A worked example

Traditional or Roth, and the match you shouldn’t leave

Priya, 32, single, earning $220,000. Her employer matches 50 cents on the dollar up to 6% of pay, and her plan document happens to allow after-tax contributions and in-plan conversions, which most do not.

“Should I be doing traditional or Roth in my 401(k)? And what is this mega backdoor everybody mentions?”

What the projection shows

The three questions turn out to have very different stakes. The match is the easy one. Contributing enough to get it leaves her $304,612 better off after tax than skipping the plan, which is why every forum thread agrees on “at least contribute up to the match.” The half-measure is also shown: deferring $6,600 gives up $3,300 of the $6,600 her employer would have paid, every year, and that money is never paid, not delayed. That path ends at $8,697,114 of after-tax wealth, versus $8,845,686 for maxing the traditional deferral. Nothing on a payslip, statement or tax return ever shows the half she didn't collect. Traditional versus Roth is a genuine bet, not a rule. All-traditional pays $1,090,587 in lifetime tax versus $1,273,652 for all-Roth. On her facts (32% bracket now, lower brackets in retirement) the deduction wins, and the 80/20 split lands between them at $1,122,374. Flip the bracket assumption and the answer flips too, which is the case for splitting rather than picking a side. The mega backdoor is the biggest lever and the least understood. It fills the gap between the regular deferral limit and the overall §415(c) limit with after-tax money that's converted to Roth at no tax cost. It pays the lowest lifetime tax of the four by a wide margin, $1,002,437, and ends about level with all-Roth on after-tax wealth, $9,112,048 versus $9,115,552. That's a rounding error on nine million, not a ranking. Both beat all-traditional's $8,845,686, simply because a dollar grows better sheltered in a Roth than in a taxable brokerage account earning the same return. The catch is cash flow. Her income has to comfortably exceed her spending every year she does it, and this projection assumes her salary keeps up with inflation. If her pay stays flat while the contribution limits keep rising, it becomes a strategy she can't afford.