When a younger worker thinks about retirement, Roth accounts are increasingly the starting point.
Teen and 20-somethings have voraciously scrolled TikTok videos from countless finance influencers explaining why they should open one of these retirement accounts that involve saving after-tax dollars, thereby paying taxes on their long-term retirement savings now.
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Inside workplace retirement plans, where most Americans actually save, Roth use is inching upward, but nowhere near as quickly as in Roth individual retirement accounts.
More young workers are also choosing Roth 401(k)s in defined contribution plans, according to new data from retirement plan providers of large, midsize and small plans. While adoption still trails traditional pre-tax contributions by a wide margin, interviews with recordkeepers, retirement researchers and financial advisers suggest the trend marks the early stages of a potential broader transformation in which more workers take advantage of Roth benefits in-plan.
The irony, they say, is that the retirement industry has largely solved the problem of Roth access, since it is now often offered in-plan. The remaining challenge is getting workers to use a feature that, in many cases, has been available in their 401(k) for the last 20 years.
A Feature Hiding in Plain Sight
Younger Americans increasingly gravitate toward saving in Roth retirement accounts generally: Fidelity reported that Gen Z IRA contributions jumped 65% year-over-year in the first quarter of 2026, while two-thirds of all IRA contributions went to Roth accounts.
In-plan usage is growing, too. According to Fidelity data shared with PLANSPONSOR, 21.4% of Gen Z participants now contribute to a Roth 401(k), up from approximately 12% five years ago. Principal Financial Group likewise shared that overall Roth participation in-plan rose to 16% over the past year with Gen X (13.9%) and Millennials (15.5%) leading the charge. According to 401Go, which specializes in provider services for small to midsize businesses, nearly six in ten of its plans now have at least one participant using the feature.
Despite the varying degrees to which recordkeepers’ participants used Roth, nearly all plans offer it. For example, more than 96.5% of Fidelity plans offer the ability to make Roth contributions in-plan, and every 401Go plan offers the option, the companies told PLANSPONSOR. Principal did not provide data on the level of Roth account offerings among its recordkeeping clients.
Despite Roth’s growing popularity, most workers still save through traditional pre-tax 401(k) contributions.
“There’s definitely availability,” says Mike Shamrell, vice president of workplace thought leadership at Fidelity. The challenge now, he says, is getting participants “going in and selecting it and starting to contribute.”
The Default Problem
Most Americans do not actively choose how they save for retirement. They accept whatever their employer’s retirement plan automatically enrolls them into. For decades, that has almost always meant traditional pre-tax contributions.
“One of the biggest issues that I see is that as more and more plan sponsors have adopted automatic enrollment, they automatically default everybody to a pre-tax source,” says Jania Stout, president of retirement and wellness at Prime Capital Financial.
Stout says her firm’s advisers routinely meet younger workers who have opened Roth IRAs but have little idea that their employer also offers a Roth 401(k).
“We’re shocked to see younger or lower earners that have set up a Roth IRA, but they don’t know anything about the Roth feature inside the 401(k),” she says. “There’s a lot of confusion around that.”
David Blanchett, head of retirement research at Prudential Financial and a portfolio manager at PGIM, argues a Roth source workplace plan also offers something many investors overlook: tax diversification.
Employer matching dollars are generally contributed on a pre-tax basis, regardless of how employees save. That means workers already accumulate traditional, pre-tax retirement assets automatically.
“I’d love to see more people doing Roth for tax diversification,” Blanchett says. “Employer matches are already pre-tax. If you’re doing all traditional, then you have all pre-tax money.”
With future tax rates impossible to predict, he says, having at least some Roth savings—not subject to income taxes at withdrawal in retirement—“is probably better than having none.”
A common assumption, given the level of the national debt and the long-term funding challenges of programs like Medicare and Social Security, is that tax rates will be higher in the future.
“The further you go out, the greater the uncertainty,” says Jim DiLellio, a professor at Pepperdine Graziadio Business School who studies tax-efficient investing. “You’d like to have a little bit more of that diverse mix” of money that will be taxable in retirement and money that will not.
