Only 18% of 401(k) Savers Choose Roth. Near Retirement, That Setting Warrants a Fresh Look

One small choice on an enrollment form can influence retirement taxes, Medicare costs, and what is left for heirs. Many workers in their late 50s never revisit it, and the numbers show that ignoring it can be costly.

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Most people sign up for a 401(k) on a single screen. They pick a contribution rate, perhaps choose an investment fund, and continue on. That same screen usually includes another decision: whether contributions are traditional, meaning pretax, or Roth, meaning after-tax. Many savers leave the default in place. The Roth option offers some clear benefits, but relatively few people use it, especially older workers. For savers nearing retirement, the difference can matter a great deal.

Roth Is Widely Available, But Few People Use It

Fidelity’s latest 401(k) data shows that 18.0% of participants contributed to a Roth 401(k), up from 16.3% previously. Most workers have access to the option. The same report says 96.5% of plans on Fidelity’s platform offered a Roth choice.

Use of Roth declines with age, which means the workers closest to retirement are the least likely to choose it. Fidelity reported the following Roth participation by generation:

• Gen Z: 20.6%
• Millennials: 19.5%
• Gen X: 16.4%
• Boomers: 13.9%

Part of that gap may come down to timing, since many older workers entered plans before Roth options and automatic enrollment became common.

How the Tax Treatment Differs

Traditional contributions are taken from your paycheck before income tax, lowering taxable income now, with taxes due later when the money is withdrawn. Roth contributions are made after tax, so there is no upfront tax break, but qualified withdrawals are tax-free. Under 26 U.S.C. § 402A(d)(1), a qualified distribution from a Roth 401(k) is not counted as taxable income. As The New York Times has reported, that generally means reaching age 59½ and having held the account for at least five years.

For people close to retirement, three factors usually drive the decision: the current tax bracket versus the expected bracket in retirement, the effect of required withdrawals later, and whether they want to leave money to heirs.

Roth 401(k) Balances Do Not Face Required Withdrawals

Traditional 401(k) accounts are subject to required minimum distributions, or withdrawals the IRS forces you to take once you reach a certain age. If you withdraw less than required, you can face a 25% excise tax on the shortfall. Roth 401(k) accounts no longer have those withdrawals while the owner is alive. The SECURE 2.0 Act eliminated them for Roth accounts starting with tax years after December 31, 2023.

Those required traditional withdrawals are added on top of Social Security income. After the 2026 cost-of-living increase, the average retired worker’s monthly Social Security check is $2,071.

More taxable income can also increase 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 accounts do not require withdrawals, more of the balance can remain invested and potentially pass to heirs.

Catch-Up Contributions Are Already Roth for Some Higher Earners

Catch-up contributions let workers age 50 and older save more than the regular limit. In 2026, they can contribute up to $8,000 more than the standard $24,500 cap.

Workers who earned more than $150,000 in the prior year must make those catch-up contributions as Roth starting Jan. 1. The law originally set the cutoff at $145,000 of prior-year wages and adjusts it annually for inflation. 24/7 Wall St. has reported on how plans are putting that rule into practice.

A Late-50s Saver’s Comparison

Consider a saver in their late 50s who directs $10,000 of pretax pay into a 401(k). If the investments grow at the same rate either way, the growth is equal in both accounts, so the decision mainly depends on taxes. For the Roth option to cost the same amount of take-home pay, the contribution would need to equal the $10,000 minus the tax owed on it today.

For context, the 24% bracket in 2026 begins at $105,700 of taxable income for single filers and $211,400 for married couples filing jointly.

When Traditional Can Still Make More Sense

Traditional contributions come out ahead in the first scenario. A person in their peak earning years, facing a higher tax rate now and expecting a lower one later, benefits more from taking the tax deduction today. The second scenario favors people who expect the same or a higher bracket in retirement, anticipate large required withdrawals, or want to leave assets to heirs. Roth is not always the better answer, and no one can know future tax rates with certainty.

The Enrollment Choice Many Savers Leave Unchanged

Open enrollment often sends workers back to the same benefits screen year after year. The contribution rate gets the most attention, but right beside it is the traditional-or-Roth choice, and it frequently stays wherever it was last set. With 18.0% of Fidelity participants using Roth and only 13.9% of Boomers doing so, the data suggests many near-retirees have not reviewed that setting in years.