Clark Howard explains how if you save a dollar in a Roth IRA you save $1 but it’s not the case if you do the same in a 401(k)

Saving for retirement is something every worker should take seriously. Social Security is under mounting financial strain. The Social Security Board of Trustees’ 2026 annual report, released on June 9, 2026, projects that the combined trust fund reserves will be depleted in 2034, at which point payroll tax income would cover only about 83% of scheduled benefits. The OASI retirement fund faces an even sharper deadline: trustees now project it will be depleted in the fourth quarter of 2032, one quarter earlier than last year’s estimate, a shift driven in part by provisions in the One Big Beautiful Bill Act that reduce the flow of income-tax revenue into the program. The longer-term picture has also deteriorated, with the 75-year actuarial deficit rising 16% to 4.42% of taxable payroll, the largest such shortfall in nearly half a century.

Even under the most optimistic scenario, Social Security was designed to replace only about 40% of the average worker’s pre-retirement earnings, while most financial advisors recommend targeting 70% to 80% of pre-retirement income to maintain your standard of living. Personal savings must close a gap that Social Security simply was not built to fill on its own.

When it comes to retirement savings, most workers have choices. A traditional 401(k) is the most common employer-sponsored option. Ask author, radio host, and podcast host Clark Howard, and he will tell you that a Roth IRA or a Roth 401(k) makes far more sense for most people. He has specific, well-reasoned arguments for that position.

Why Howard loves Roth accounts

On a recent show, Howard said, “I’m obsessed with the Roth as a way to save for retirement.” His core argument is straightforward: save $1 in a Roth IRA and you keep $1 in retirement. Save that same dollar in a traditional 401(k) and you will keep something less, because every withdrawal will eventually face income tax. The real question is not whether you will pay taxes on your retirement savings. It is whether you pay now or pay later.

Congress permanently extended the Tax Cuts and Jobs Act individual income tax rates when President Trump signed the One Big Beautiful Bill Act on July 4, 2025, locking in today’s seven brackets. The law also added temporary deductions for tips and overtime pay that apply from 2025 through 2028. Even with today’s rates now codified into law, Howard’s core point holds: future Congresses can always raise rates, and contributing to a Roth at a known rate today insulates savers from that uncertainty.

Howard also argues that savers accumulate more spendable wealth inside a Roth over a full career because investment gains are never taxed. Contribute the same dollar amount each year to a traditional account versus a Roth, and the Roth produces more after-tax retirement income, since withdrawals come out completely tax-free. That advantage compounds dramatically over a multi-decade savings horizon. In 2026, workers can contribute up to $24,500 to a Roth 401(k), or up to $7,500 to a Roth IRA, and those limits apply equally to the traditional versions of each account. Savers aged 50 and older can add an extra $1,100 catch-up contribution to a Roth IRA, raising the total IRA ceiling to $8,600 for that group.

Roth accounts also shield savers from a less obvious retirement cost. Required Minimum Distributions (RMDs) from traditional 401(k)s push up taxable income, which can trigger Medicare Income-Related Monthly Adjustment Amount (IRMAA) surcharges on Part B and Part D premiums. Roth withdrawals do not count toward those IRMAA thresholds, keeping healthcare costs lower. SECURE 2.0 also eliminated RMDs from Roth 401(k)s during the owner’s lifetime, aligning those accounts with long-standing Roth IRA rules and preserving the tax-free growth advantage for as long as the money stays invested.

More recently, Howard has sharpened his message. On his April 2026 podcast, he told a caller that about 95% of wage earners would be better off directing all retirement contributions into Roth accounts rather than traditional ones. He has suggested only households earning $500,000 or more annually might benefit from blending Roth and traditional contributions, since their current marginal rate could realistically exceed what they face in retirement.

Higher earners can use a Roth, too

For years, many higher earners faced a practical barrier: their 401(k) plans simply did not offer a Roth option. That landscape has changed substantially. Howard has said that roughly 90% of companies offering a 401(k) now give employees the choice between traditional and Roth contributions. More recent data from the Plan Sponsor Council of America puts the figure even higher: about 96% of plans permitted Roth savings in 2024, up from 93% the prior year and roughly 60% back in 2015. Under SECURE 2.0, employers can also optionally direct matching contributions straight into a Roth account rather than a tax-deferred one.

A significant rule that took effect in January 2026 adds another wrinkle for high earners. Workers who earned more than $150,000 in Social Security wages the prior year must make all age-based catch-up contributions on a Roth basis. High earners may find themselves shifted into Roth catch-ups automatically, and plans that do not offer a Roth option cannot accept catch-up contributions from affected employees until the plan is amended.

Higher earners face a separate obstacle with the Roth IRA specifically, because income phaseouts apply to direct contributions. For 2026, the phaseout range runs from $153,000 to $168,000 for single filers and from $242,000 to $252,000 for married couples filing jointly. The standard workaround is the backdoor Roth: contribute to a nondeductible traditional IRA, then convert those funds to Roth. The strategy works, but it requires careful attention to the pro-rata rule for anyone who holds other pre-tax IRA balances.

High earners with access to an after-tax 401(k) can also pursue the Mega Backdoor Roth. This approach uses the gap between the $24,500 employee deferral limit and the Section 415(c) total plan limit of $72,000 for 2026 (up from $70,000 in 2025), which caps combined contributions from all sources. After-tax dollars can fill that gap and then be converted to Roth status through an in-plan conversion or in-service distribution. Workers ages 60 through 63 have an additional lever: the SECURE 2.0 super catch-up of $11,250 applies to those four specific years, pushing the theoretical ceiling to $83,250. The standard catch-up for workers aged 50 through 59 also rose to $8,000 for 2026, up from $7,500 the prior year.

Consulting a qualified financial advisor is wise before choosing a strategy, since the right answer depends on your current tax bracket, income trajectory, and overall financial picture.

One more option is worth knowing: you do not have to pick just one account type. Using both a traditional and a Roth account in tandem gives you the near-term tax deduction from traditional contributions alongside the long-term benefit of tax-free gains and withdrawals from the Roth. That combination of tax diversification acts as a hedge against whatever the future tax code looks like when you retire, preserving flexibility that no single account type can offer on its own.

Editor’s note: This article was updated to include the 2026 Social Security Trustees Report finding that the OASI trust fund alone is now projected to deplete in Q4 2032, one quarter earlier than last year, and that the program’s 75-year actuarial deficit has risen 16% to 4.42% of taxable payroll. Howard’s April 2026 podcast comment that roughly 95% of wage earners would be better off in Roth accounts was added, along with updated Plan Sponsor Council of America data showing that 96% of 401(k) plans offered a Roth option as of 2024.

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