Should I choose a 401(k) or a Roth 401(k)?

The choice between a traditional 401(k) and a Roth 401(k) depends on whether you want a tax break now or in retirement. If your income is higher now than you expect it to be in retirement, then a traditional 401(k) is likely the better option, because you can deduct contributions from your taxable income. If you expect your income to be higher in retirement, then a Roth 401(k) is probably the way to go, because distributions in retirement are tax-free.

What is the downside of a Roth 401(k)?

The primary downside of a Roth 401(k) is that you don't get any immediate tax benefits. Contributions aren't tax-deductible, and instead, you get a tax break on your withdrawals in retirement.

Can I retire at 62 with $400,000 in a 401(k)?

You could retire at 62 with $400,000 in your 401(k), but this may not be enough to fully fund your retirement. As a rule of thumb, 4% is considered a safe withdrawal rate (although it doesn't guarantee your retirement savings will last as long as you need). With $400,000, you could safely withdraw about $16,000 per year following that rule, which isn't enough to cover the typical household's expenses. However, the answer also depends on your expenses and other sources of retirement income. Depending on your Social Security benefits and any other retirement accounts you have, you may be able to manage with a $400,000 balance in your 401(k).

Should I switch my traditional 401(k) to a Roth 401(k)?

It may be a good idea to convert traditional 401(k) funds to a Roth 401(k) if you expect to be in a higher tax bracket in retirement. With a Roth conversion, you can take the tax hit now so that your withdrawals are tax-free when you're retired. You can spread out your Roth conversions over multiple years to avoid a large tax bill in a single year.

401(k) vs. Roth 401(k): Which Is Best for You?

As more employers offer both retirement plans, it's important for employees to know the difference.

By Lyle Daly – Updated Feb 10, 2026 at 5:03 PM EST | Fact-checked by Parker Hicks

Key Points

Over 95% of 401(k) plans will offer a Roth option by 2025, yet only 21% use it.
Roth 401(k) allows tax-free withdrawals in retirement; traditional taxes withdrawals.
Choosing between Roth and traditional 401(k) depends on your current and future tax rates.

More and more employers are adding Roth options to their 401(k) plans. In 2023, 93% of 401(k) plans gave employees the option of a Roth 401(k) versus a traditional 401(k), according to a survey by The Plan Sponsor Council of America. By 2025, this number has risen to over 95%.

Only 21% of participants made Roth contributions when given the opportunity, though. If you have the choice between a Roth 401(k) and a traditional 401(k), it's smart to examine the advantages and disadvantages of each one before you decide.

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An infographic comparing the similarities and differences between traditional 401(k) and Roth 401(k) retirement plans. — Image source: The Motley Fool.

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Data source: IRS.

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FAQ

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About the Author

Lyle Daly is a contributing Motley Fool stock market analyst covering information technology and cryptocurrency. Lyle has been a contributor at the financial services company since 2018. His work has been featured on USA Today, Yahoo Finance, MSN, Fox Business, and Nasdaq. Before joining The Motley Fool, he wrote for financial brands including Intuit.

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