{"id":2750,"date":"2025-12-08T13:00:35","date_gmt":"2025-12-08T13:00:35","guid":{"rendered":"https:\/\/www.finznest.com\/blog\/most-companies-now-allow-roth-savings\/"},"modified":"2025-12-08T13:00:35","modified_gmt":"2025-12-08T13:00:35","slug":"most-companies-now-allow-roth-savings","status":"publish","type":"post","link":"https:\/\/www.finznest.com\/blog\/most-companies-now-allow-roth-savings\/","title":{"rendered":"Most companies now allow Roth savings"},"content":{"rendered":"
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Cravetiger | Moment | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Nearly all 401(k) plans now allow for workers to save money in Roth accounts, after legislative changes led adoption to jump significantly in recent years. <\/p>\n

A Roth account is funded with after-tax money. Savers pay income tax up front on their 401(k) contributions but don’t pay tax when they withdraw money later, with some exceptions.<\/p>\n

Financial planners generally recommend Roth savings for workers who are likely in a lower tax bracket now than when they retire, like young people who are early in their careers. A Roth 401(k) can be particularly beneficial, because it lets workers put aside more per year than a Roth IRA ($24,500 compared with $7,500, respectively, in 2026), and doesn’t have the income restrictions that come with Roth IRA contributions.<\/p>\n

Nearly all employers offering a 401(k) plan now allow workers to contribute to Roth 401(k) accounts: About 96% of plans permitted Roth savings in 2024, according to a recent report by the Plan Sponsor Council of America, a trade group representing employers with workplace retirement plans.<\/p>\n

That share is up from 93% the prior year. In 2020, 86% of plans offered a Roth option, and in 2015, it was about 60%, according to PSCA data. <\/p>\n

About 22% of 401(k) savers made Roth contributions in 2024, up marginally from 21% the prior year, it found. <\/p>\n<\/div>\n

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More from Financial Advisor Playbook:<\/h2>\n
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Here’s a look at other stories affecting the financial advisor business.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

Secure 2.0’s effect on Roth availability<\/h2>\n
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Workers traditionally save for retirement on a pretax basis, meaning they get a tax break on 401(k) contributions now but pay taxes on their savings and investment earnings later.<\/p>\n

In years past, offering more choice to workers was a large motivator for employers to add Roth savings, said Hattie Greenan, the PSCA’s research director.<\/p>\n

But legislation known as Secure 2.0 accelerated the trend, she said. <\/p>\n

For example, the legislation, which was passed in 2022 during the Biden administration, requires that all “catch-up” contributions from workers age 50 or older who are high earners be made to Roth accounts.<\/p>\n

Beginning in 2026, catch-up contributions will generally have to be made as Roth if you earned\u00a0more than $150,000\u00a0from your current employer in 2025.<\/p>\n

“This definitely helped increase [Roth availability] into the high 90s,” Greenan said. “We’ve seen an increase north over the last 10 years anyway, but it definitely increased the rate of adoption.”<\/p>\n

Additionally, the law gave employers the option to offer 401(k) matches in Roth accounts. <\/p>\n

About 19% of 401(k) plans have added or were in the process of adding this option in 2024, and a third of plans are considering it, according to PSCA data.<\/p>\n<\/div>\n

Why the government likes Roth savings<\/h2>\n
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The government is likely expanding Roth 401(k) access points for workers in order to collect more revenue for federal coffers sooner rather than later, said Philip Chao, a certified financial planner and founder of Experiential Wealth, based in Cabin John, Maryland.<\/p>\n

“The government’s motivation is obvious: We want to collect the taxes now, and don’t really want to give everybody a tax break [up front], because we need the money,” Chao said. <\/p>\n

In 2025, U.S. debt totaled nearly 100% of gross domestic product, according to the Congressional Budget Office. In other words, U.S. debt is as large as the U.S. economy.<\/p>\n

The Tax Policy Center estimates that share will swell to 126% by 2034, exacerbated by the so-called One Big Beautiful Bill, a multitrillion-dollar package of tax and spending cuts Republicans passed in July.<\/p>\n<\/div>\n

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“Roth [availability] is one way \u2014 a very small way \u2014 to encourage people not to take the tax deduction now,” he said.<\/p>\n

Of course, the trade-off is that the government would be forfeiting tax revenue in later years, Chao said.<\/p>\n

The decision to save in a Roth account isn’t necessarily a given, Chao said. <\/p>\n

For example, lower earners may not have ample additional cash to be able to pay taxes on their 401(k) contributions now, he said. In this case, it might be a better idea to take the tax break up front, and pay the taxes later in retirement, he said. <\/p>\n

However, households that can afford it should consider saving at least a portion of their contributions in a Roth 401(k), Chao said.<\/p>\n

“Everybody’s situation is a little different,” he said. “I’d say Roth should be a serious contender, if you can afford the taxes.”<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Cravetiger | Moment | Getty Images Nearly all 401(k) plans now allow for workers to save money in Roth accounts, after legislative changes led adoption to jump significantly in recent years. A Roth account is funded with after-tax money. Savers pay income tax up front on their 401(k) contributions but don’t pay tax when they […]<\/p>\n","protected":false},"author":1,"featured_media":2751,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[252,1137,247],"class_list":["post-2750","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-companies","tag-roth","tag-savings"],"_links":{"self":[{"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/posts\/2750","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/comments?post=2750"}],"version-history":[{"count":0,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/posts\/2750\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/media\/2751"}],"wp:attachment":[{"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/media?parent=2750"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/categories?post=2750"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/tags?post=2750"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}