Roth 401k Contribution Calculator
How to Calculate Roth 401k Contribution on Your Paycheck
Unlike a traditional 401k, a Roth 401k is funded with after-tax dollars. This means the percentage you choose to contribute is calculated based on your total gross pay, but the money is taken out after the government takes its share of taxes.
The Roth 401k Formula
Calculating the specific dollar amount of your Roth contribution is straightforward:
Gross Pay × Contribution Percentage = Roth Contribution Amount
For example, if you earn $2,000 per pay period and contribute 5%, your Roth contribution is $100 ($2,000 × 0.05). Because this is an "after-tax" contribution, this $100 does not reduce your taxable income for the current year.
Step-by-Step Calculation Example
Let's look at a realistic scenario for a single filer earning a $3,000 gross paycheck with a 10% Roth contribution and an effective tax rate of 25%:
- Gross Pay: $3,000
- Roth Contribution (10%): $3,000 × 0.10 = $300
- Taxes (25% of Gross): $3,000 × 0.25 = $750
- Net Take-Home Pay: $3,000 (Gross) – $750 (Taxes) – $300 (Roth) = $1,950
Key Benefits of Roth Contributions
While your take-home pay is lower today compared to a traditional 401k, the primary advantage is that your withdrawals in retirement—including all the investment growth—are generally 100% tax-free. This makes the Roth 401k an excellent tool for employees who expect to be in a higher tax bracket in the future.