Workplace retirement plans have evolved over the past 20 years from simply offering pretax 401(k) contributions to giving employees more flexibility through Roth deferrals and in-plan Roth conversions. The traditional pretax route might reduce your taxable income today, but withdrawals are taxable in retirement. In contrast, Roth contributions are made with after-tax dollars today and allow tax-free withdrawals in retirement if specific IRS requirements are met.

If your plan adviser isn’t talking about Roth contributions, consider seeking a second opinion of your workplace retirement plan. What you do can have a significant impact on your long-term financial future.

Here are a few thoughts.

1. When Do Roth Contributions in a 401(k) Make Sense?

Choosing between pretax and Roth contributions often comes down to three questions: When will you retire, do you expect your retirement tax rate to be higher or lower than it is today, and do you value the diversification of tax buckets?

Roth contributions are helpful in these situations:

• Long investment horizons: Roth can be an appealing choice if you are in your 20s, 30s or 40s. The longer your money compounds, the more potential tax-free growth you have over time. A Roth account can be especially advantageous for younger investors or anyone planning to leave an inheritance, since Roth IRAs and, by extension, Roth 401(k) rollovers can generally pass to heirs free of income tax, depending on individual circumstances.
• Early-career professionals: If your career is young and you earn a relatively modest salary, you’re likely in a lower tax bracket today than you will be in later.
• Diversification of tax buckets: Many retirees rely heavily on pretax accounts, like traditional 401(k)s and IRAs. Roth accounts may serve as a hedge by offering a pool of tax-free money to draw from later, giving flexibility in managing taxable income, Medicare premium thresholds and Social Security taxation.
• Uncertainty about future tax policy: If you believe tax rates are more likely to rise than fall, Roth contributions may allow you to pay less at today’s rates, avoiding potentially higher rates in retirement.

Bottom line: Roth may be appealing if you are young, expect higher taxes in retirement, want tax diversification or value flexibility later in life, and intend to leave an inheritance. Traditional pretax contributions may be more appropriate if you’re at peak earnings and expect lower taxes after you stop working.

2. In-Plan Roth Conversions: A Double-Edged Sword

In addition to making Roth contributions directly, many 401(k) plans allow in-plan Roth conversions. That means you move money that’s in your pretax 401(k) account and convert it to Roth status, paying taxes today for the potential of tax-free growth, depending on individual circumstances.

• Here’s how it works:
• You designate part of or all your pretax 401(k) balance for conversion.
• The amount is added to your taxable income in the year of conversion.
• Once converted, the funds grow tax-free, and qualified withdrawals are tax-free, provided you have a Roth account for at least five years and withdrawals begin after age 59½.

In-plan conversions may be suitable for high earners who might not otherwise qualify for Roth contributions outside of work.

Conversions make sense:

• During market downturns: Converting when account values are depressed means you pay taxes on a smaller balance, and the recovery growth is tax-free.
• During low-income years: If you have a gap year, such as between jobs or during a sabbatical, your taxable income may be unusually low, creating an opportunity to convert at a favorable tax rate.
• Before expected tax increases: If you think your tax brackets will rise due to legislation or personal income growth, converting now helps because you pay taxes at today’s rates.
• For estate planning: Roth money may be more beneficial to heirs than pretax money since heirs don’t pay income tax on Roth withdrawals. (They must deplete the account within 10 years.)

Conversions don’t make sense:

• During high tax rates: If you’re already in the 35% to 37% bracket, a conversion may saddle you with a huge tax bill, potentially more than you or your future heirs would pay if the money remained pretax.
• During cash flow constraints: You pay the conversion taxes out of pocket. Using a retirement fund to pay the tax defeats much of the purpose of a conversion.
• When you’re close to retirement: If you need the money within a few years, you may not give it enough time to grow tax-free and offset the upfront tax hit.

3. Catch-Up Provisions for Highly Compensated Employees

The SECURE 2.0 Act, passed in 2022, introduced a significant change to catch-up contributions.

Here’s what you should know:

• Traditionally, employees age 50 or over could make catch-up contributions beyond the standard 401(k) limits. For 2025, the regular contribution limit is $23,500, and catch-up contributions add another $7,500, for a total of $31,000. For 2026, the regular contribution limit is $24,500, and catch-up contributions add another $8,000, for a total of $32,500. Those ages 60 to 63 will have an increased catch-up limit of $11,250, for a total of $35,750.
• Under SECURE 2.0, if you earned more than $145,000 in the previous year (indexed for inflation), your catch-up contributions must now be made as Roth contributions.
• High-income earners must pay taxes on catch-up contributions today rather than defer the taxes.

The catch-up provisions matter because of:

• Tax diversification: For high earners used to making all contributions pretax, the change shifts part of their retirement savings into after-tax territory. It reduces the immediate deduction but creates long-term Roth exposure that they might not otherwise choose.
• Take-home pay: Because catch-up contributions for high earners are after-tax, paycheck deductions will feel larger compared to pretax contributions.
• Employer plan readiness: Not all 401(k) plans support Roth contributions. The IRS delayed enforcement of the provisions until at least 2026 to give payroll companies and retirement plan recordkeepers time to adjust.

Putting It All Together

Roth contributions in a 401(k), whether through salary deferrals, in-plan conversions or catch-up provisions, are no longer a fringe option. Instead, they are a central part of modern retirement planning.

For younger or lower-income workers, a Roth contribution may be a suitable option because they pay taxes now at a low rate and enjoy decades of tax-free growth.

For high earners and midcareer professionals, the choice requires nuance. Pretax contributions may provide a valuable deduction, but strategic Roth conversions in low-income years or during downturns can provide balance.

For older, high-income workers, the SECURE 2.0 catch-up rule means Roth will be required, making it all the more important to understand how tax-free and pretax balances fit into your overall financial plan.

The smartest strategy often isn’t “all Roth” or “all pretax.” Instead, it’s building tax diversification to draw down assets in the most tax-efficient way during retirement.