Roth vs traditional 401(k): which one, and when?

You are in your highest-earning years, and your plan's enrollment page has two boxes where it used to have one: traditional and Roth. The choice in Roth vs traditional 401(k) is about when you pay the tax. A traditional contribution is not subject to income tax now and is taxed when you take it out. A Roth contribution is taxed now, and qualified withdrawals are not taxed.¹ Which one leaves you more to live on depends on your tax rate now compared with your rate when the money comes out.

This page explains what each account is, the limits for 2026, what happens to your employer's match, and how to compare the two when you have ten or fifteen working years left. The arithmetic and the citations are in the detailed version below.

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

Both are parts of the same workplace plan, and both come out of your paycheck. They differ in two places: your paycheck now and your withdrawals later.

With a traditional 401(k), also called a pre-tax 401(k), your contribution is taken from your pay before income tax. You pay no income tax on it this year. Everything you withdraw later, your contributions and their growth, is taxed as income.¹

With a Roth 401(k), your contribution is taken from your pay after income tax. You get no tax break this year. Withdrawals of your contributions and their growth are not taxed if they are qualified. That generally means the account is at least five years old and you are 59½ or older.²

You do not have to pick one. You can split each year's contributions between the two in any proportion.³

Is a Roth 401(k) pre-tax or after-tax?

A Roth 401(k) is after-tax. The money goes in after income tax has been taken from it, and it is included in your taxable pay for the year.⁴ A traditional 401(k) is pre-tax. Some people say "post-tax" for Roth, and it means the same thing as after-tax.

After-tax does not mean you can take the money out whenever you like. The plan's limits on withdrawals apply to both kinds. If you take growth out of a Roth 401(k) before the withdrawal is qualified, that growth is taxed.⁴

How much can you contribute in 2026?

The limit is the same for both kinds, and it is one limit shared between them. In 2026 you can put in up to $24,500 of your pay, traditional and Roth combined.⁵

If you are 50 or older, you can add a catch-up contribution of up to $8,000. If you turn 60, 61, 62 or 63 during 2026, the catch-up limit is $11,250.⁵

A newer rule applies to higher earners. If your wages from the employer that sponsors the plan were more than $150,000 in 2025, any catch-up contributions you make in 2026 have to be Roth.⁶ Your regular contributions, up to $24,500, can still be either kind.

If your plan offers one, a Roth 401(k) has no income limit. You can use it at any income, which is not true of a Roth IRA.⁷

What happens to your employer's match?

Your employer can match your contributions whichever kind you choose. Under the long-standing rule, the match goes into the pre-tax side of the plan even when your own contributions are Roth, and you pay income tax on it when you withdraw it. The law now also lets a plan offer you the choice of taking the match as Roth, and a Roth match is taxed in the year it is contributed.⁸ Your plan's documents say which applies to you.

Roth vs traditional 401(k): which leaves you more?

Invested the same way, the two accounts grow the same way. If each one costs you the same amount of take-home pay, the only difference is the tax rate. For the Roth it is your rate now. For the traditional account it is your rate when the money comes out.

Here is a hypothetical example. Suppose you are 55, you are in the 32% bracket, and you set aside $20,000 of this year's pay. In the example the money grows 5% a year for ten years. That growth rate is an assumption for the illustration, not a forecast, and it does not change which account comes out ahead.

If the $20,000 goes into the traditional account, none of it is taxed now. In the example it is $32,578 in ten years, and it is taxed when you take it out.

If you choose Roth at the same cost to your paycheck, $6,400 goes to tax now and $13,600 goes into the account. In the example it is $22,153 in ten years, and no tax is due on it.⁹

In the example the two tie when your rate in retirement equals your rate today. A lower rate later favors the traditional account. A higher rate later favors the Roth. Our Roth or traditional 401(k) calculator runs the same comparison with your own contribution, rates and years.

Which one tends to fit in your last working years?

No one knows their tax rate ten or twenty years from now. This is a judgment, and the facts that bear on it are your own.

When the traditional account tends to fit. If you are in a high bracket now and expect less income after you stop working, the tax you skip today is at a higher rate than the tax you pay later. Many people in their peak earning years are in this position.

When the Roth tends to fit. Your rate in retirement can be as high as your rate today, or higher. That can happen when you have a pension, when your pre-tax balances are already large, or when one of you outlives the other and files as a single person. The widow's penalty explains that last case. Qualified withdrawals from a Roth account also do not add to your taxable income in the year you take them.²

If you live in Illinois. Illinois taxes your pay at 4.95%, and a Roth contribution is part of your pay. A traditional contribution is left out of the income Illinois taxes, and Illinois does not tax withdrawals from a 401(k) or an IRA later. If you work and retire in Illinois, the state does not tax the traditional account going in or coming out. It taxes the Roth once, going in.¹¹

What the traditional account leads to. Money in a traditional 401(k) does not stay untaxed for life. Once you reach the starting age, 73 or 75 depending on your birth year, the law generally requires a withdrawal every year, and each one is taxed. A Roth 401(k) has no required withdrawals while you are alive.¹⁰ Our guide to RMDs explains the rules, and Can you avoid taxes on RMDs? shows how much tax they can add.

What the Roth costs. You pay the tax now, at your highest rates, and you cannot get it back if your rate turns out lower later. In the example, choosing Roth and then withdrawing in the 24% bracket leaves you $2,606 less.

Many people split their contributions between the two for this reason. With a split, whichever way your later tax rate turns out, part of your savings was taxed at the better rate.

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With a split, whichever way your later tax rate turns out, part of your savings was taxed at the better rate.

How is this different from Roth vs traditional IRA?

The idea is the same, and the rules are different. An IRA is an account you open yourself, outside your employer's plan. The yearly limit is much smaller: $7,500 in 2026, or $8,600 if you are 50 or older.¹²

A Roth IRA also has an income limit, and a Roth 401(k) does not. In 2026 the amount you can contribute to a Roth IRA shrinks to nothing between $242,000 and $252,000 of income on a joint return, and between $153,000 and $168,000 for a single person.¹² What is a backdoor Roth IRA? explains what people above those limits do.

What goes wrong with the Roth or traditional choice?

These are the mistakes we see most often.

People pick one box when they enroll and never look at it again, even after their income changes.

People choose Roth in their highest-earning years because they heard Roth is better, and pay tax at 32% or more on money they could later take out at a lower rate.

People put everything in the traditional account for thirty years and reach retirement with no Roth money at all, so every dollar they take out is taxed.

People who earn over the wage threshold are surprised when their catch-up contributions become Roth and their take-home pay drops.

People assume the employer match is Roth because their own contributions are, and are surprised that it is taxed when it comes out.

People compare the two by today's tax break alone and do not count the required withdrawals the traditional balance will bring later.

People treat a Roth 401(k) and a Roth IRA as the same thing and think the income limit keeps them out of the Roth 401(k).

Where we fit in. We integrate tax considerations into your investment strategy and collaborate with estate attorneys and CPAs to ensure your plan is coordinated. We are not a law firm or accounting firm, so we do not provide legal or tax advice. Everything in this material is for educational purposes, based on primary sources. Before taking any action, please consult the appropriate professionals to apply these ideas to your situation.

You make this choice again every year you work, and you can change it. If you would like to look at your own rates, now and later, with someone, we are glad to have that conversation.