Roth 401K Retirement Calculations

[RookieStache]

It seems all retirement withdraw rates, estimated amount of money you need, percent of salary per each year of retirement you need, etc. is all based off of standard 401K retirement plans.

Obliviously, the amount of money you would need in a Roth 401K would be significantly lower but it seems like their aren't many discussions on Roth 401K nest eggs. What would be the best way to calculate the differences here?

Thanks!

[talltexan]

There's less discussion about the Roth here because many in this community have concluded that pre-tax retirement accounts are much more efficient for saving. This is because the tax at the MARGINAL (i.e. highest) rate is deferred on 401(K) contributions, to be paid later as the AVERAGE rate. Particularly for people who can live a fulfilling life at below-average incomes, those taxes in the withdrawal stage will already be pretty small.

If you'd like more, please see the "pinned" thread on investment order.

[MDM]

There's less discussion about the Roth here because many in this community have concluded that pre-tax retirement accounts are much more efficient for saving. This is because the tax at the MARGINAL (i.e. highest) rate is deferred on 401(K) contributions, to be paid later as the AVERAGE rate.

That is, unfortunately, a common misconception.

When deciding on traditional vs. Roth for a given year, one should compare marginal tax saving rate for that year vs. expected future marginal tax rate on withdrawals due to that year's contribution.

E.g., if one does not make a traditional contribution in a given year, there will still be income and tax due when taking withdrawals in retirement, correct?  Thus, any additional traditional contribution will be withdrawn on top of that, and taxed at the future marginal rate.

See Traditional versus Roth - Bogleheads for more.

The answer still comes out "use traditional" in most cases, but not all.

[MDM]

Obliviously, the amount of money you would need in a Roth 401K would be significantly lower....

Depends on the definition of "significantly".

To judge things correctly, one should look at all expenses in retirement.  Those include food, shelter, clothing, entertainment, and...taxes.  The lower the desired spending, the lower the expected tax amount.

Estimate your non-tax retirement expenses, then calculate the gross income needed to provide that much after tax.  The amount of tax will depend on the income sources.

[DreamFIRE]

It seems all retirement withdraw rates, estimated amount of money you need, percent of salary per each year of retirement you need, etc. is all based off of standard 401K retirement plans.

Obliviously, the amount of money you would need in a Roth 401K would be significantly lower but it seems like their aren't many discussions on Roth 401K nest eggs. What would be the best way to calculate the differences here?

Thanks!

Having both types may be best.  I have a mix of regular 401K, Roth IRA, and non-retirement brokerage investments.  It provides some nice flexibility with withdrawals/distributions to give me the cash I need/want, enough taxable income to meet ACA minimums, and non-taxable income to provide more cash while keeping my taxable income in a narrow range to maximize ACA benefits and minimize taxes on SS benefits.  And by keeping my taxable income low enough, I won't have to pay long term capital gains taxes on my brokerage investments.