What is the difference between a Traditional 401(k) and a Roth 401(k)?

Both are employer-sponsored retirement accounts with the same annual contribution limit ($23,500 in 2025, plus $7,500 catch-up if you are 50 or older). The difference is when you pay taxes. Traditional 401(k): contributions are pre-tax (reduce your taxable income today), money grows tax-deferred, and you pay ordinary income tax when you withdraw in retirement. Roth 401(k): contributions are after-tax (no tax break today), but all growth and qualified withdrawals in retirement are completely tax-free. Roth wins if you expect to be in a higher tax bracket in retirement; Traditional wins if you expect a lower bracket. Many financial educators suggest mixing both if your plan allows it to create tax flexibility in retirement.