Traditional vs Roth 401(k): How to Choose (2026)

A traditional 401(k) and a Roth 401(k) differ in exactly one thing: when you pay tax. Traditional contributions skip tax today and are taxed on withdrawal; Roth contributions are taxed today and withdrawn tax-free in retirement (qualified withdrawals, including all growth). Everything else — the investment menu, the match, the contribution limit — is shared.

How each is taxed

• Traditional (pre-tax): contributions reduce your federal (and usually state) taxable income now. You pay ordinary income tax on withdrawals in retirement. Note they do not reduce Social Security or Medicare tax.
• Roth (after-tax): contributions come out of taxed pay, so your paycheck shrinks more today. Qualified withdrawals — contributions and decades of growth — are tax-free after 59½ (and a 5-year holding period).

2026 contribution limits

• Employee contributions: $24,500 across traditional and Roth combined — you can split between both.
• Catch-up (age 50+): an extra $8,000; ages 60–63 get a higher "super catch-up" of $11,250.
• Since 2026, if you earned over the IRS wage threshold (~$145,000, indexed) the prior year, catch-up contributions must go into the Roth side.
• Unlike a Roth IRA, the Roth 401(k) has no income limit — high earners can use it directly.

What about the employer match?

The match is never lost either way — but it is typically contributed pre-tax regardless of which side you choose, so even an all-Roth saver usually retires with a taxable traditional balance too (some plans now offer Roth matching, but pre-tax remains the default). Always contribute at least enough to get the full match: it is a guaranteed 50–100% return.

A simple decision rule

Compare your marginal tax rate today with the rate you expect in retirement:

• Higher bracket now (peak earning years, e.g. 32%+): traditional usually wins — take the deduction now, withdraw at a lower average rate later.
• Lower bracket now (early career, e.g. 10–12%): Roth usually wins — lock in today's cheap tax on decades of growth.
• Unsure or mid-bracket (22–24%): splitting between both is a legitimate hedge, not indecision — it gives you taxable and tax-free buckets to draw from strategically in retirement.

Your marginal federal bracket is driven by taxable income after the standard deduction — see how your paycheck is taxed for the 2026 brackets.

Run your numbers

Project your balance at retirement with the US 401(k) Calculator (salary growth, contribution rate, and employer match included), and see how a pre-tax contribution changes your take-home pay with the US Paycheck Calculator. Verify current limits at IRS.gov. This is general education, not personalized tax advice.