Full retail, it's much cheaper over two years and I'm not tied down to anything.
It's a little less than $500 extra when I get the phone, but I pay $50+ a month less.
Basically if it's a $500 difference, it can't be more than $21 more a month to be on a contract or you're wasting money. Also don't forgot about how much you'll pay in taxes and fees compared to a prepaid plan that includes them.