Most companies now allow Roth savings

Nearly all 401(k) plans now allow workers to save money in Roth accounts, after regulatory changes led to a significant increase in adoption in recent years.

A Roth account is funded with after-tax money. Savers pay income taxes upfront on their 401(k) contributions but do not pay taxes when they withdraw money later, with some exceptions.

Financial planners often recommend Roth savings for workers who are currently in a lower tax bracket than when they retire, such as young people at the beginning of their careers. A Roth 401(k) can be especially beneficial because it allows employees to set aside more annually from a Roth IRA ($24,500, respectively, compared to $7,500 in 2026) and does not have the income restrictions that come with Roth IRA contributions.

Nearly all employers offering 401(k) plans now allow workers to contribute to Roth 401(k) accounts: About 96% of plans allowed Roth savings in 2024, according to a recent report by the Plan Sponsor Council of America, a trade group that represents employers with workplace retirement plans.

This share is more than 93% compared to the previous year. In 2020, 86% of plans offered a Roth option, compared to about 60% in 2015, according to PSCA data.

About 22% of 401(k) savers made Roth contributions in 2024; this figure was 21%, a slight increase from the previous year.

Workers traditionally save pre-tax for retirement; This means they currently get a tax deduction on their 401(k) contributions, but pay taxes later on their savings and investment gains.

Hattie Greenan, PSCA’s director of research, said that in years past, giving workers more options was a big motivator for employers to increase Roth savings.

But legislation known as Secure 2.0 has accelerated that trend, he said.

For example, the law enacted in 2022 during the Biden administration “Match-up” contributions from high-income workers age 50 and older can be made into Roth accounts.

Starting in 2026, catch-up contributions will generally need to be made in Roth if you earn more than $150,000 From your current employer in 2025.

“This has definitely helped increase [Roth availability] “We’ve seen an increase in the north over the last 10 years but this has definitely increased the adoption rate,” Greenan said.

Additionally, the law gave employers the option to offer 401(k) matches on Roth accounts.

About 19% of 401(k) plans have added or were in the process of adding this option, and one-third of plans are considering this option, according to PSCA data.

US debt in 2025 reached almost 100% Gross domestic product, according to the Congressional Budget Office. So the US debt is as big as the US economy.

The Tax Policy Center estimates this share It will increase to 126% by 2034This situation was exacerbated by the One Big Beautiful Bill, a bill consisting of billions of dollars in tax and spending cuts that Republicans passed in July.

“Roth [availability] “It’s a way, a very small way, to encourage people not to take the tax cut now,” he said.

Of course, this means the government loses tax revenue in later years, Chao said.

The decision to save into a Roth account isn’t necessarily a given, Chao said.

For example, low-income earners may not currently have enough additional cash to pay taxes on 401(k) contributions, he said. In that case, he said, it might be a better idea to take the tax deduction up front and pay the taxes later in retirement.

But Chao said households that can afford it should consider saving at least some of their contributions to a Roth 401(k).

“Everyone’s situation is a little different,” he said. “If you can afford the taxes, I’d say Roth should be a serious contender.”