Roth Account

A Roth account flips the usual retirement tax deal. Instead of deducting contributions now and paying tax on withdrawals later, you pay tax on the money going in and then owe nothing on qualified withdrawals, including decades of growth. That makes Roth especially valuable if you expect to be in the same or a higher tax bracket in retirement, or if you simply want tax certainty.

Roth comes in two main forms: the Roth IRA, which you open yourself and which has income limits, and the Roth 401(k), offered through an employer with no income limit. A Roth IRA also skips required minimum distributions during the original owner’s lifetime, which adds flexibility late in retirement. The choice between Roth and traditional comes down mainly to your tax rate now versus in retirement. Our Roth versus traditional playbook walks through the one question that usually settles it.