Originally published July 2016. Last updated March 2026.
If your employer offers both a traditional and Roth 401(k), you have a choice that will affect your taxes for decades. Here’s how they compare.
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The Core Difference
Traditional 401(k): Contributions are pre-tax. They reduce your taxable income now. You pay income tax when you withdraw in retirement.
Roth 401(k): Contributions are after-tax. No tax break now. Withdrawals in retirement (both contributions and earnings) are tax-free, as long as you’ve had the account for at least five years and are 59 and a half or older.
2025 Contribution Limits (Same for Both)
- Under age 50: $23,500
- Ages 50-59 and 64+: $31,000
- Ages 60-63: $34,750 (new super catch-up)
You can split contributions between traditional and Roth in any ratio, as long as the total doesn’t exceed the limit. Your employer’s matching contributions always go into the traditional (pre-tax) side, regardless of your election.
Big Change: No More Roth 401(k) RMDs
Before 2024, Roth 401(k)s had required minimum distributions, unlike Roth IRAs. The SECURE 2.0 Act eliminated Roth 401(k) RMDs starting in 2024. This was a major disadvantage that no longer exists.
Now Roth 401(k) money can stay invested and grow tax-free for your entire lifetime, just like a Roth IRA. No need to roll it into a Roth IRA to avoid RMDs.
When Traditional Makes More Sense
- You’re at peak earning years in a high tax bracket (32%, 35%, 37%)
- You expect your income (and tax rate) to be lower in retirement
- You need the immediate tax deduction to free up cash flow
- You’re close to retirement and want to maximize the deduction during your highest-income years
When Roth Makes More Sense
- You’re early in your career at a lower tax bracket
- You expect tax rates to increase in the future (the TCJA’s lower brackets are set to expire after 2025)
- You want tax-free income in retirement to manage your bracket
- You have a long time horizon for tax-free growth
- You want to leave tax-free money to heirs (inherited Roth 401(k) distributions are tax-free)
The Best Answer: Split Your Contributions
If you’re unsure, contribute to both. Put some in traditional for the current tax break, and some in Roth for tax-free income later. In retirement, you can draw from whichever bucket makes sense that year:
- High-income year? Draw from Roth (no additional tax).
- Low-income year? Draw from traditional (pay tax at the lower rate).
This kind of tax diversification is one of the most underused strategies in retirement planning.
FAQ
Can I convert my traditional 401(k) to a Roth 401(k)?
Some plans allow in-plan Roth conversions. You’ll pay income tax on the converted amount. Alternatively, when you leave the employer, you can roll the traditional 401(k) into a Roth IRA (also taxable as income).
Does my employer match go into Roth too?
No. Employer matching contributions always go into the pre-tax (traditional) portion of the plan, regardless of your election.
What if I’m not sure which bracket I’ll be in during retirement?
That uncertainty is exactly why splitting contributions is a good default. You’re hedging against an unknowable future.
Schedule a free 20-minute consultation to figure out the right split for your situation.
R.L. Brown Wealth Management
106 W Vine St, Suite 300, Lexington, KY 40507
859.317.5889
