Clark Howard: Your tax bracket plays a role in where you should invest your retirement funds

The 2026 tax brackets have been released, and consumer advisor Clark Howard suggests that choosing a Roth 401k could be beneficial for those earning under $200,000.

During the open enrollment period, employees must decide how to allocate their retirement savings. Clark Howard has analyzed the new tax brackets and advises that, for most people earning less than $200,000, a Roth 401k is the preferable option. This is because the tax bracket for this income range is relatively low in 2026, allowing individuals to contribute after-tax dollars and benefit from tax-free growth and withdrawals.

“Unless you’re making huge money, you absolutely choose the Roth version of the 401k because the tax bracket that you’re in, if you make under $200,000 a year, is so low for 26,” said Clark Howard.

A Roth 401k allows contributions to be made with after-tax dollars, which then grow tax-free and can be withdrawn tax-free in retirement.

This approach contrasts with a traditional 401k, where contributions are made pre-tax, but withdrawals are taxed as income.

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