Most retirement advice argues about which account wins over forty years. Fair enough — but the more immediate question is what each choice does to next Friday's paycheck, because that is the number your budget actually lives on.
Pre-tax: the check shrinks less than you fear
A traditional 401(k) or TSP contribution comes out before federal and state income tax are calculated. Contribute $300 per paycheck in the 22% bracket and your take-home falls by roughly $234 — the missing $66 is tax you simply did not owe. The higher your bracket, the bigger this discount, which is why pre-tax contributions feel almost subsidized for higher earners.
The bill arrives in retirement: withdrawals are taxed as ordinary income, at whatever rates apply then.
Roth: full price now, free forever
Roth contributions are made after tax — contribute $300 and your take-home falls by the full $300. In exchange, qualified withdrawals in retirement are completely tax-free: every dollar of growth, never taxed again. For younger workers in low brackets, paying 12% now to avoid possibly higher rates later is often the winning trade.
A paycheck-first decision rule
Run both versions through the calculator: once with your contribution, once with it set to zero. The difference in net pay is the true monthly price of the pre-tax version — and knowing that number turns a philosophical debate into a budget line.
- Bracket likely lower now than in retirement → lean Roth.
- Bracket likely higher now than in retirement → lean pre-tax.
- Genuinely unsure → split the contribution; most plans allow both.
- Either way, capture the full employer match first — it is the only guaranteed 100% return in the tax code.