When people think of Roth options, most think of a Roth IRA. Even though 95% of employers offer a Roth 401(k) plan, less than 20% of employees take advantage of it.
I worked as a consultant in the retirement industry for decades and I was part of the 80% that didn’t contribute to Roth in my 401(k). Almost five years into retirement, it’s one of my biggest regrets.
The statistics show that, like me, most people continue to contribute pretax to their 401(k). They don’t question the conventional wisdom that their tax bracket is probably higher while they’re working than it will be in retirement. They take the deduction now and defer the income tax until retirement when they’re likely in a lower bracket. It makes sense.
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For a lot of Boomers and Gen Xers, Roth 401(k) wasn’t an option they skipped — it simply wasn’t available. Roth in 401(k) plans didn’t exist until 2006, and most employer plans didn’t add them for years after that.
As a Gen Xer, that was me: Roth didn’t reach my plan until my mid-forties, when I was in my highest-earning years and wanted to reduce my taxable income as much as possible.
Now, almost five years into retirement, I wish I had given Roth 401(k) more consideration. I’m not alone in feeling this way.
Roth conversions increased 41% year-over-year as of Q1 2026, according to Fidelity, indicating that many people who previously contributed on a tax-deferred basis now want the benefits of tax-free growth.
Why the regret?
1. Paying tax on the compounding when it could have been tax-free
Reducing my taxable income while I was working helped, but it was only going to help once. Had I contributed to Roth instead, it could have grown tax-free for decades. And the income tax I’d have avoided on all that growth would have outweighed the tax I saved on the contributions themselves.
When you contribute on a pretax basis, you’re not just deferring tax on what you put in, you’re deferring it on everything that money earns for decades.
Take a person earning $100,000 who contributes 6% to a 401(k) and receives a 4% employer match over a 40-year career, working and retiring in Florida (no state income tax) at 65. Over those 40 years, they earn a 5% annual return.
For simplicity, this assumes a flat $100,000 salary with no raises, a 22% federal tax rate while working, and a $75,000 annual draw in retirement taxed at 15%.
Real careers and tax brackets are messier than that. The point isn’t to predict your exact outcome — it’s to illustrate how the tax owed on decades of compounding growth compares to the tax saved on the contribution alone. Before making the Roth versus pretax decision, it’s important to run your own numbers with your tax accountant or financial adviser to see how it plays out for your specific situation.
This example also assumes the employee contributes the same dollar amount either way. The Roth contribution reduces take-home pay more because the tax is paid upfront. A pretax saver could invest the tax savings elsewhere, which would narrow the gap. But many people don’t, and that’s part of the point.
| Header Cell – Column 0 |
Roth |
Pretax |
|---|---|---|
|
Annual 401(k) contribution |
$6,000 |
$6,000 |
|
Annual federal tax savings ($6,000 × 22% = $1,320) |
$0 |
$1,320 |
|
Reduction in take-home pay |
$6,000 |
$4,680 |
|
401(k) employee balance at 65 |
$761,039 |
$761,039 |
|
Company match balance at 65 |
$507,359 |
$507,359 |
|
Total balance at 65 |
$1,268,398 |
$1,268,398 |
|
Taxable balance |
$507,359 |
$1,268,398 |
|
Less taxes (taxable balance × 15% tax rate) |
$76,103 |
$190,259 |
|
After-tax retirement assets |
$1,192,295 |
$1,078,139 |
|
Roth vs pretax difference in retirement |
$114,156 |
Row 9 – Cell 2 |
The company match stays pretax in both scenarios, since only about one in five plans currently offer a Roth match.
In this example, if you elect Roth contributions throughout your career, you’d get to retirement with $761,000 of income-tax-free money. You contributed, invested and paid income tax on $6,000 every year for 40 years ($240,000 in total). The other $521,000 is pure tax-free growth. Compare that to the pretax side, where the entire $1.2 million balance is taxed. It feels different, doesn’t it?
2. A greater long-term average rate of return widens the gap
The example above uses a conservative 5% return. If the stock market’s long-term return is higher, the difference can become more pronounced. Here’s the same example: Same contributions, same 15% tax rate, using a 7% return instead of 5%.
| Header Cell – Column 0 |
Roth |
Pretax |
|---|---|---|
|
Total balance at 65 |
$2,136,100 |
$2,136,100 |
|
401(k) balance that’s taxable |
$854,440 |
$2,136,100 |
|
Less taxes (15%) |
($128,166) |
($320,415) |
|
After-tax retirement assets |
$2,007,934 |
$1,815,685 |
|
Roth vs pretax difference in retirement |
$192,249 |
Row 4 – Cell 2 |
The only thing that changed is investment performance, and by contributing to Roth the difference nearly doubled. The better you do as an investor, the more this decision is worth.
These are hypothetical examples and not representative of any specific situation. Your results will vary. The hypothetical rates of return used don’t reflect the deduction of fees and charges inherent to investing.
3. Where you work and where you retire both matter
To keep the math simple, the example above assumes no state income tax. But state taxes can change the equation.
Work in a high-tax state and retire to one with no income tax, and pretax may work in your favor.
But if you flip it — work in a no-tax state and retire in one that taxes retirement income — those same pretax dollars could end up subject to both federal and state tax on the way out.
4. Pretax only means grossing up every withdrawal to get what you want
Want to withdraw $10,000 out of your pretax 401(k)? You’ll have to take out $11,765 if you’re in a 15% tax bracket to net the $10,000. With Roth, if you want $10,000, you withdraw $10,000.
5. Roth conversions mean writing a check you feel
You have to pay income tax regardless of whether you contribute to Roth initially or convert the assets down the road. But paycheck withholding happens automatically, before the money ever reaches your account. A conversion means writing the government a bigger check, since you’re also paying tax on the earnings. And writing a check just doesn’t feel the same.
6. Roth 401(k): No RMDs
With the SECURE 2.0 Act, as of 2024, original owners of a Roth 401(k) (or Roth IRA) don’t have to take RMDs from that account during their lifetime.
7. Heirs inherit money and the tax
When my dad passed away in 2018, he left me some money in his traditional IRA. I was 50, still working and in some of my highest-earning years, so every required distribution added to my taxable income at the worst possible time.
Because he passed in 2018, I was able to stretch those distributions over my own lifetime. That option largely went away for non-spouse heirs beginning in 2020. Those heirs now have 10 years to empty an inherited pretax account, which means bigger distributions and bigger tax bills, often during their own highest-earning years.
When I’ve had to take RMDs on my dad’s IRA, I’ve paid tax at whatever rate I happen to be in that year. Had it been Roth, those withdrawals would have been income-tax-free.
To Roth or not to Roth?
Whether you plan on “dying with zero” or leaving a legacy to your heirs, to Roth or not to Roth is something to carefully consider. And it doesn’t have to be either/or — it can be both.
When you’re living in retirement on a fixed budget, having some portion of your assets income-tax-free is confidence that’s hard to put a number on.
I can’t go back and change my 401(k) contribution elections. But if you’re still working and have a Roth option sitting unused, you can. It’s worth considering during annual enrollment this year.