What is a Roth 401(k)?

A Roth 401(k) is the Roth option inside an employer’s 401(k) plan: you contribute part of each paycheck after income tax, and qualified withdrawals in retirement, including all the investment growth, come out tax-free. There is no income limit to contribute, and the account shares the same annual deferral limit as a traditional 401(k).

The IRS calls it a designated Roth account. It isn’t a separate plan you sign up for; it’s a contribution type your employer’s plan may or may not offer, held in its own bookkeeping bucket so the after-tax money and its earnings stay separate from your pre-tax balance. The same feature exists in 403(b) and governmental 457(b) plans.

How a Roth 401(k) Works

You choose a contribution percentage, and your employer withholds it from your pay after calculating income tax. Your taxable income for the year doesn’t go down. Inside the account, the money is invested in the same fund menu as the rest of your plan, and nothing is taxed while it stays there.

The payoff comes at withdrawal. Once a distribution is qualified, you owe no income tax on any of it, and it doesn’t add to your adjusted gross income. That matters later in life, since qualified Roth withdrawals don’t raise Medicare premium surcharges, increase how much of your Social Security is taxable, or shrink Affordable Care Act (ACA) subsidies the way traditional withdrawals can.

Roth 401(k) vs. Traditional 401(k)

Both live in the same plan and share one contribution limit. The difference is when you pay the tax.

You don’t have to pick one. If your plan offers both, you can split each paycheck between them and adjust the split when the plan allows.

Should I Do Roth or Traditional 401(k)? A Worked Example

Say you’re in the 22% federal bracket and can give up $7,800 of take-home pay this year. Assume 7% annual growth for 30 years, which multiplies any balance by about 7.61.

With the Roth, you contribute $7,800. It grows to about $59,376, all of it tax-free.

With traditional, $10,000 of pre-tax contributions costs the same $7,800 of take-home pay, since the deduction saves $2,200. It grows to about $76,123, and what you keep depends on your tax rate when you withdraw:

At the same rate, the two tie. Traditional wins if your rate falls in retirement; Roth wins if it rises. One thing tilts toward Roth for savers who hit the cap: $24,500 of Roth contributions shelters more after-tax money than $24,500 pre-tax. To find where your own break-even sits, build the plan twice in ProjectionLab’s tax analytics, once with Roth deferrals and once pre-tax, and compare the tax bill year by year.

Roth 401(k) Contribution Limits for 2026

The 2026 elective deferral limit is $24,500. That is one limit across all your Roth and pre-tax deferrals to 401(k), 403(b), and Thrift Savings Plan accounts, not $24,500 for each.

Employer contributions don’t count against these figures; your deferrals plus employer contributions are capped together at $72,000 per employer for 2026, not counting catch-ups.

Starting in 2026, catch-ups have a Roth requirement for higher earners. If your prior-year Federal Insurance Contributions Act (FICA) wages (Box 3 of your W-2) from the employer sponsoring the plan topped $150,000, your age-based catch-up contributions must go in as Roth. If that plan has no Roth option, you can’t make catch-up contributions in it at all.

Roth 401(k) Income Limits

There are none. Unlike a Roth IRA, which phases out between $153,000 and $168,000 of modified adjusted gross income (MAGI) for single filers in 2026, a Roth 401(k) is open to you at any income as long as your plan offers it. For high earners, it puts new money into a Roth account directly, with no backdoor Roth workaround needed.

Roth 401(k) vs. Roth IRA

Both are funded with after-tax money and pay out tax-free once qualified. The differences are in access, limits, and how early withdrawals are taxed.

The limits are separate, so you can fund both in the same year: $24,500 to the Roth 401(k) and $7,500 to a Roth IRA if your income allows it.

Employer Match in a Roth 401(k)

Employers can match Roth contributions the same way they match pre-tax ones. By default, the match itself lands in your pre-tax account, so it’s taxed when you withdraw it, even though your own contributions were Roth.