The uncertainty of future tax rate levels, DiLellio suggests, makes the case less about choosing one tax treatment over another and instead more about avoiding putting every retirement dollar in the same basket.
Building Momentum
The industry’s case for Roth is getting help from Washington.
The SECURE 2.0 Act of 2022 has already begun reshaping how employers think about Roth contributions. Beginning this year, many higher-income workers making catch-up contributions must direct those additional savings into Roth accounts, rather than traditional pre-tax accounts.
Specifically, workers age 50 or older who earned at least $150,000 in taxable compensation from their current employer in the previous year must make any 401(k), 403(b) and 457(b) catch-up contributions as Roth contributions. If their plan does not offer Roth in-plan, participants would not be able to make catch-up contributions.
While the mandatory Roth catch-up provision affects only a slice of workers, retirement professionals say it has forced employers and recordkeepers to revisit Roth features more broadly.
“I do think Roth catch-up will certainly create more buzz around Roth,” Stout says. She also expects more employers to explore Roth matching contributions as they become more familiar with the new rules.
Principal Financial Group is already seeing signs of momentum, but with a catch.
Sri Reddy, the firm’s senior vice president of retirement and income solutions, says that while Roth usage is growing, choosing Roth inside a workplace plan requires workers to understand how paying taxes today affects take-home pay, while producing tax-free income decades later.
“Access alone isn’t enough,” Reddy says. “Behavior follows clarity.”
Why Does the Gap Exist?
When it comes to why Roth in-plan contributions have lagged the growth in Roth IRAs, some argue it is a problem of education, while others stress a structural issue.
Jared Porter, co-founder of and chief marketing and strategy officer at 401Go, says comparisons between Roth IRAs and Roth 401(k)s often overlook the fact that the two systems steer workers in opposite directions.
“The behavioral gap you’re seeing is real,” Porter says. “However, I think the explanation is less about education than it first appears.”
Seventeen of 22 state-run retirement plans for private sector workers offer automatic IRA programs. The mandatory state plans, which offer payroll-related retirement savings to employees of private businesses that do not offer retirement plans, default workers directly into Roth IRAs, he notes, meaning much of what appears to be enthusiastic adoption is simply inertia. Workplace retirement plans, by contrast, almost always default participants into traditional pre-tax contributions.
“Put these plan types together, and the trend lines aren’t really in tension,” Porter says. “Roth in IRAs is being driven largely by auto-IRA defaults. Roth in 401(k)s is being driven by a mix of regulation, active election and new contribution types.”
Still, Porter acknowledges one important educational gap remains.
Many workers mistakenly believe Roth IRA income limits or contribution caps apply inside their 401(k)s as well. (Single or married filing separately workers cannot contribute to a Roth if they make $168,000 or more; for married joint filers, the threshold is $252,000, although backdoor Roth IRA conversions serve as a legal workaround for higher earners.)
If the Roth account is in-plan, that cap does not exist.
The Next Default?
Retirement plan changes move notoriously slowly, so maximizing Roth usage in-plan might require making it the default.
Though that remains a minority view, some advisers believe it could happen in years to come.
“I’ve long been a champion for Roth in the 401(k),” says Phil Senderowitz, managing director at Strategic Retirement Partners. “It’s easy to make the argument that more people would benefit from Roth than traditional contributions.”
Senderowitz argues that employers already shape participant behavior through automatic enrollment, automatic escalation and target-date funds. Defaulting workers into traditional contributions, he says, is itself a decision, even if it feels like maintaining the status quo.
Blanchett and DiLellio envision less dramatic possibilities.
Rather than forcing workers into one tax treatment, they suggest employers could eventually default contributions into a blend of traditional and Roth savings, allowing participants to build tax diversification automatically, without having to make a complicated financial decision on Day 1.
“The default would just be half and half,” DiLellio says, noting that employer matching dollars already create traditional savings.
