benefits

Roth vs Traditional 401(k): the actual paycheck difference

9 min read · published 2026-05-05 · updated 2026-05-05

Both reduce your savings rate. Only one reduces your taxable wages today. Here is exactly how each appears on a US pay stub, what changes for federal vs FICA wages, and the rule of thumb that matters most.

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The same paycheck dollar can go three places

Each dollar of gross pay can become (a) take-home cash, (b) tax, or (c) retirement savings. Traditional 401(k) shifts the dollar from tax-now to tax-later (deferring federal and most state income tax). Roth 401(k) shifts the dollar from take-home to never-taxed-on-growth (you pay tax now; growth and qualified withdrawals are tax-free).

How they appear on a pay stub

Traditional 401(k): contribution shows as a pre-tax deduction. Federal taxable wages and most state taxable wages drop by the contribution. FICA wages do NOT drop. Box 1 of your W-2 will be lower than Box 3 (Social Security wages) by the year's contribution total.
Roth 401(k): contribution shows as a post-tax deduction. Federal taxable wages do NOT drop. FICA wages do NOT drop. Box 1 and Box 3 of your W-2 are unchanged by the contribution.

2025 contribution limits

Employee elective deferral: $23,500 (combined Traditional + Roth)
Catch-up at age 50+: $7,500
Enhanced catch-up at ages 60–63 (SECURE 2.0): $11,250

Employer match: same regardless of Roth/Traditional

Your employer match is always pre-tax — even if your contribution is Roth. The match grows tax-deferred and is taxed on withdrawal. SECURE 2.0 lets employers offer Roth matches if you elect, but you would owe tax on the match in the year of the contribution.

The bracket rule of thumb

If your marginal tax rate today is HIGHER than you expect in retirement, Traditional usually wins — you defer at the higher rate and withdraw at the lower. If LOWER (early-career, low-income year), Roth usually wins. If you don't know, splitting the contribution is a hedge.

Why FICA does not drop matters

A common misconception: "I am putting $20,000 in my 401(k), so I am dropping a tax bracket." You are reducing federal taxable wages by $20,000, not your gross. Social Security and Medicare are still computed on the full gross. Your take-home drop is approximately $20,000 minus your federal-tax-saved (and state, where applicable).

Mega-backdoor Roth (advanced)

Some plans allow after-tax contributions above the $23,500 elective deferral limit, up to the total 415(c) limit ($70,000 in 2025 minus employer match). Those after-tax dollars can be in-service-converted to Roth. Plan-specific. Talk to a CPA before assuming your plan supports it.