The glib answer is simply that you could put in less. For example, if your marginal tax rate was 25% and you put $1,000 pre-tax into the 401(k), your taxes would go down by $250. So, effectively, that $1,000 which went into your 401(k) only "cost" you $750 out of pocket.
(Naturally, eventually, taxes will be owed on that money and its growth when it comes back out.)
So to leave your "spendable" (after-tax) income the same, but make contributions to the Roth 401(k) instead of the pre-tax 401(k) -- you'd simply put $750 into the Roth 401(k).
Now, before you get too upset at saving so much less -- consider the future -- if your 401(k) is invested the same way (Roth versus traditional) and therefore got the same growth over time -- look at what eventually happens: Suppose the value of your 401(k) triples over the next 20 years, and then you withdraw the resulting money. Further, suppose your tax rate 20 years from now is the same as it is now:
$1,000 in the traditional 401(k) triples to $3,000. You withdraw it all, but pay 25% in taxes. You end up with $2,250 to spend.
versus $750 in the Roth 401k over the same time, it also triples -- to $2,250. You can then take out that amount, tax-free, and you spend -- exactly the same -- $2,250.
The real power of the Roth comes in a variety of other forms.
For one, since it has the same maximum limit $18,000 -- if you put the full $18,000 into the Roth, you've effectively saved a lot *more* than if you put the max $18,000 in the traditional. (See the example above - where $750 in the Roth was equivalent to $1,000 in the traditional). So the tax-equivalent effective limit on the Roth is a lot higher.
There are a variety of other advantages to the Roth, too -- eventually if you rolled it into a Roth IRA, at least under current law, it would not be subject to required distributions. Eventual distributions don't affect your Annual Gross Income and may have other tax benefits. It would provide some "tax diversification" -- eventually you may have pre-tax, taxable, and Roth assets. Having that variety may help you optimize distributions and even optimize the portfolio (i.e. put the "growthiest" things into the Roth). | 03.16.16 @ 01:37