The SECURE 2.0 Act lets plans offer something else: you can elect to have matching or nonelective contributions made as Roth. Two conditions apply. You must be fully vested in those contributions when they’re allocated, and the full amount counts as taxable income to you in the year it hits your account. Not every plan has adopted this option, so check your plan documents. See 401(k) match for how match formulas and vesting work.

Whichever way your plan routes the match, you set it with one toggle on the contribution when you model your 401(k) in a ProjectionLab retirement plan.

Roth 401(k) Withdrawal Rules

A distribution is qualified, and fully tax-free, when it meets two tests:

• It comes at least five tax years after January 1 of the year you first made Roth contributions to that plan.
• It happens after you reach 59 1/2, become disabled, or die.

The five-year clock is per plan. If you start Roth contributions at a new employer, that plan’s clock starts fresh, unless you directly roll your old Roth 401(k) into it, in which case the earlier start date carries over.

A nonqualified withdrawal is split pro-rata between contributions and earnings. If your Roth 401(k) holds $50,000, of which $30,000 is your contributions, 60% of any withdrawal is a tax-free return of contributions. Take $10,000 out and $6,000 is tax-free, while $4,000 of earnings is taxable and, before 59 1/2, generally hit with a 10% penalty unless an exception applies. A Roth IRA, by contrast, lets you pull out all your contributions first.

Since 2024, Roth 401(k) balances have no required minimum distributions during your lifetime. Before then, avoiding them meant rolling the balance into a Roth IRA. Beneficiaries who inherit the account still face distribution rules.

Rolling a Roth 401(k) Into a Roth IRA

You can roll a Roth 401(k) into a Roth IRA tax-free, typically after leaving the employer, though not into a traditional IRA. The Roth IRA’s own five-year clock governs from then on, and time in the 401(k) doesn’t count toward it. If you’ve had a Roth IRA open for five years already, you’re covered; if this rollover opens your first one, the clock starts that year. Rolling a traditional 401(k) into a Roth IRA is a different transaction, a Roth conversion, and the pre-tax amount is taxable.

Roth 403(b) and Roth 457(b)

A Roth 403(b) works the same way for employees of public schools, hospitals, and nonprofits, and shares the same $24,500 limit with any 401(k) deferrals. See 403(b) for that plan’s 15-year service catch-up.

Governmental 457(b) plans can also offer a Roth option, and their deferral limit is separate. A public employee with both a Roth 403(b) and a Roth 457(b) can defer up to $49,000 in 2026 before catch-ups.

Frequently Asked Questions

Is a Roth 401(k) pre-tax? No. Roth 401(k) contributions are made with after-tax money, so they don’t reduce your taxable income this year. The trade is that qualified withdrawals, including earnings, are tax-free.

Can I contribute to a Roth IRA and a Roth 401(k)? Yes. The limits are separate, so in 2026 you can put $24,500 in a Roth 401(k) and $7,500 in a Roth IRA, as long as your income is within the Roth IRA limits. The Roth 401(k) has no income limit.

Is a Roth 401(k) the same as a Roth IRA? No. Both offer tax-free qualified withdrawals, but a Roth 401(k) runs through your employer, has a limit more than three times higher, has no income cap, and taxes early withdrawals pro-rata. A Roth IRA is one you open yourself, with income limits and easier access to your contributions.

Can I split contributions between a Roth and traditional 401(k)? Yes, if your plan offers both. The $24,500 limit is combined, so any split works, such as $12,000 Roth and $12,500 pre-tax. Holding both lets you choose each year in retirement which bucket to draw from.

What’s the difference between a Roth 401(k) and after-tax 401(k) contributions? Roth deferrals count toward the $24,500 limit and grow tax-free. After-tax (non-Roth) contributions sit above that limit, up to the $72,000 total, and their earnings are taxable unless you convert them, which is the basis of the mega backdoor Roth.