The Roth 401(k) and 403(b): built into your paycheck, ignored by most participants.
Most workers know about the Roth IRA — the standalone account you open at Fidelity or Schwab with a $7,500 annual cap. Far fewer know that the same Roth tax treatment is sitting inside their workplace plan, with a contribution limit more than three times higher and no income phase-out at all. Plan Sponsor Council of America data shows that roughly 88% of 401(k) plans now offer a Roth option, but only about 28% of participants use it. For 403(b) plans — California teachers and public-school employees — adoption is even lower.
“The single most under-used wrapper in the U.S. tax code is the Roth bucket already inside someone’s existing 401(k) or 403(b). It costs nothing to switch on. Most people have just never been told it exists.”
How the workplace Roth works
A Roth 401(k) or Roth 403(b) is not a separate account — it’s a second money source inside the same plan you already contribute to. Same recordkeeper, same fund menu, same employer match, same vesting schedule. The only thing that changes is which side of the tax bill the money gets withheld for. You can shift the percentage in your payroll/recordkeeper portal in about 90 seconds.
$24,500 / year (2026)
Same elective-deferral limit as the pre-tax bucket — and they share one cap. You can put $24,500 entirely into Roth, entirely into pre-tax, or split it any way you like. $32,500 if you’re 50 or older. $35,750 with the SECURE 2.0 super catch-up at ages 60–63.
Open to every earner
Roth IRAs phase out at $150K–$165K single / $236K–$246K MFJ in 2026. The workplace Roth has no income limit at all. A $500K-earning physician can put the full $24,500 into a Roth 401(k) directly, no Backdoor procedure required.
Match goes to whichever side you pick
SECURE 2.0 (effective 2024) gave employers the option to deposit the match into the Roth source if you elect — previously, the match had to be pre-tax even if your contribution was Roth. Adoption is gradual; ask your HR or look in the Summary Plan Description.
No RMDs after SECURE 2.0
Roth 401(k) and Roth 403(b) accounts used to require RMDs at 73 — the only Roth vehicles that did. SECURE 2.0 fixed that as of 2024. The workplace Roth now matches the Roth IRA: no lifetime distributions required.
Roth 403(b) — the version California teachers should know about
403(b) plans are the K–12, university, and non-profit equivalent of 401(k)s. Created by the same 1958 statute that gave teachers tax-deferred retirement accounts in the first place, the 403(b) historically existed only in pre-tax form. The Pension Protection Act of 2006 added Roth 403(b) authority — meaning California school district employees, CSU/UC staff, and most non-profit workers can route their contributions through a Roth source if their plan vendor supports it. Most major 403(b) vendors now do.
The pension-coverage angle changes the math materially. A CalSTRS or CalPERS member retires with a defined pension that already produces ordinary-income tax at the federal level — before any 403(b) withdrawal layered on top. Pre-tax 403(b) contributions deferred during a 22% or 24% bracket may come out at a 24% or 32% bracket in retirement once the pension floor stacks on Social Security and any spousal income. Roth 403(b) sidesteps that compression. It is one of the highest-leverage decisions a mid-career California educator can make — and almost nobody at the district HR office is having that conversation.
Why so few participants use it
| Reason | What’s actually happening |
|---|---|
| Default is pre-tax | Auto-enrollment defaults route 100% to pre-tax. Switching to Roth requires the participant to actively change the election — a step most never take. |
| HR doesn’t advise | HR is not allowed to give tax advice. The Summary Plan Description mentions Roth in passing; nobody walks new hires through the choice. |
| “Roth” still means IRA to most people | Survey data: when participants hear “Roth” they think of the standalone IRA, not the workplace bucket. The category gets lost. |
| Recordkeeper UI buries it | On most platforms the Roth/pre-tax split is two clicks deep inside the contribution-rate screen. If you don’t know to look, you won’t see it. |
The 90-second action
Log in to your recordkeeper (Fidelity NetBenefits, Empower, Vanguard, Voya, TIAA, CalSTRS Pension2, etc.). Navigate to the contributions or paycheck-deductions screen. You will almost always see two sliders or two percentage fields — one labeled Pre-tax / Traditional and one labeled Roth. Pick a split, save. The next paycheck reflects the new election. There is no paperwork, no enrollment form, no waiting period.
Mega Backdoor Roth — $72,000 of tax-advantaged additions per year.
“Super Roth” is shorthand for the Mega Backdoor Roth strategy: combining the standard 401(k) deferral with after-tax (non-Roth) 401(k) contributions, then immediately converting those after-tax dollars to a Roth source. The combined limit for 2026 is $72,000 of total annual additions ($80,000 with the 50+ catch-up, $83,250 with the SECURE 2.0 super catch-up for ages 60–63). For high earners with a plan that supports it, this is the single largest tax-free wrapper in the U.S. tax code.
