Retirement Account Tax Strategies: 401k, IRA, and Roth

Retirement Account Tax Strategies

Traditional 401(k) and IRA

• Contributions are pre-tax (reduce current taxable income)
• Growth is tax-deferred
• Withdrawals in retirement are taxed as ordinary income
• 2025 Contribution Limits: 401(k) $23,500; IRA $7,000 ($8,000 if 50+)

Roth 401(k) and Roth IRA

• Contributions are after-tax (no current deduction)
• Growth is tax-free
• Qualified withdrawals in retirement are tax-free
• Great if you expect to be in a higher tax bracket in retirement

Roth IRA Income Limits (2025)

• Single: Phase-out $150,000–$165,000
• Married Filing Jointly: Phase-out $236,000–$246,000

Backdoor Roth IRA

High earners who exceed Roth IRA income limits can contribute to a traditional IRA and then convert to a Roth (the "backdoor" strategy).

Required Minimum Distributions (RMDs)

• Begin at age 73 for traditional accounts
• Roth IRAs have no RMDs during the owner's lifetime

Roth Conversion Strategy

Convert traditional IRA funds to Roth during low-income years (e.g., early retirement) to reduce future RMDs and tax liability.

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