Retirement tax · comparison
Roth 401(k) vs. Traditional 401(k)
Updated 2026-10-21 · Gregory Garone, CEPA®
Short answer: Traditional contributions cut your tax bill today and are taxed when withdrawn. Roth contributions are taxed today and qualified withdrawals are tax-free. If you expect a higher tax rate in retirement than now, Roth tends to win; if you expect a lower one, traditional tends to win. Many people split contributions because the future rate is unknown.
Roth 401(k) vs. Traditional 401(k), side by side
| Question | Roth 401(k) | Traditional 401(k) |
|---|---|---|
| Tax on contributions | Made with after-tax pay | Reduce taxable income this year |
| Tax on qualified withdrawals | Tax-free after age 59½ and five years | Taxed as ordinary income |
| 2026 employee limit | $24,500 combined with traditional, plus catch-up | $24,500 combined with Roth, plus catch-up |
| Required minimum distributions | None for the account owner since 2024 | Required starting at 73, or 75 if born in 1960 or later |
| Employer match | Usually pre-tax; some plans now allow Roth matching | Pre-tax |
| Effect on today’s income-based items | Does not lower adjusted gross income | Lowers adjusted gross income, which can help with credits and deductions |
When each one tends to fit
Roth 401(k) may fit when
- You are early in your career or in a low bracket this year.
- You expect large pre-tax balances and RMDs later.
- You want tax-free money for heirs or for flexibility in retirement.
Traditional 401(k) may fit when
- You are in your peak earning years in a high bracket.
- You expect retirement income to be lower than your income today.
- Lowering this year’s adjusted gross income has extra value to you.
An example
Illustration only: someone in the 32% bracket who contributes $24,500 to the traditional side saves about $7,840 of federal tax this year. If those dollars are later withdrawn in the 22% bracket, the trade worked in their favor. If heavy RMDs and a surviving spouse filing single push withdrawals into the 32% bracket or higher, the Roth side would have done as well or better.
Questions to bring to your CPA or advisor
- What bracket are we in now, and what bracket do we expect our RMDs to land in?
- How large are our pre-tax balances already?
- Does our plan offer Roth matching or in-plan Roth conversions?
- Am I a higher earner whose 2026 catch-up contributions must go to the Roth side?
Common questions
Can I contribute to both a Roth and a traditional 401(k)?
Yes, if the plan offers both. The $24,500 employee limit for 2026 is shared between them.
Is there an income limit for Roth 401(k) contributions?
No. Unlike a Roth IRA, a Roth 401(k) has no income limit for contributions.
Do Roth 401(k) accounts have required minimum distributions?
Not for the original owner. SECURE 2.0 removed RMDs from Roth accounts in employer plans starting in 2024.
What happens to Roth 401(k) money when I leave my job?
It can be rolled into a Roth IRA. The Roth IRA’s own five-year clock applies to the rolled amount if that IRA is newer.
Sources and limitations
More comparisons
- Convert to Roth vs. Keep it traditional
- Charitable remainder trust vs. Donor-advised fund
- Charitable lead trust vs. Charitable remainder trust
- Earnout vs. Seller note
- Use NUA vs. Roll it all to an IRA
- Claim at 62 vs. Wait until 70
- Take the lump sum vs. Take the annuity
- Donor-advised fund vs. Private foundation
- GRAT vs. Sale to an IDGT
- Sell to an ESOP vs. Sell to a third party
- All comparisons
Weighing this choice for real?
Tell us what you are deciding and when. Greg will reply personally.
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