Should You Choose a Roth 401(k) Over a 401(k) for Retirement Savings?

Choosing how to invest in your 401(k) sounds simple, but it gets complicated quickly. You have to look at investment fees and estimated returns and try to figure out which makes the most sense for you.

You also have to make a choice that workers in decades past never had to: Should you save in a traditional 401(k) or a Roth 401(k)? It's an individual decision, and understanding the pros and cons of each account is key to making the right call.

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The big difference between traditional 401(k)s and Roth 401(k)s

Traditional 401(k)s and Roth 401(k)s have only one major difference: how they're taxed. Traditional 401(k)s give you a tax break in the year you make your contribution. For example, if you put $5,000 in a traditional 401(k) this year, your 2026 taxable income would decrease by $5,000. However, you'll owe ordinary income tax on all your contributions and any associated earnings in retirement.

Roth 401(k)s work the opposite way. You don't get any upfront tax break when you set that money aside, but then you're allowed tax- and penalty-free withdrawals in retirement, as long as you're at least 59 1/2 and have had your account for at least five years.

Each type has its advantages and drawbacks. You might prefer a traditional 401(k) if you're in a high tax bracket now and you expect your expenses to drop significantly in retirement. But if you expect your expenses in retirement to be similar to or higher than your income today, a Roth 401(k) could save you more money overall.

401(k) contribution limits you need to know in 2026

No matter which type of 401(k) you choose to save in, you must be careful not to exceed $24,500 in total contributions for 2026 if you're under 50. This limit applies to all your 401(k) contributions for the year, not to each account individually. If you decide to stash some money in a traditional 401(k) and some in a Roth 401(k), the combined total cannot exceed $24,500.

There's an exception for adults 50 and older. Those who will be aged 50 to 59 or 64 or older by the end of the year can save up to $32,500 in a 401(k) while those aged 60 to 63 by the end of the year can save up to $35,750. These additional contributions beyond the $24,500 standard limit are known as catch-up contributions.

Beginning this year, those earning $150,000 or more must make Roth 401(k) catch-up contributions, thanks to a recent law change. High earners who don't have access to a Roth 401(k) will have to stop making 401(k) contributions once they hit the standard $24,500 contribution limit. Those with lower incomes are still free to make traditional 401(k) catch-up contributions.

Keep in mind that retirement account contribution limits can change over time. Always remember to check the new rules before placing money in one of these accounts at the start of a new year.

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