Roth 401(k) vs Traditional 401(k)
Choosing between a Roth and Traditional 401(k) is one of the most important retirement decisions you will make. The key difference is when you pay taxes: now (Roth) or later (Traditional).
Key Differences
| Feature | Traditional 401(k) | Roth 401(k) |
|---|---|---|
| Contributions | Pre-tax (reduces taxable income) | After-tax (no tax break now) |
| Growth | Tax-deferred | Tax-free |
| Withdrawals in Retirement | Taxed as ordinary income | Tax-free (if qualified) |
| RMDs | Required at age 73 | No RMDs (SECURE 2.0 Act) |
| 2026 Contribution Limit | $24,500 | $24,500 |
| Income Limits | None | None (unlike Roth IRA) |
| Best For | Higher tax bracket now than retirement | Lower tax bracket now than retirement |
When to Choose Traditional
- You are in a high tax bracket now and expect a lower bracket in retirement
- You want to reduce your current taxable income
- You are close to retirement and need the immediate tax benefit
- You live in a high-tax state now but plan to retire in a no-income-tax state
When to Choose Roth
- You are early in your career with a lower salary (and tax bracket)
- You believe tax rates will be higher in the future
- You want tax-free income in retirement for flexibility
- You want to avoid Required Minimum Distributions
- You want to leave tax-free money to heirs
Frequently Asked Questions
Yes! You can split contributions between Roth and Traditional 401(k) within the same plan. The combined total cannot exceed $24,500 for 2026 ($32,500 if 50+). Many advisors recommend a mix for tax diversification.
Employer match contributions always go into a Traditional (pre-tax) account, even if your own contributions are Roth. This means withdrawals of employer match money will be taxed as ordinary income in retirement.
No! Unlike a Roth IRA, there is no income limit for Roth 401(k) contributions. High earners who cannot contribute to a Roth IRA can still use a Roth 401(k).