Roth 401(k) vs Traditional 401(k)

Same plan, same $24,500 elective-deferral limit, opposite tax timing. Which one wins depends on your current marginal rate vs your retirement marginal rate — and on a half-dozen secondary effects (employer match, in-plan conversions, RMDs, IRMAA stacking).

Side-by-side comparison

Feature	Traditional 401(k)	Roth 401(k)
Tax deduction on contribution	Yes — reduces W-2 Box 1	No — funded with after-tax dollars
Tax on qualified withdrawal	Ordinary income (10–37%)	Tax-free (post-59½, 5-yr rule)
2026 elective-deferral limit	$24,500 (shared with Roth side)	$24,500 (shared with Traditional)
Age 50+ catch-up (2026)	+$8,000	+$8,000 (mandatory Roth if prior-year wages > $150,000)
Age 60–63 enhanced catch-up	+$11,250 (SECURE 2.0)	+$11,250 (SECURE 2.0)
Employer match treatment	Always pre-tax (taxable on withdrawal)	Optional Roth (taxable in year of match) per SECURE 2.0 §604
RMDs at 73	Yes — mandatory	No — exempt starting 2024
In-plan Roth conversion allowed?	Source — convert to Roth side	Destination — receives the conversion
Income limit to contribute	None	None (unlike Roth IRA)
Triggers IRMAA at withdrawal?	Yes (counts in MAGI)	No
Triggers SS taxation?	Yes (counts in provisional income)	No

Worked example: $23,500 contribution, 30 years at 7%

Three earners each contribute the 2025 max of $23,500. Traditional gives a current-year tax refund at the contribution-year marginal rate, which is invested in a taxable brokerage at 6% net (assumes 22% effective tax on returns). Roth pays tax now and grows tax-free. All withdrawn at age 67 at the assumed retirement rate:

Earner	Now / retire rate	Roth balance at 67	Traditional after-tax at 67	+ side brokerage from refund	Winner
$80k earner	22% / 22%	$178,800	$178,800	$29,700 brokerage	Tie (rate match) — Roth slight edge for RMD/IRMAA optionality
$150k earner	24% / 22%	$178,800	$183,300	$32,400 brokerage	Traditional ahead by ~$36,900 lifetime
$300k earner	35% / 24%	$178,800	$209,200	$47,200 brokerage	Traditional ahead by ~$77,500 lifetime

Assumes refund is reinvested in a taxable brokerage; without the refund-investment assumption Roth and Traditional break even when contribution-year and retirement marginal rates are equal. The Roth advantage grows when retirement income includes IRMAA-triggering or SS-taxation-triggering withdrawals.

2025 and 2026 contribution limits

Roth and Traditional sides of a 401(k) share every limit below — the elective-deferral cap applies to your combined contributions, split in any ratio. All figures are from IRS Notice 2025-67 (2026 cost-of-living adjustments):

Limit	2025	2026
Employee elective deferral (§402(g))	$23,500	$24,500
Age 50+ catch-up (§414(v)(2)(B)(i))	$7,500	$8,000
Age 60–63 super catch-up (SECURE 2.0 §109)	$11,250	$11,250
Max deferral, age 50–59 or 64+	$31,000	$32,500
Max deferral, age 60–63	$34,750	$35,750
Total additions limit, employee + employer (§415(c))	$70,000	$72,000

The age 60–63 super catch-up replaces (does not stack on) the age-50 catch-up in that four-year window. Catch-up contributions do not count against the §415(c) total-additions limit. From 2026, catch-ups must be Roth if your prior-year wages from the employer exceeded $150,000 (SECURE 2.0 §603).

