Roth 401(k) vs 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401(k) is funded with pre-tax dollars — you take a deduction now and pay ordinary income tax on every dollar withdrawn in retirement.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.

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 in the year contributed and is reported on Form W-2 Box 12 with code AA (Roth match). Most plans still default to pre-tax matching, so check with HR if Roth match is available.

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.

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).

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.

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.

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.

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.

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.

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.

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.

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.