginary Roth 401k with $100k contribution limit.

Now: Invest $100k in Roth 401k, pay $25k in taxes.

Retirement: Roth 401k account has grown to $540,000, you owe no additional taxes.

Option #2: Imaginary Traditional 401k with $100k contribution limit.

Now: invest $100k in Traditional 401k, pay $0 in taxes. Pay taxes on your remaining $25k, leaving you with $18,750. Invest remaining $18,750 in taxable investment account at similar interest rates.

Retirement: Traditional 401k account has grown to $540,000. You withdraw it and pay 10% tax, leaving you with $486,000. Your $18,750 taxable investment as grown to $101,764. Now, in current tax law the capital gains tax for long-term investments is 0% if you are below the 25% tax bracket, so realistically you wouldn't actually pay taxes on this when you withdraw. Let's be pessimistic and say that you'll also pay a 10% tax on this. You pay the tax on the gains, and you have $93,462 left over from this account.

Totals:

Roth: $540,000

Traditional + additional: $486,000 + $93,462 = $579,462

Choosing the Traditional over the Roth gives you an extra forty thousand dollars. If you could have put all $125,000 into the Traditional 401k the difference would have been even greater. The only reason Roth accounts sound comparable to Traditional accounts for most people is because they ignore the opportunity cost of the money they pay to the tax man.

Edit: grammar