Break-even: your rate now vs your rate later

The whole decision compresses to one comparison: the tax rate you avoid today (Traditional) vs the rate you avoid in retirement (Roth). Two scenarios computed with our federal tax engine on 2026 brackets (single filer, standard deduction):

Scenario	$150,000 earner, $40,000 retirement income	$45,000 earner, $150,000 retirement income
Amount deferred	$24,500 (2026 max)	$10,000
Marginal rate today	24%	12%
Marginal rate in retirement	12%	24%
Federal tax a Traditional deferral saves today	$5,880	$1,200
Federal tax due withdrawing those dollars in retirement	$2,940	$2,400
Net edge on the contribution itself	Traditional, by $2,940	Roth, by $1,200

Read the last row as the direction of the rate arbitrage, not a lifetime dollar total — growth multiplies both sides equally, so when contribution-year and retirement rates match, the outcomes match. The $150,000 earner defers at 24% and withdraws at 12%, so Traditional keeps the spread; the $45,000 earner is the mirror image. Model your own numbers in the 401(k) calculator.

Rollovers, RMDs, and the 5-year rule

Beyond tax timing, four operational rules genuinely differ between the two sides of the plan:

Rule	Traditional 401(k)	Roth 401(k)
Lifetime RMDs	Required from age 73 (75 for those born 1960 or later; 1959 births unsettled)	None since 2024 — SECURE 2.0 §325 exempted designated Roth accounts
Where it can roll	Traditional IRA or new employer plan tax-free; to any Roth account only as a taxable conversion	Another Roth 401(k)/403(b) or a Roth IRA only — never back to pre-tax
5-year rule on earnings	Not applicable — every withdrawal is ordinary income regardless of holding period	Earnings are tax-free only after 5 years of plan participation AND age 59½; rolling to a Roth IRA restarts on the IRA's own clock
Employer match	Default destination — pre-tax, taxed on withdrawal	Plans may offer Roth match (SECURE 2.0 §604) — taxable to you in the year received, then grows tax-free

Frequently asked questions

What's the headline difference between a Roth 401(k) and a Traditional 401(k)?

A Traditional 401(k) is funded with pre-tax dollars — you take a deduction now and pay ordinary income tax on every dollar withdrawn in retirement. A Roth 401(k) is funded with after-tax dollars — no deduction now, but qualified distributions (post-59½ AND 5-year holding) are 100% tax-free. Same employer plan, same $24,500 (2026) elective-deferral limit, opposite tax timing.

How does the employer match work in a Roth 401(k)?

Employer matching contributions can now be deposited directly into the Roth side of the 401(k) under SECURE 2.0 Section 604 (effective 2023+). If you elect this, the match is taxable as ordinary income to you for the year it is allocated to your account. It is reported on Form 1099-R with code G in box 7, not on your W-2 (IRS Notice 2024-2, Q&A L-9), and nothing is withheld from it for income tax, Social Security or Medicare, so plan to cover the extra tax yourself. Most plans still default to pre-tax matching, so check with HR if Roth match is available.

What are the 2025 and 2026 contribution limits?

For 2025, the elective-deferral limit is $23,500 (under 50), $31,000 (age 50–59), and $34,750 (enhanced catch-up, age 60–63 under SECURE 2.0 Section 109). For 2026, those amounts step up to $24,500 / $32,500 / $35,750 per IRS Notice 2025-67. Roth and pre-tax contributions share the same limit — you can split between them in any ratio.

Do Roth 401(k)s have RMDs?

No — starting in 2024, Roth 401(k) accounts are exempt from Required Minimum Distributions while the participant is alive (SECURE 2.0 Section 325). This matches the long-standing Roth IRA treatment. Traditional 401(k) accounts still have RMDs starting at age 73 (rising to 75 in 2033).

What is an in-plan Roth conversion?

Many 401(k) plans allow you to convert pre-tax 401(k) balances into Roth 401(k) balances inside the same plan, paying ordinary income tax on the converted amount in the conversion year. There is no income limit and no annual cap on the conversion itself. The IRS covers in-plan Roth conversions in in-plan Roth rollover guidance. Best executed in low-income years.

Which one wins for a high earner?

