What is the difference between a 401(k) and a Roth 401(k)?

A traditional 401(k) uses pre-tax dollars — you reduce taxable income now and pay taxes on withdrawals in retirement. A Roth 401(k) uses after-tax dollars — you get no upfront deduction but withdrawals in retirement are completely tax-free, including all growth.

Which is better, a 401(k) or Roth 401(k)?

Choose a traditional 401(k) if you expect to be in a lower tax bracket in retirement than you are today. Choose a Roth 401(k) if you expect to be in the same or higher bracket in retirement, or if you are early in your career with many years for tax-free growth to compound.

Is there an income limit for a Roth 401(k)?

No. Unlike a Roth IRA, there is no income limit to contribute to a Roth 401(k). Any employee with access to a Roth 401(k) option in their workplace plan can contribute regardless of income.

Do Roth 401(k)s have required minimum distributions?

No. SECURE 2.0 eliminated required minimum distributions (RMDs) for Roth 401(k)s starting in 2024. You are no longer required to take withdrawals from a Roth 401(k) at any age, unlike traditional 401(k)s which require RMDs starting at age 73.

Can I contribute to both a traditional and Roth 401(k)?

Yes, if your plan allows both options. Your total combined contributions cannot exceed $23,500 in 2026 (or $31,000 if you are 50 or older). You can split the contribution any way you choose between the two account types.

Where does the employer match go in a Roth 401(k)?

Employer matching contributions always go into a traditional (pre-tax) account, even if your own contributions go into a Roth 401(k). When you withdraw the employer match in retirement, those funds will be taxed as ordinary income.

401(k) vs Roth 401(k) 2026: Which Should You Choose?

The 2026 401(k) contribution limit is $23,500 — and your single most important decision is whether those dollars go in pre-tax (traditional) or after-tax (Roth). Both accounts shelter your investments from annual taxes. The difference is when you pay the IRS.

Quick Comparison: 401(k) vs Roth 401(k)

Feature	Traditional 401(k)	Roth 401(k)
Contributions	Pre-tax	After-tax
2026 limit	$23,500	$23,500
Catch-up (age 50–59 & 64+)	+$7,500 → $31,000	+$7,500 → $31,000
Super catch-up (age 60–63)	+$11,250 → $34,750	+$11,250 → $34,750
Income limits to contribute	None	None
Tax on growth	Deferred	Tax-free
Tax on withdrawals	Ordinary income	Tax-free
Required minimum distributions	Age 73	None (after SECURE 2.0)
Employer match tax treatment	Pre-tax	Pre-tax

How the Tax Treatment Works

Traditional 401(k): Tax Now vs Tax Later

With a traditional 401(k), every dollar you contribute reduces your taxable income in the year you contribute. On a $90,000 salary, contributing $23,500 brings your federal taxable income down to $66,500, potentially saving you $5,170 or more in federal taxes at the 22% bracket.

You pay taxes when you withdraw funds in retirement. If you are in a lower bracket then — say 12% or 22% — you come out ahead by deferring.

Worked example: A 45-year-old earning $90,000 contributes $23,500 traditional. Federal tax saving this year: ~$5,170. That money instead stays invested and grows. At retirement in the 15% effective tax bracket, withdrawals are taxed at a lower rate than the 22% bracket that was avoided.

Roth 401(k): Pay Tax Now, Never Again

With a Roth 401(k), you contribute money that has already been taxed. The account then grows completely tax-free. Qualified withdrawals in retirement — both your contributions and decades of gains — are 100% tax-free.

Worked example: A 28-year-old in the 22% bracket contributes $10,000 Roth. That $10,000 grows to $76,122 over 35 years at 6% annually. Every dollar of that $76,122 is withdrawn tax-free in retirement. Had it been a traditional 401(k), withdrawals at a 22% rate would cost $16,747 in taxes on the gains alone.

Who Should Choose a Traditional 401(k)?

A traditional 401(k) tends to win if:

You are in the 32%, 35%, or 37% federal bracket today and expect to be in 22% or lower in retirement
You are close to retirement and have few years for Roth growth to compound
You want to lower your AGI now to qualify for income-sensitive deductions or credits (child tax credit, ACA subsidies, student loan interest deduction)
Your state has high income taxes now but you plan to retire in a no-tax state

Who Should Choose a Roth 401(k)?

A Roth 401(k) tends to win if:

You are early in your career in the 10% or 12% bracket — paying taxes now is cheap
You expect Congress to raise tax rates in the future (Roth locks in today’s rates)
You want tax diversification in retirement alongside traditional accounts
You value no RMDs — Roth 401(k)s have no required minimum distributions starting in 2024

Splitting Contributions Between Both

If you cannot confidently predict your future tax bracket — and most people cannot — splitting contributions between traditional and Roth is a rational hedge. For example, contributing $12,000 traditional and $11,500 Roth gives you both a current-year tax break and future tax-free withdrawals.

What About the Employer Match?

Employer matching contributions always land in a traditional (pre-tax) account, regardless of your own contribution type. When you retire and withdraw the matched funds, you will owe ordinary income tax on them. This is worth knowing: even all-in Roth 401(k) contributors will have some taxable money at retirement from the employer match.

2026 Contribution Limits at a Glance

Age Group	Employee Limit	Total (Employee + Employer)
Under 50	$23,500	$70,000
50–59 and 64+	$31,000	$77,500
60–63 (super catch-up)	$34,750	$81,250

The combined employee-plus-employer limit for 2026 is $70,000 (under age 50).

401(k) vs Roth 401(k) vs Roth IRA

If you have access to a Roth 401(k) at work, how does it compare to opening a Roth IRA?

Roth 401(k): Employer match available; $23,500 limit; no income limits
Roth IRA: No employer match; $7,000 limit; income limits apply ($150,000–$165,000 single in 2026)
Best approach: Max employer match first, then consider a Roth IRA for additional flexibility and investment choice

See the full 401(k) guide for contribution strategies, rollover rules, and investment selection.

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy