What Is a Roth 401(k)?

A Roth 401(k) brings many of the benefits of a traditional employer-sponsored 401(k) retirement savings vehicle. However, a traditional 401(k uses pre-tax dollars, and you write off your contributions from your taxes. With a Roth 401(k), you contribute after-tax dollars, so you pay taxes now on your contributions, not when you withdraw from your account in retirement. Not all employees have access to Roth 401(k) plans, though, but those who do may be well served to enroll in one.

A financial advisor can help you put a retirement plan that meets your financial goals and income needs.

What Is a Roth 401(k) and How Does It Work?

With a Roth 401(k), you contribute after-tax dollars to a retirement savings account.

The type of retirement account you use depends on what your employer offers. You may decide to opt for a target-date fund, or you may build your own diversified portfolio of stocks, bonds, mutual funds and money market holdings.

You pay regular income taxes each year on the money you choose to contribute to your Roth 401(k). Then, when you retire, you can start taking distributions from the account. You won’t owe any tax payments on these withdrawals because you already paid taxes on your deposits. As you might expect, this can be helpful when you reach retirement age.

Not just anyone can open a Roth 401(k) because they are employer-sponsored retirement plans. The best way to find out if you can have one at your job is to ask your company’s HR department.

Roth 401(k) Rules and Contribution Limits

It’s pretty common for people to split their employer-sponsored savings between a traditional 401(k) and a Roth 401(k).

For this reason, the IRS states annual contribution limits in the aggregate. In 2026, you can contribute up to $24,500 in either a traditional 401(k) or a Roth 401(k). This is up from $23,500 in 2025 and $23,000 in 2024.

Workers 50 and over are allowed catch-up contributions of up to an extra $8,000 per year, adding up to a total of $32,500 ($31,000 in 2025 and $30,500 in 2024). Per the Secure Act 2.0, there is also a super catch-up contribution limit of $11,250 instead of $8,000, for a total of $19,250 in 2026.

If you choose to use both kinds of 401(k), the total amount you contribute across the two accounts cannot exceed the total contribution limit.

Taking tax-free distributions in retirement is the biggest benefit of the Roth 401(k). However, to take advantage of this benefit without an early withdrawal penalty,you must be at least 59.5 years old when you begin taking distributions from your account. In addition, you must have had the Roth 401(k) for at least five years.

Roth 401(k) plans also come with required minimum distribution (RMD) rules. Once you are age 73, you are required by law to begin taking distributions from your Roth 401(k).

Roth 401(k) vs. Traditional 401(k)

A Roth 401(k) can be an important part of your retirement plan.

Both Roth 401(k)s and traditional 401(k)s are extremely similar, but they’re best suited for different individuals.

If you want tax savings now, go for the traditional 401(k). Those looking for reduced taxes in retirement should opt for the Roth 401(k).

However, you don’t have to choose between a regular 401(k) and a Roth 401(k) because you can split your retirement savings between the two. Many choose to diversify tax risk in retirement through the use of both accounts because you can’t be sure exactly what your retirement income will be or how the tax law will have changed by then.

Roth 401(k) vs. Roth IRA

In both 2026, the annual contribution limit for Roth IRAs is $7,500, with an $1,100 catch-up contribution limit.. With contribution limits of $24,500, Roth 401(k) plans allow for contributions that more than triple those of Roth IRAs.

To diversify their retirement tax burden, some workers save with a regular 401(k) through their employer and then open a Roth IRA on their own. They do this to diversify their tax burden in retirement. Now that Roth 401(k)s are becoming more widely available from companies, more workers are wondering how to choose between a Roth 401(k) and a Roth IRA.

The IRS may choose for you. With the Roth 401(k), there is no income limit, so even high-net-worth individuals can contribute.

Roth IRAs, on the other hand, are designed with lower- and middle-income savers in mind.

2026 Roth IRA AGI Phase-Out

Filing Status	Phase-Out Range
Single	$81,000 – $91,000
Married couples filing jointly	$129,000 – $149,000
Spouses of covered employees with no workplace retirement plan of their own	$242,000 – $252,000
Married filing separately and covered by workplace plan	$0 – $10,000

Why a range? If your income is below the bottom of the range, you can contribute the full $7,500 to a Roth IRA. But if it’s within the range, you are subject to contribution phase-out rules, meaning that you won’t be able to contribute the full $7,500.

If your income is above the top of the phase-out range, IRS rules prohibit you from contributing to a Roth IRA. However, if your income excludes you from contributing to a Roth IRA but you still want to diversify your retirement tax risk, you can instead opt for a Roth 401(k) if your employer offers this option.

When a Roth 401(k) May Make Sense in a Retirement Strategy

A Roth 401(k) can be useful for workers who expect their tax rate in retirement to be the same as or higher than their current rate.

Paying taxes on contributions upfront may reduce uncertainty later, especially for households that anticipate multiple streams of retirement income, such as pensions, taxable investments or required distributions from other accounts. In that context, tax-free withdrawals can add flexibility when managing income year to year.

This account type can also appeal to younger workers early in their careers. Earnings are often lower in the first working years, which can place contributions in a lower tax bracket. Locking in today’s tax rate allows future growth to occur without future tax exposure, even if income rises meaningfully over time. The longer time horizon also allows compounding to work more heavily in favor of tax-free withdrawals.

A Roth 401(k) may also fit into a broader tax diversification strategy. Holding both pre-tax and after-tax retirement assets gives more control over taxable income in retirement. Withdrawals can be sequenced to manage brackets, surcharges tied to income and Social Security taxes, rather than relying on a single tax treatment for all distributions.

That said, a Roth 401(k) is not always the default choice. Workers who expect a lower tax rate in retirement or who need the current-year tax deduction to support cash flow may find a traditional 401(k) more practical.

The decision often depends less on the account itself and more on timing, income trajectory and how retirement income is expected to be structured.

Bottom Line

A couple who have just set up their Roth 401(k).

If you like the sound of a Roth 401(k) but your company doesn’t provide one, consider asking HR for a Roth 401(k). The more time your savings have to grow in a Roth 401(k), the greater your benefits. This is because you’ll see greater tax-free earnings as your savings compound with time.

Tips to Get Ready for Retirement

Figure out how much you’ll need to save to retire comfortably. An easy way to get ahead on saving for retirement is by taking advantage of employer 401(k) matching.
Work with a financial advisor. According to industry experts, people who work with a financial advisor are twice as likely to be on track to meet their retirement goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.