Only 18% of 401(k) Savers Use the Roth Option. For Savers Near Retirement, the Choice Deserves a Second Look

Most people set up a 401(k) on a single enrollment screen. They choose a contribution rate, maybe choose a fund, and move on. That screen usually includes a second choice: whether contributions are made as traditional (pretax) or Roth (after-tax). Many savers leave that setting exactly as they found it. The Roth option has some real advantages, yet surprisingly few savers use it, especially older workers. For someone in their late 50s, the numbers reveal why that decision matters.

Roth Is Offered Almost Everywhere, Yet Few Savers Pick It

Fidelity’s Q4 2025 401(k) data shows 18.0% of participants contributing to a Roth 401(k) in full year 2025, up from 16.3% in full year 2024. Most savers have the option. The same report shows 96.5% of plans on Fidelity’s platform offered a Roth option in Q4 2025.

Roth use drops with age, so people closest to retirement use it least. Here’s the share of each generation contributing to a Roth 401(k), according to Fidelity:

• Gen Z: 20.6%
• Millennials: 19.5%
• Gen X: 16.4%
• Boomers: 13.9%

Timing may explain part of the gap, since many older workers joined their plans before Roth options and automatic enrollment became common.

What Each Choice Changes at Tax Time

A traditional contribution comes out of your paycheck before income tax. That lowers your taxable income today, and you pay the tax when you withdraw the money later. A Roth contribution comes out after tax, so you get no break now, but qualified withdrawals come out tax-free. Under 26 U.S.C. § 402A(d)(1), a qualified distribution from a Roth 401(k) isn’t counted as taxable income. As The New York Times reported, that generally means being at least 59½ and having had the account for at least five years.

For savers near retirement, three things usually settle the question. The first is today’s tax bracket compared with the bracket they expect in retirement. The second is required withdrawals later on. The third is whether they plan to leave money to heirs.

Roth 401(k) Accounts No Longer Have Required Withdrawals

Traditional 401(k) balances come with required minimum distributions, which are withdrawals the IRS makes you take once you reach a certain age. If you take less than the required amount, you owe a 25% excise tax on the shortfall. Roth 401(k) accounts no longer have these withdrawals while the owner is alive. The SECURE 2.0 Act removed them for Roth accounts, starting with tax years beginning after December 31, 2023.

Those required traditional withdrawals get added on top of Social Security. After the 2026 cost-of-living increase, the average retired worker’s check is $2,071 a month.

More taxable income can also push up Medicare costs. In 2026, a single filer with income over $109,000 pays $284.10 a month for Part B instead of the standard $202.90. Because no one has to draw down a Roth balance, more of it can stay invested for heirs.

For Higher Earners, the Law Already Picks Roth for Catch-Up Money

Catch-up contributions are the extra amount workers 50 and older can save beyond the regular limit. In 2026, they can put in up to $8,000 more than the standard $24,500 cap.

Starting Jan. 1, workers who earned more than $150,000 in 2025 have to make those catch-up contributions as Roth. The law first set the cutoff at $145,000 of the prior year’s wages and raises it each year for inflation. 24/7 Wall St. has covered how plans are implementing the change.

Comparing Both Options for a Saver in Their Late 50s

Picture a saver in their late 50s who puts $10,000 of pretax pay toward a 401(k). Say the investments grow at the same rate either way. Growth boosts both accounts by the same amount, so the comparison comes down to tax rates. For the Roth to cost the same amount of take-home pay, the contribution has to be the $10,000 minus the tax owed on it today.

For reference, the 24% bracket in 2026 starts at $105,700 of taxable income for single filers and $211,400 for married couples filing jointly.

When Traditional Still Comes Out Ahead

Traditional comes out ahead in the first scenario. Someone in their peak earning years, sitting in a high bracket and expecting a lower one in retirement, keeps more by taking the tax break now. The second scenario fits people who expect the same or a higher bracket later, have large required withdrawals, or plan to leave a balance to heirs. Roth isn’t the better choice for everyone, and nobody knows what tax rates will be years from now.

One Open Enrollment Setting Most Savers Never Change

Open enrollment usually brings workers back to the same benefits screen. The contribution rate gets most of the attention. Right next to it is the traditional or Roth setting, and it stays wherever it was last set. With 18.0% of Fidelity participants using Roth and 13.9% of Boomers, the data suggests many savers near retirement haven’t looked at that setting in years.

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