Roth vs traditional 401(k)

Updated 7 November 2026 · ClearCost USA · 4 min read

The choice between a Roth and a traditional 401(k) comes down to when you pay tax: now (Roth) or later (traditional). If you expect a lower tax rate in retirement, traditional often wins; if you expect a higher one, Roth often wins.

The key differences

The table compares how each type is taxed.

	Traditional 401(k)	Roth 401(k)
Tax on contributions	Pre-tax: lowers taxable income now	After-tax: no deduction now
Tax on growth	Tax-deferred	Tax-free
Tax on withdrawals	Taxed as ordinary income	Tax-free if qualified
Required minimum distributions	Yes, starting at the RMD age	Roth 401(k) follows RMD rules, Roth IRA has none
Good if you expect	A lower tax rate in retirement	A higher tax rate in retirement

A worked example

You put $6,000 a year into a 401(k) for 30 years at 6%. The account grows to about $487,256. If your tax rate is 22% now and 22% in retirement, the traditional account pays $107,196 in tax at withdrawal, while the Roth account pays none but you gave up a $1,320 deduction each year. With equal tax rates the after-tax result is the same: the choice matters when your rate changes.

Can you have both?

Many plans allow both. A mix gives you tax diversification: some pre-tax money and some tax-free money to draw on in retirement.

Sources and further reading

Questions people ask

Is Roth or traditional 401(k) better?

If you expect a higher tax rate in retirement than now, Roth tends to be better. If you expect a lower rate, traditional tends to be better. If you are unsure, splitting is reasonable.

Results are estimates for information only, not financial advice. Read the full disclaimer.

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