For a 35%+ marginal-rate earner today who expects a 22–24% rate in retirement, Traditional 401(k) usually wins because the deduction is taken at a higher rate than the eventual withdrawal tax. The break-even flips when retirement income includes NIIT-triggering investment income, IRMAA-triggering RMDs, or a mandatory state-tax move. Most high earners should use Traditional 401(k) and put excess savings into a separate Backdoor Roth IRA — see our backdoor Roth calculator.

Which one wins for a younger or lower-income saver?

Roth 401(k) wins decisively when your current marginal rate is below your expected retirement rate. A 22%-bracket worker today who saves aggressively and expects to retire in the 24% or 32% bracket should pay tax now. Roth also wins for anyone wanting tax-rate diversification — having both pre-tax and Roth balances at retirement gives you a withdrawal-source choice each year to manage RMDs, IRMAA, and Social Security taxation.

Should I use both?

Yes — most workers should split contributions to manage tax-rate uncertainty. A common ordering: (1) contribute enough to Traditional 401(k) to capture the full employer match; (2) max a Roth IRA ($7,500 in 2026) directly or via Backdoor Roth; (3) split remaining 401(k) capacity 50/50 between Roth and Traditional unless your marginal-rate forecast is strong in one direction. Run our 401(k) calculator to model both sides.

What is the total 401(k) limit including employer contributions?

The Section 415(c) annual-additions limit — employee deferrals + employer match + any after-tax contributions combined — is $70,000 for 2025 and $72,000 for 2026 per IRS Notice 2025-67. Age-50+ catch-up contributions do NOT count against this limit, so a 50-year-old can effectively reach $80,000 in 2026. The gap between your deferrals-plus-match and the §415(c) ceiling is exactly the space a mega backdoor Roth exploits.

Is the age-50 catch-up required to be a Roth contribution?

For high earners, yes — starting with 2026 plan years, SECURE 2.0 Section 603 requires catch-up contributions to be designated Roth if your prior-year Social Security wages from the plan sponsor exceeded the §414(v)(7)(A) threshold, which is $150,000 of 2025 wages for 2026 catch-ups per IRS Notice 2025-67. IRS Notice 2023-62 delayed enforcement through 2025, so 2026 is the first year the mandatory-Roth rule actually bites. Below the wage threshold, you can still choose pre-tax catch-ups.

Does the Roth 401(k) 5-year clock carry over when I roll to a Roth IRA?

No — the Roth 401(k) participation clock does not transfer. Once the money lands in a Roth IRA, the Roth IRA's own 5-year clock governs whether earnings distributions are qualified. If the receiving Roth IRA is brand new, a fresh 5-year period starts even if the Roth 401(k) was 10 years old. Practical fix: open and fund any Roth IRA (even $1 via backdoor) years before you expect to roll over, so the IRA clock is already running.

Can I roll a Roth 401(k) into a Traditional 401(k) or Traditional IRA?

No. Roth money can never be converted back to pre-tax — a Roth 401(k) can only roll to another designated Roth account (a new employer's Roth 401(k)/403(b)) or to a Roth IRA, per the IRS rollover chart. Traditional 401(k) balances are more flexible: they can roll tax-free to a Traditional IRA or a new employer plan, or roll to a Roth account as a taxable conversion. Direction of travel is one-way — pre-tax to Roth (taxable), never Roth to pre-tax.

Try the relevant calculators

401(k) Calculator — model employer match, Roth vs Traditional split, and projected balance
Roth vs Traditional IRA — IRA-side comparison with income limits
Backdoor Roth Calculator — high earners' workaround for direct Roth IRA contribution
Mega Backdoor Roth Calculator — after-tax 401(k) contributions up to the §415(c) total-additions limit, converted to Roth
Roth Conversion Calculator — model an in-plan or IRA Roth conversion
RMD Calculator — Required Minimum Distributions starting at age 73
SS Benefits Taxability — how 401(k) withdrawals push Social Security into the 50/85% taxable bands
IRMAA Calculator — Medicare premium surcharges driven by Traditional 401(k) RMDs

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