Two Neighbors Retired With $600,000 Each. His Is in a Roth. Hers Is in a 401(k). Only One of Them Actually Has $600,000
Same balance, same retirement age, but one neighbor controls how much tax the IRS collects and the other doesn't. The account type makes all the difference, and most retirees are holding the one that leaves them with less than they…
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Two neighbors retire with $600,000 each. His is in a Roth account, hers in a traditional 401(k), but the same balance masks different tax treatments that determine how much each can spend, how Social Security gets taxed, and whether the IRS requires withdrawals.
Where a $600,000 Balance Ranks Among Retirement Savers
A $600,000 account is larger than what most retirement savers hold. According to Fidelity, the average 401(k) held by someone between 65 and 69 years old is $251,400. Averages get pulled up by the biggest accounts. If nine people each have $100,000 and a tenth person has $5 million, the average works out to $590,000, but the median (the person in the middle) still has $100,000. So the typical retiree probably has less than the average suggests, which remains an important consideration.
Saving for a long time without a break changes the picture. Fidelity reports that people who contributed continuously for 15 years had an average balance of $613,200. That puts the two neighbors near that group of long-term savers.
How Taxes Change What Each Neighbor Can Spend
Money in a traditional 401(k) is taxed when you withdraw it. A Roth works the opposite way: contributions are made with after-tax dollars, and withdrawals are generally tax-free once the owner is at least 59½ and the money has been in the account for at least five years. His balance is available money. Hers includes an unpaid tax bill.
The size of that bill depends on her tax bracket. The standard deduction for single filers in 2026 is $16,100. It applies a 12% rate to taxable income above $12,400 and 22% above $50,400. At a 12% tax rate, her $600,000 buys about as much as $528,000 in a Roth. At 22%, that drops to $468,000, which is $132,000 less than his.
Why Social Security Gets Taxed More for One Neighbor
Most retirees also collect Social Security, and each account affects it differently. Under federal rules, a single filer with provisional income between $25,000 and $34,000 can owe tax on up to 50% of their benefits. Above $34,000, up to 85% of benefits can be taxed. Withdrawals from a traditional 401(k) count toward provisional income. Qualified Roth withdrawals are left out of the calculation.
Taking 4% annually from $600,000 comes to $24,000. For her, that amount counts toward provisional income alongside half her Social Security benefit, potentially making more of it taxable. For him, the withdrawal doesn’t affect his benefit tax. Provisional income could rise further for retirees near the thresholds, with the 2027 cost-of-living adjustment on track for 3.3%.
Required Withdrawals Apply to Only One Account
Required minimum distributions from a traditional 401(k) start at age 73. The IRS life-expectancy factor at that age is 26.5, so a $600,000 balance requires a first withdrawal of about $22,642. She must take it and pay tax even if she doesn’t need the money. Roth 401(k)s have had no required withdrawals since 2024, so he can leave his investments invested indefinitely.
Which Account Most Workers Are Actually Using
Most workplace savers are in her position. Fidelity reports overall Roth 401(k) use at 17.5% of participants, with 20.0% for Gen Z and 12.2% for Baby Boomers. Those closest to retirement use Roth accounts least.
New rules are moving more money into Roth accounts. Starting this year, workers 50 and older who made more than $150,000 in 2025 have to put their catch-up contributions into a Roth 401(k). In 2026, catch-up contributions can be up to $8,000. The quieter opportunity is the gap between someone’s last paycheck and their first required withdrawal, when converting pretax dollars is often cheapest (we sized up that window in a free Roth guide here).
What Each $600,000 Is Really Worth
A traditional 401(k) balance is a before-tax figure. What she can spend depends on her tax bracket, Social Security income, and required withdrawals. His $600,000 is closer to its stated value. Someone in a higher bracket while working and lower in retirement may benefit from pretax savings. The key difference is when each paid tax and at what rate.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
