Many employers now offer both a traditional and a Roth 401(k). They have the same contribution limit, but you are taxed at different times, so the better choice depends on your tax rate now and later.
This guide compares the two, gives the 2026 limits from IRS Notice 2025-67, shows a simple worked example of when each wins and explains how to split contributions, using the IRS Roth comparison chart.
| Traditional (pre-tax) 401(k) | Roth 401(k) | |
|---|---|---|
| Contributions | Made with before-tax dollars | Made with after-tax dollars |
| Tax on withdrawals | Contributions and earnings are subject to federal and most state income tax | Not taxed if a qualified distribution: held at least 5 years and made on or after age 59½, on disability or on death |
| Income limit to participate | None | None |
| 2026 limit | $24,500 combined across both types | $24,500 combined across both types |
The IRS says designated Roth contributions are made with after-tax dollars and traditional contributions with before-tax dollars, and that you can split your annual deferrals between the two as long as the combined total does not exceed the deferral limit. The limit applies to you as an individual, not to each plan.
| Limit | 2026 |
|---|---|
| Employee elective deferral (402(g)), Roth and traditional combined | $24,500 (was $23,500) |
| Catch-up contribution, age 50 or over | $8,000 (was $7,500) |
| Catch-up for those who attain age 60, 61, 62 or 63 in 2026 | $11,250 |
| Roth catch-up wage threshold (employer wages for the preceding year above which age-50+ catch-ups must be Roth) | $150,000 (was $145,000) |
| IRA contribution limit, for comparison | $7,500 (was $7,000) |
Under section 414(v)(7)(A), if your wages (as defined in section 3121(a)) from the plan's sponsoring employer for the preceding calendar year exceed the threshold, your catch-up deferrals are allowed only as Roth contributions. The Roth catch-up wage threshold is the figure the notice uses to determine whether an individual's catch-up contributions for 2026 must be designated as Roth contributions; the notice states it as the 2025 wage threshold. The IRS's comparison chart still shows older dollar figures, so rely on the notice for amounts. For more limits see our 401(k) limits guide and 2027 limits guide.
| Retirement tax rate | Traditional: $10,000 doubles to $20,000, then taxed | Roth: $7,600 after tax doubles to $15,200, tax-free |
|---|---|---|
| 22% | $15,600 | $15,200 |
| 24% | $15,200 | $15,200 |
| 32% | $13,600 | $15,200 |
This is our simplified illustration. It assumes you are in the 24% bracket now, that the money doubles, that the traditional contribution is $10,000 and the Roth contribution is the $7,600 you would have left after tax on the same pay (so take-home pay today is the same), and that both are withdrawn after qualifying. The traditional account wins if your tax rate in retirement is lower than today's, the Roth wins if it is higher, and they tie if the rates are equal. Real outcomes depend on your future rates, state tax and other income.
The tax-rate comparison above is the main lever. A Roth account may suit you if you expect a higher rate in retirement, such as a young worker in a low bracket; traditional contributions help if you want the deduction now and expect lower income later. You do not have to pick one: the IRS says you can split deferrals. Withdrawals of a Roth that are not qualified are not covered by the simple rule above, so check the distribution rules before taking money early; see our 401(k) early withdrawal penalty guide and Roth IRA income limits guide. Employer matching is outside this page; ask your plan administrator.
IRS: Roth comparison chart, IRS: Notice 2025-67, 2026 amounts relating to retirement plans and IRAs.