7 Reasons a Roth 401(k) Deserves More Attention — Lessons from a Retirement Consultant Who Wishes He Had Used One

If your employer offers a Roth 401(k), it may be worth a closer look. Skipping it can mean passing up years of potential tax-free growth and several other benefits.

When people hear the word Roth, they usually think of a Roth IRA. Yet although 95% of employers offer a Roth 401(k), fewer than 20% of workers use it.

I spent decades consulting in the retirement industry and was among the 80% who did not put money into the Roth side of my 401(k). Nearly five years into retirement, that is one of my biggest regrets.

The numbers suggest that, like me, most savers continue making pretax 401(k) contributions. They accept the familiar logic: their tax bracket is probably higher while they are working than it will be in retirement, so they take the deduction now and delay the tax bill until later, when they expect to be in a lower bracket. On the surface, that makes sense.

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For many Baby Boomers and Gen Xers, Roth 401(k) contributions were not a choice they passed up because the option was not available. Roth in 401(k) plans did not exist until 2006, and many employers did not add it for years after that.

That was true for me as well. The Roth feature did not reach my plan until my mid-forties, when I was earning the most I ever had and wanted to reduce my taxable income as much as possible.

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Now, nearly five years into retirement, I wish I had taken the Roth 401(k) choice more seriously. I am far from the only person who feels that way.

According to Fidelity, Roth conversions rose 41% year over year in the first quarter of 2026, suggesting that many people who once saved on a tax-deferred basis now want the advantages of tax-free growth.

So why the regret?

1. You may end up paying tax on decades of compounding that could have been tax-free

Cutting my taxable income while I was working helped, but only once. If I had used Roth contributions instead, that money could have compounded tax-free for decades. In the long run, the tax avoided on the growth could have been worth far more than the tax savings on the contributions.

With pretax contributions, you are not just postponing tax on the amount you put in — you are postponing tax on everything that money earns over many years.

Consider a worker earning $100,000 who saves 6% in a 401(k), receives a 4% employer match, works a 40-year career, retires in Florida with no state income tax at 65, and earns 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 retirement withdrawal taxed at 15%.

Real life is messier than that. The point is not to forecast your exact outcome, but to show how taxes on decades of compounding can stack up against the tax savings from the contribution itself. Before choosing Roth or pretax, it is smart to review your own numbers with a tax professional or financial adviser.

This example also assumes the employee saves the same dollar amount either way. Roth contributions reduce take-home pay more because the tax is paid upfront. A pretax saver could invest the tax savings elsewhere, which would reduce the difference. But many people do not, and that is part of the lesson.

The company match remains pretax in both cases, because only about one in five plans currently offers a Roth match.

In this example, choosing Roth for your career would leave you with $761,000 of income-tax-free money in retirement. You contributed, invested, and paid income tax on $6,000 a year for 40 years, or $240,000 in total. The remaining $521,000 is tax-free growth. Compare that with the pretax side, where the full $1.2 million balance is taxable. That difference is hard to ignore.

2. Higher long-term returns make the Roth advantage even larger

The example above uses a conservative 5% return. If the market delivers more over the long haul, the gap can widen. Using the same contribution amounts and the same 15% tax rate, here is the same illustration with a 7% return instead of 5%.

Nothing changed except investment performance, yet the Roth advantage almost doubled. The stronger your returns, the more valuable this choice becomes.

These are hypothetical examples and do not represent any specific situation. Results will differ, and the assumed returns do not include fees or other investment costs.

3. Your work state and retirement state both affect the outcome

To keep the math simple, the example assumes no state income tax. In reality, state taxes can shift the answer.

If you work in a high-tax state and retire in a state with no income tax, pretax contributions may be more attractive.

But if the situation is reversed and you work where there is no income tax but retire in a state that taxes retirement income, those pretax dollars could be hit by both federal and state tax when you withdraw them.

4. Pretax savings require larger withdrawals to net the same amount

If you want $10,000 from a pretax 401(k), you must withdraw $11,765 if you are in a 15% tax bracket to end up with $10,000 after tax. With Roth, a $10,000 withdrawal is simply $10,000.

5. Roth conversions make the tax bill feel more immediate

You owe income tax either way, whether you contribute to Roth from the start or convert assets later. But withholding from your paycheck happens automatically before the money reaches your account. A conversion feels different because you are writing a larger check to the government, including tax on the earnings. That makes the cost more tangible.

6. Roth 401(k) accounts do not have required minimum distributions for the original owner

Under the SECURE 2.0 Act, original owners of a Roth 401(k) or Roth IRA do not have to take required minimum distributions from that account during their lifetime.

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7. Heirs may inherit both the money and the tax burden

When my father died in 2018, he left me money in his traditional IRA. I was 50, still working, and earning one of my highest salaries, so every required withdrawal added to my taxable income at the worst possible time.

Because he died in 2018, I was allowed to stretch those distributions over my lifetime. That rule largely disappeared for non-spouse heirs beginning in 2020. Those heirs now generally have 10 years to empty an inherited pretax account, which can mean larger withdrawals and larger tax bills during their peak earning years.

Whenever I had to take RMDs from my father’s IRA, I paid tax at whatever rate applied that year. If the account had been Roth, those withdrawals would have been tax-free.

So, should you choose Roth?

Whether you plan to spend every last dollar yourself or leave money to your heirs, the Roth decision is worth careful thought. It does not have to be an all-or-nothing choice; many people can use both pretax and Roth savings.

For retirees living on a fixed budget, having some assets that can be withdrawn tax-free can provide a level of peace of mind that is difficult to quantify.

I cannot change the contribution choices I made in my own 401(k). But if you are still working and have a Roth option available and unused, you still can. It may be worth reviewing during annual enrollment.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.