Retirement

Traditional 401(k) vs Roth 401(k)

Compare Traditional and Roth 401(k) plans to choose the right tax treatment for your retirement savings.

Overview

Both options share the same contribution limit and employer match rules, but they differ in when you pay income tax. Traditional reduces your taxable income today; Roth gives you tax-free withdrawals in retirement. Your current vs. future tax bracket is the deciding factor.

Feature

Traditional 401(k)

Roth 401(k)

2025 Contribution Limit

$23,500 ($31,000 if 50+)

Tax on Contributions

Pre-tax — reduces current income

After-tax — no current deduction

Tax on Withdrawals

Taxed as ordinary income

Tax-free if qualified

Income Limits

None

Required Minimum Distributions

Required at age 73

No RMDs (rule changed in 2024)

Employer Match Treatment

Always pre-tax

Can be Roth or pre-tax (post-SECURE 2.0)

Best For

High earners now expecting lower retirement bracket

Younger workers, current low bracket, expect higher later

Choose Traditional 401(k) when...

Choose Traditional if you are in a high tax bracket now, want immediate tax savings, and expect to be in a lower bracket in retirement.

Choose Roth 401(k) when...

Choose Roth if you are early-career, in a low or moderate bracket, or expect tax rates (yours or the federal code) to be higher later.

Our Verdict

If you expect higher taxes in retirement — common for younger workers and high earners outside their peak — the Roth 401(k) usually wins. If you are at the top of your career and expect to drop a bracket or two in retirement, the Traditional 401(k) saves more in lifetime taxes. Splitting contributions hedges the bet.

Frequently Asked Questions

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

When should I choose Traditional 401(k) over Roth 401(k)?

Choose Traditional if you are in a high tax bracket now, want immediate tax savings, and expect to be in a lower bracket in retirement.

When should I choose Roth 401(k) over Traditional 401(k)?

Choose Roth if you are early-career, in a low or moderate bracket, or expect tax rates (yours or the federal code) to be higher later.

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