The 2026 Contribution Stack
The Super Roth Flow, Step by Step
The four conditions a plan needs
After-tax (non-Roth) contributions
The plan document must allow employee after-tax contributions above the elective deferral limit. Distinct from Roth deferrals. Only ~25% of plans currently offer this — it’s most common at large public-company employers (Microsoft, Meta, Google, Amazon, Tesla) and at sophisticated solo-401(k) custodians.
In-plan Roth conversion or in-service distribution
The plan must permit either an in-plan Roth rollover (preferred) or in-service withdrawals of the after-tax sub-account to a Roth IRA. Without this lever, after-tax dollars sit and accumulate taxable earnings.
Frequent conversion cadence
Convert weekly or quarterly, not annually. Earnings on after-tax dollars are taxable on conversion; the longer the after-tax money sits, the larger the taxable component. Many participants set up automatic in-plan conversions on a per-paycheck basis.
Cash flow to fund it
$35K of after-tax 401(k) contributions is pure additional savings on top of the standard $24,500 deferral. The strategy is for high-income households with discretionary cash flow, not for someone still building an emergency fund.
Solo Mega Backdoor Roth (self-employed)
Self-employed individuals with a Solo 401(k) can run the same play with one extra step. The plan must be specifically drafted to allow after-tax contributions and in-plan Roth conversions — many off-the-shelf prototype plans (Vanguard, Fidelity) do not. A custom-drafted Solo 401(k) from a specialized provider opens the entire $72,000 wrapper to a single sole-prop or S-corp owner whose net business income supports it.
The math at 37% federal + 13.3% California: a $35,750 after-tax-then-Roth conversion shelters roughly $1.05M of inflation-adjusted growth from federal and state tax over 30 years at a 7% real return, vs. holding the same dollars in a taxable brokerage account. That ~$525K of preserved tax is the prize.
“The Super Roth is the only U.S. retirement vehicle that lets a single earner shelter $72,000 of new contributions every year. If your plan supports it and your cash flow can fund it, there is no closer thing to a free lunch in the tax code.”
Roth, Traditional, or both?
There is no universal answer. The right mix depends on three variables — current marginal rate, expected retirement marginal rate, and time horizon — weighed against the fiscal backdrop above. The framework we use:
| Profile | Tilt | Why |
|---|---|---|
| Age 25–40, marginal rate ≤ 24% | Roth-heavy | Decades of tax-free compounding. Today’s bracket is almost certainly the lowest you will see. |
| Peak earner, age 40–55, in 32%+ bracket, no pension | Mostly Traditional + Roth at the margin | Big deduction matters. Use Roth via 401(k) Roth and Mega Backdoor when cash flow allows. |
| Public employee with full pension (CalSTRS, CalPERS) | Roth-heavy | Pension floor will already keep retirement income in a high bracket. Traditional adds insult to injury. |
| Pre-retiree, age 55–72, gap years before SS / RMDs | Conversion years | Roth conversions during low-income gap years before RMDs at 73 (SECURE 2.0). |
| Business owner, S-corp or sole-prop, $400K+ net | Solo Mega Backdoor + cash-balance DB plan | Stack the wrappers. $72K Roth + $200K–$350K cash-balance deduction is the standard high-earner playbook. |
What we look at in a Roth review
Bring your most recent paystub and your 401(k) plan summary. A typical review covers: (1) your current marginal federal rate and likely retirement bracket; (2) whether your 401(k) plan allows Roth deferrals, after-tax contributions, and in-plan conversions; (3) whether a Backdoor Roth or Mega Backdoor Roth is the better play for your cash flow; (4) the conversion calendar — what dollar amount per year, in which years; (5) coordination with any pension benefit (CalSTRS, CalPERS, federal FERS) so we don’t accidentally push retirement income into a higher bracket than your peak earnings.
The Roth question is really a tax-rate question, and the federal balance sheet has an opinion. At 37% top rates against a 58% century average, with $36 trillion of debt compounding its own interest, the asymmetric risk sits on the side of deferral. Diversify the tax treatment the way you diversify everything else — and use the doors (workplace Roth, Backdoor, Super Roth) that stay open at every income.
Bring the paystub. We’ll map the wrapper.
Fifteen minutes, one conversation — your marginal rate this year, what your plan actually allows, and a side-by-side of Roth-heavy vs Traditional-heavy under three future tax-rate paths. The whole conversation is about the tax wrapper and your dates.
Begin step one — book the review → Or check the 2026 numbers first →