A Roth 401(k) is a designated Roth account inside an employer-sponsored 401(k) plan. You contribute money that has already been taxed (after-tax dollars), which means you don’t get a tax deduction today. In exchange, your money grows tax-free and qualified withdrawals in retirement are completely tax-free.
It shares contribution limits with the traditional 401(k) — you’re not getting extra room, just a different tax treatment. Whether that tradeoff is worth it depends on when you expect your tax rate to be higher: now or in retirement.
Roth 401(k) vs traditional 401(k): the key differences
| Feature | Traditional 401(k) | Roth 401(k) |
|---|---|---|
| Contributions | Pre-tax (reduces taxable income now) | After-tax (no current deduction) |
| Tax on growth | Deferred | Tax-free |
| Withdrawals | Taxed as ordinary income | Tax-free (if qualified) |
| Income limits | None | None |
| RMDs | Required at age 73 | No longer required (SECURE 2.0, effective 2024) |
2025 and 2026 contribution limits
The IRS sets a combined limit for traditional and Roth 401(k) contributions:
| Year | Under 50 | Age 50–59, 64+ | Age 60–63 |
|---|---|---|---|
| 2025 | $23,500 | $31,000 | $34,750 |
| 2026 | $24,500 | $32,500 | $35,750 |
Source: IRS newsroom, October 2025. These limits apply to total employee contributions across both traditional and Roth designations in the same plan.
Employer matching contributions always go into a traditional 401(k) account, even if your own contributions are Roth. The employer match is pre-tax and will be taxed when you withdraw it in retirement.
No income limits — the key advantage over a Roth IRA
Roth IRAs have income limits: in 2025, the ability to contribute phases out for single filers earning $150,000–$165,000, and for married filers earning $236,000–$246,000. Roth 401(k)s have no such restriction. High earners who can’t contribute directly to a Roth IRA can still use a Roth 401(k) through their employer.
When a Roth 401(k) makes more sense
Use Roth when you expect to be in a higher tax bracket in retirement. If you’re early in your career, earning relatively little now but expect income to grow significantly, paying taxes today at a lower rate and enjoying tax-free withdrawals later is advantageous.
Use traditional when you expect a lower bracket in retirement. If you’re in a high bracket now and expect a lower effective rate in retirement (because you’ll withdraw only what you need), deferring taxes with a traditional 401(k) likely saves more.
Use Roth for tax diversification. Having both a traditional 401(k) and a Roth 401(k) gives you flexibility in retirement: you can draw from either account depending on which creates fewer taxes in any given year. This optionality has real value that’s hard to model in advance.
Roth 401(k) vs Roth IRA
| Roth 401(k) | Roth IRA | |
|---|---|---|
| Income limit | None | Yes (phases out by income) |
| 2025/2026 contribution limit | $23,500 / $24,500 | $7,000 / $7,500 |
| Investment options | Limited to plan menu | Any brokerage investments |
| Required minimum distributions | None (SECURE 2.0) | None |
| Early access | More restricted | Contributions withdrawable any time |
The Roth 401(k)‘s higher contribution limit and lack of income restrictions make it the more powerful account for high earners. If your employer offers it and you can afford to contribute after-tax, it deserves serious consideration alongside — or instead of — a Roth IRA.
Qualified withdrawals
To withdraw tax-free from a Roth 401(k), two conditions must be met: you must be at least 59½ years old, and the account must have been open for at least five years. The five-year clock starts January 1 of the first year you made a Roth contribution to that employer’s plan.