By RnM Advisory · Updated October 11, 2026
The main difference between a Roth and a traditional 401(k) is when income tax applies. Your employer’s plan determines which options are offered. This guide explains the tax treatment, the 2026 employee contribution limits and the questions to bring to a tax review.
Traditional versus Roth 401(k): tax treatment
| Account | General federal income-tax treatment |
|---|---|
| Traditional pre-tax 401(k) | Pre-tax deferrals reduce current taxable income. Previously untaxed contributions and earnings are generally taxable when distributed. |
| Roth 401(k) | Contributions are included in current taxable income. Qualified distributions, including earnings, are tax-free. |
A Roth distribution generally must satisfy the five-tax-year participation period and occur after age 59½, disability or death to be qualified. A nonqualified withdrawal can have different tax consequences. Confirm the account history and distribution rules before taking money out.
IRS guidance on Roth accounts and qualified distributions.
2026 employee contribution limits
Traditional and Roth employee deferrals share a limit; choosing both does not double it. For most ordinary 401(k) plans in 2026:
| Age during the year | Employee deferral limit |
|---|---|
| Under 50 | $24,500 |
| 50–59 or 64 and older | $24,500 + up to $8,000 catch-up = $32,500 |
| 60–63 | $24,500 + up to $11,250 catch-up = $35,750 |
Catch-up contributions require an eligible plan and sufficient compensation. The higher age-60-to-63 amount replaces the ordinary catch-up amount. SIMPLE plans have separate limits. These employee limits are not the same as the combined employer-and-employee limit.
IRS announcement of the 2026 contribution limits.
A 2026 Roth catch-up rule for higher-paid employees
For plans with Roth features offering catch-ups, the IRS says 2026 catch-up contributions must be Roth if prior-year wages from the plan sponsor exceeded $150,000. Ask the plan administrator how the rule applies to your 2025 wages and 2026 payroll elections.
IRS catch-up contribution rules.
Can an employer match be Roth?
A plan may permit eligible employees to designate certain employer matching or nonelective contributions as Roth. Those amounts are included in income and must be tracked separately. The older blanket statement that employer contributions can never be Roth is no longer correct. Confirm which feature your plan actually offers before making an election.
IRS Publication 560: qualified Roth contribution programs.
Required minimum distributions
Roth 401(k) account owners do not have lifetime required minimum distributions. Beneficiaries have separate distribution rules. Traditional 401(k) balances generally remain subject to RMD requirements; applicable timing can depend on age, employment and ownership. Ask the plan administrator to confirm your deadline instead of applying one age rule to every account.
Questions to ask before choosing an election
- Which traditional and Roth options does my employer offer?
- How will the election affect my take-home pay and current tax picture?
- What assumptions am I making about future income and tax rates?
- What are the plan’s matching, vesting and catch-up provisions?
- Do I need to coordinate contributions after changing employers?
- How will I keep records of contributions, rollovers and distributions?
Write down the assumptions behind a comparison rather than treating a future tax bracket as certain. Bring your plan summary, recent pay statements, prior return and any Form 1099-R to the review. A plan administrator answers plan-operation questions; a tax review helps connect those details with your return.
Prepare for a tax review with RnM Advisory
RnM Advisory in Fort Lauderdale helps you organize the tax documents connected with retirement contributions and distributions. See our tax preparation checklist, review tax preparation services or book an appointment. Service is available in English and Haitian Creole.
This article provides general federal tax information, not a personalized investment recommendation. Confirm the tax year, plan terms and rules for your specific transaction before acting.