Just 18% of 401(k) Investors Choose Roth. Near-Retirees May Want to Reevaluate

Quick Read

• Only 18% of Fidelity 401(k) savers contribute to a Roth, even though nearly all plans make it available, and Boomers are the least likely at 13.9%.

• Roth accounts do not require withdrawals during the owner’s lifetime, which can help keep taxable income down, reduce Medicare surcharges, and preserve more assets for heirs.

• Which option works better depends on taxes: traditional is stronger if retirement tax rates are lower, while Roth is better if rates are higher or stay about the same.

Most workers choose a 401(k) in one quick enrollment step. They pick a contribution rate, maybe select an investment fund, and move on. Buried in that same screen is another important decision: whether contributions go in as traditional pretax dollars or Roth after-tax dollars. Many savers never change the default. Roth contributions can offer meaningful advantages, but relatively few people use them, especially older workers. For someone nearing retirement, that choice can make a real difference.

Roth Is Widely Available, But Few Savers Use It

Fidelity data for the full year shows that 18.0% of participants contributed to a Roth 401(k), up from 16.3% in the prior full year. The option is widely offered: 96.5% of plans on Fidelity’s platform included a Roth feature in the latest quarter cited by the report.

Use of Roth falls as workers get older, which means those closest to retirement are least likely to choose it. Fidelity’s figures break down this way by generation:

• Gen Z: 20.6%

• Millennials: 19.5%

• Gen X: 16.4%

• Boomers: 13.9%

Part of that gap may simply reflect timing. Many older workers signed up for their plans before Roth contributions and automatic enrollment became common.

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Learn 13 Major Retirement Mistakes and Ways To Avoid Them

One investment mistake could create big risks for your retirement. Many investors make the same critical errors: being too conservative, making big bets on “sure things,” or paying excessive fees. Any of those blunders can endanger your hard-earned savings.

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How Each Choice Affects Your Tax Bill

Traditional 401(k) contributions come out of pay before income tax, which lowers taxable income now and shifts the tax bill to later withdrawals. Roth contributions are made after tax, so there is no immediate tax break, but qualified withdrawals can later be taken tax-free. Under federal law, a qualified Roth 401(k) distribution is not counted as taxable income. In general, that means the account must be at least five years old and the saver must be at least 59½.

For those close to retirement, the decision usually comes down to three questions: how their current tax bracket compares with the one they expect in retirement, whether required withdrawals will matter later, and whether they want to pass money on to heirs.

Roth 401(k) Balances No Longer Face Lifetime Required Withdrawals

Traditional 401(k) accounts are subject to required minimum distributions, or RMDs, once the IRS-mandated age threshold is reached. Taking less than the required amount can trigger a 25% excise tax on the shortfall. Roth 401(k) accounts are no longer subject to those lifetime withdrawals while the original owner is alive. The SECURE 2.0 Act removed that requirement for Roth balances for tax years beginning after December 31, 2023.

Those traditional withdrawals can stack on top of Social Security. After the latest cost-of-living increase, the average retired worker’s monthly Social Security check is $2,071.

Higher taxable income can also raise Medicare premiums. In 2026, a single filer with income above $109,000 pays $284.10 a month for Part B instead of the standard $202.90. Because Roth balances do not have to be drawn down, more money can remain invested for heirs.

Higher Earners Already Get Roth Treatment for Catch-Up Contributions

Catch-up contributions are the extra amount workers age 50 and older can save beyond the regular annual limit. In 2026, that means up to $8,000 on top of the standard $24,500 cap.

Beginning Jan. 1, workers who earned more than $150,000 in the prior year must make those catch-up contributions as Roth. The law originally used a $145,000 threshold and indexes it for inflation. 24/7 Wall St. has reported on how plans are rolling out the change.

What the Two Options Look Like for Someone in Their Late 50s

Consider a saver in their late 50s who directs $10,000 of pretax pay into a 401(k). If the investments perform the same way in either account, the key difference is taxes. For Roth contributions to cost the same amount out of pocket, the saver would need to contribute the $10,000 minus the tax that would otherwise be due today.

For context, the 24% bracket begins at $105,700 of taxable income for single filers and $211,400 for married couples filing jointly.

When Traditional Still Makes Sense

Traditional comes out ahead in the first scenario. Someone in their higher-earning years who expects a lower bracket in retirement generally benefits more from taking the tax deduction now. The second scenario is better suited to people who expect the same or a higher bracket later, anticipate large required withdrawals, or plan to leave money behind for heirs. Roth is not the best choice for everyone, and no one knows where tax rates will be years from now.

The Setting Most Savers Leave Untouched

Open enrollment often sends workers back to the same benefits page they used before. The contribution rate gets most of the attention, while the traditional-versus-Roth setting usually remains unchanged. With 18.0% of Fidelity participants using Roth and just 13.9% of Boomers doing so, the numbers suggest many near-retirees have not revisited that decision in a long time.

Help Avoid These 13 Retirement Mistakes Before They Derail Your Future

One investment mistake could create big risks for your retirement. Many investors make the same critical errors: being too conservative, making big bets on “sure things,” or paying excessive fees. Any of those blunders can endanger your hard-earned savings.

Now you can learn the mistakes even experienced investors make (and ways you can sidestep them before it’s too late) with this new guide: 13 Retirement Mistakes and How to Avoid Them from Fisher Investments. (sponsor)