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For many investors, workplace retirement plans<\/a> build long-term savings via automatic paycheck deferrals. But most employees don’t make Roth contributions<\/a>, which can grow tax-free.\u00a0<\/p>\n Some 86% of retirement plans<\/a>, such as 401(k)s, offered Roth contributions in 2024, but only 18% of investors with the option participated, according to Vanguard’s 2025 analysis of more than 1,400 qualified plans<\/a> and nearly 5 million participants.<\/p>\n That’s up slightly from 17%<\/a> who made a Roth 401(k) contribution in 2023.<\/p>\n One reason for low adoption is that plans typically default to pre-tax contributions, meaning investors must switch to the Roth option, experts say.<\/p>\n More from Personal Finance:<\/strong> “I don’t know that people understand the benefits of the tax-free growth,” said certified financial planner Jordan Whitledge, lead advisor at Donaldson Capital Management in Evansville, Indiana.\u00a0<\/p>\n Younger or higher-income investors are more likely to make Roth contributions, according to the Vanguard report.<\/p>\n Here are some key things to know about Roth 401(k) contributions \u2014 and how to know if this option is right for you.<\/p>\n<\/div>\n Most workplace retirement plans offer two choices for employee deferrals: pre-tax or after-tax Roth. (A smaller percentage of plans also offer after-tax contributions<\/a>, which are different from Roth, and allow big savers to exceed the employee deferral limit<\/a>.)\u00a0\u00a0<\/p>\n For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 in “catch-up contributions” if you’re age 50 and older. That catch-up contribution jumps to $11,250<\/a> for investors aged 60 to 63.<\/p>\n While pre-tax contributions offer an upfront tax break, you’ll owe regular income taxes on withdrawals in retirement, depending on your tax bracket<\/a>.<\/p>\n Pre-tax funds are subject to required minimum distributions<\/a>, known as RMDs, or you may face an IRS penalty. The first deadline for RMDs is April 1 of the year after you turn 73, and Dec. 31 is the due date for future years.<\/p>\n<\/div>\n By comparison, Roth contributions are after-tax, but your balance grows tax-free. For Roth accounts, the original account owner won’t face RMDs, but certain heirs are subject to the 10-year rule<\/a>, meaning the account must be emptied within 10 years of the original owner’s death.<\/p>\n For some investors, especially for those with a large pre-tax balance, RMDs can be a pain point in retirement, Whitledge said.<\/p>\n This can also be an issue for heirs who may have to empty pre-tax accounts and boost their adjusted gross income during their peak earning years, experts say.<\/p>\n<\/div>\n
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