AARP Hearing Center
![Is a Roth 401(k) Right for You? a person holding a piggy bank on a beach with the sun in the background](https://aarp.widen.net/content/euvdogccfq/jpeg/1140-piggybank-savings-sun.jpg?crop=true&anchor=0,0&q=80&color=ffffffff&u=ovnylx&w=1140&h=655)
Being able to save for retirement in an employer-sponsored plan is among the most popular workplace benefits. For most who enjoy it, that means a traditional 401(k), with tax-deferred contributions taken out of every paycheck but a tax bite on the back end when you withdraw the money.
For a growing number of workers, there’s another option: a Roth 401(k), in which contributions are taxed going into the account but withdrawals in retirement are tax-free.
![member card Image Alt Attribute](https://cdn.aarp.net/content/dam/experience-fragments/uxdia-folder-structure/en/features/membership/inline-membership-promo/default/master5/_jcr_content/root/responsivegrid/container_copy/container/articleimage.coreimg.75.1140.png/content/dam/uxdia/membership-card-d-and-t.png)
LIMITED TIME OFFER: Labor Day Sale!
Join AARP for just $9 per year with a 5-year membership and get a FREE Gift!
From 2013 to 2022, the share of retirement plans that give employees a Roth option grew from 58 percent to 89 percent, according to the most recent data available from the Plan Sponsor Council of America, a nonprofit trade association.
“Having Roth as an option has become standard — a best practice — the last few years,” says Hattie Greenan, director of research and communications for the association. “Allowing Roth contributions is often seen as a low-cost way for plans to offer choice to participants.”
As with Roth IRAs, Roth 401(k)s allow you to stash money after you’ve paid taxes on it, so your withdrawals in retirement are tax-free. They can also give you greater flexibility when you’re taking money out: As of 2024, the IRS no longer requires Roth 401(k) owners to withdraw a minimum amount each year once they reach a certain age, an exception previously limited to Roth IRAs.
One big difference is that you can save a lot more with a workplace Roth account. In 2024, you can contribute up to $23,000 to a 401(k) — $30,500 if you’re age 50 or older. The limit for IRAs is $7,000, $8,000 if you’re 50-plus.
Compare 401(k) Options
AARP’s Roth 401(k) vs. Traditional 401(k) Calculator can help you find out which kind of 401(k) is best for you.
Despite the wider availability, only about 1 in 5 retirement plan participants contribute to a Roth 401(k), according to the association. Here are some things to ask yourself if you’re thinking about enrolling in a Roth 401(k) or converting to one from a traditional retirement plan.
Do you want to pay Uncle Sam now or later?
In essence, the decision to save in a traditional or a Roth 401(k) comes down to one basic trade-off, says Scott Thoma, principal for client needs research at Edward Jones: “Do I want to save money on taxes today or do I want to save money on taxes whenever I retire?”
More From AARP
4 Reasons Not to Cash Out 401(k) When You Leave a Job
2 in 5 departing workers drain retirement accountsNew Law Eases Rules for Tapping Retirement Accounts
More situations qualify for penalty-free withdrawal
More Businesses Jumping on Retirement Savings Bandwagon
State ‘auto IRAs,’ federal incentives spur 401(k) wave
Recommended for You