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 everyone should be doing. Not only is Social Security at risk of getting cut, but even without a broad reduction in payments, those benefits will only replace about 40% of your pre-retirement earnings. And most retirees need close to double that amount of replacement income.

When it comes to retirement savings, you may have choices. You could choose to participate in a traditional 401(k) if your company offers one. But if you ask author and radio/podcast host Clark Howard, he’ll tell you that a Roth IRA or 401(k) makes a lot more sense.

Why Howard loves Roth accounts

On a recent show, Howard said, “I’m obsessed with the Roth as a way to save for retirement.” He also explains that if you save $1 in a Roth IRA, you get $1 in retirement — but that’s not the case if you do the same in a traditional 401(k).

With a traditional 401(k), $1 saved today is not $1 later because everything in that account will be taxed, Howard explains. And who knows what tax rates will be in place down the line?

Howard warns that today’s tax rates are historically low, but they won’t stay that way forever. With the individual tax provisions of the Tax Cuts and Jobs Act (TCJA) sunsetting at the end of 2025, many Americans face higher tax brackets moving into 2026. The benefit of saving for retirement in a Roth account is that you’re locking in your current tax rate, which may be lower than your tax rate in the future.

Howard also says that people can save a lot more money with a Roth all in. And the reason is that you’ll never pay taxes on your investment gains. So if you save the same amount of money for retirement each year in a traditional account versus a Roth, you’re getting more retirement income out of the Roth.

Beyond standard income taxes, Roth accounts protect you from hidden retirement costs. Required Minimum Distributions (RMDs) from Traditional 401(k)s increase your taxable income, which can trigger expensive Medicare Income-Related Monthly Adjustment Amount (IRMAA) surcharges. Roth withdrawals, however, do not count toward these IRMAA thresholds, helping you keep your healthcare costs down in retirement.

Higher earners can use a Roth, too

For a long time, it was harder for higher earners to save for retirement in a Roth retirement plan. And the reason is that many companies’ 401(k)s did not have a Roth version.

Meanwhile, higher earners are not allowed to contribute to a Roth IRA directly. You can fund a traditional IRA and do a standard backdoor Roth conversion, but that can get complicated. However, high-income workers with access to an after-tax 401(k) can utilize the “Mega Backdoor Roth” strategy. By combining employer and employee contributions with in-service distributions, higher earners can shelter up to $72,000 annually in 2026—or $83,250 if they fall into the new 60 to 63 age bracket.

But these days, Howard says, 90% of companies that offer a 401(k) give you the choice of putting your money into a traditional or a Roth. And you may want to choose the latter for the long-term benefits. In fact, under recent SECURE 2.0 regulations, employers can now optionally direct matching funds straight into your Roth account, rather than forcing them into a tax-deferred Traditional account.

That said, it’s a good idea to consult a qualified financial advisor and see what retirement plan they recommend you save in based on your personal situation. An advisor might recommend a Roth account, but they might also advise you to stick to a traditional 401(k) based on your current income and tax bracket.

Another thing you should know is that you don’t necessarily have to choose between a traditional retirement plan and a Roth. There’s nothing wrong with using both.

And that might be advantageous. That way, you get the benefit of shielding some income from taxes in the near term, but you also get tax-free gains and withdrawals in the long term.

Editor’s Note: This article has been updated to reflect the 2026 expiration of the Tax Cuts and Jobs Act provisions and the new 2026 IRS contribution limits for IRAs and 401(k)s. Additional information has also been included regarding Medicare IRMAA surcharges, the Mega Backdoor Roth strategy, and recent SECURE 2.0 rules for employer matching and catch-up contributions.