To Roth or not to Roth

Individuals saving for retirement have two basic choices. They can save on a pre-tax or after-tax basis. That is, a traditional 401k or IRA or the Roth version.

Conventional wisdom says if you expect your tax rate to be higher in retirement you should consider contributing to a Roth 401(k) or IRA. That makes sense.

If your tax rate is the same pre and post retirement, then how you save doesn’t matter much. If your tax rate is going to be lower in retirement, pay your taxes then.

However, there are other considerations.

  • If you save on a pre-tax basis, especially in a 401k and thus your take home pay is higher, can you save more?
  • Regardless of the differences in tax rates, would tax-free income in retirement be beneficial to you?
  • Required Minimum Distributions (RMDs) are not required for Roth IRAs, but they are required for Roth 401k plans unless you are still working at age 72. However, you can avoid taking future RMDs from a Roth 401(k) by rolling the money over to a Roth IRA. Is that what they called a rigged system?
  • And, Roth withdrawals don’t count toward higher Medicare premiums based on IRMAA😎

Seems nothing is as simple as it may appear. You can thank our incredibly complicated tax laws for that.

If you are interested in how workers are using their 401k, here is a good summary.


  1. I went 100% traditional. I’m 58, recently retired, and plan to do Roth conversions through age 72, while trying to stay under the IRMAA thresholds. I don’t know who said this, but it played a part in my decision; “Why would you put so much of your money into an investment vehicle whose tax rate will be determined by a future congress that is likely to be in dire need of cash?”.


  2. If I could do it over again, I would have picked the Roth in hindsight. But my crystal ball was broken. I had no ideal that I would be making so much at the end of career and that my retirement income would be about the same as when I was working. The Roth was not offered as an option for me with my employer until about 2/3 through my career. The tax hit would have hurt my overall nest egg too much to convert at the time I looked into it. I was able to get my wife into a Roth IRA so that helps a little.

    I would also think that if I was forced to save on my own (no employer plans), I would pick a traditional IRA and take the tax break while working because the restrictions are such there is no way you can save enough money for retirement. You are probably in a low tax bracket now and will be in retirement.

    Initially, I needed the 401K tax break to save more money while raise children. So I don’t regret that. I don’t like paying more taxes than I have to and if that means that I have more money in retirement to qualify for the higher tax bracket, so be it.

    Paying taxes is a good problem to have vs wondering if you qualify for free meals and housing. I say do what’s best for you at the time of savings because you can’t guess where you’ll be 30-40 years from now. Indecision will only hurt you. You can’t deal with the taxes if you didn’t save anything to tax.


  3. Good question. My wife and I each have an IRA we hopefully will leave the grandkids.* Our pensions and SS are enough to live on, plus save/invest some each month. However, when/if one of us passes, the survivor will be left in a higher tax bracket (filing single) with a lower standard deduction. (And about $1500 less SS each month. Double whammy.)
    I am looking at converting my IRA to a Roth over a two year period, then doing the same with the wife’s. Then no more forced withdrawals or taxes for us or the kids.

    *We don’t have LTC insurance, so that might eat some of the kids inheritance. Sorry kids.

    I’m 73, so I hope I (we) outlive the five year rule(s).


    1. I split between Roth and traditional. If I had to do it over I would have done all Roth. My investments did so well that the RMD is very high. .When added to my pension, SS and misc. income the tax bracket is astronomical. As a result I expect my Medicare premiums to increas!


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