Roth vs 401K

Traditional 401(k) contributions reduce your taxable income now—if you earn $80,000 and contribute $10,000, you're taxed on $70,000. Roth contributions use money you've already paid tax on, so that same $10,000 comes from your net pay.

Roth IRAs phase out at modified adjusted gross incomes above $146,000 (single) or $230,000 (married filing jointly) in 2024, and you can't contribute at all above $161,000 or $240,000 respectively. Roth 401(k)s have no income limit—high earners can use them freely.

Younger workers in lower brackets (10% or 12% federal) benefit most from Roth—you pay tax at historically low rates and lock in decades of tax-free growth. If you're early in your career earning $45,000, paying 12% tax now beats paying 22% or 24% on a larger distribution later.

Both traditional and Roth 401(k)s allow penalty-free withdrawals starting at age 59½, but taxation differs. Traditional distributions are fully taxable as ordinary income; Roth distributions are tax-free if the account has been open five years.

Yes, if your plan allows it, and the combined total cannot exceed $23,000 in 2024 ($30,500 if 50+). You might contribute 50/50, or adjust the split each year based on your tax situation—go heavier Roth in a low-income year, heavier traditional in a bonus year.

Can I convert my traditional 401(k) to a Roth?

Yes, through an in-plan Roth conversion if your employer allows it, or by rolling to a Roth IRA after leaving the job. You'll owe ordinary income tax on the converted amount in the year you convert, so time it during a low-income year or spread over multiple years to manage the tax hit.

Do Roth 401(k) contributions count toward the income limit for Roth IRAs?

What happens to my Roth 401(k) if I leave my job?

You can roll it to a Roth IRA (which eliminates RMDs and often offers more investment choices), roll it to a new employer's Roth 401(k), or leave it in the old plan if the balance exceeds $7,000. Rolling to a Roth IRA starts a new five-year clock only if you've never had a Roth IRA before.

Should I stop traditional contributions to max out Roth instead?

Only if your tax situation has changed—if you've moved to a lower bracket, expect higher future rates, or want tax-free income in retirement. If you're in peak earning years (ages 45–60) in the 24% or 32% federal bracket, the traditional deduction often provides more value than paying tax now on Roth contributions.