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Rob Berger - Traditional vs Roth 401k: The Optimal Strategy

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Author: Rob Berger
Categories: Personal Finance
Tags: finance
Views: 2 · Last viewed: 2026-10-15 07:49 UTC

Short Summary

Main recommendation: Rather than choosing only traditional or only Roth 401(k) contributions based on guessing future tax rates, contribute to a traditional account now and plan Roth conversions during early retirement, before Social Security, Medicare, and IRMAA kick in, to pay taxes at a lower rate. The video frames this as a strategy that reduces the uncertainty of projecting retirement tax liability.

Key Points

  • The traditional approach compares taxes paid today on Roth contributions with taxes paid in retirement on traditional withdrawals, but projecting those years out is difficult because tax laws, state of residence, RMDs, Social Security, charitable giving, and filing status can all change.
  • Early retirement years (after leaving work but before Social Security and Medicare) often have low or zero taxable income, creating a window where converting traditional money to Roth can be taxed at a lower rate.
  • Roth conversions let you trigger taxes on traditional balances on your own schedule rather than being forced into higher brackets later through RMDs and Social Security income.
  • Converting in lower-income years can also reduce future RMDs and help avoid IRMAA, the income-based surcharge on Medicare premiums that applies starting three years before Medicare enrollment.
  • Traditional contributions still make sense for those in very high tax brackets or high-tax states, while Roth fits those in the lowest brackets; most people fall in the middle, where the analysis is harder.

Details Worth Noting

  • Concrete instructions:
    • Estimate your taxes today if you contributed to a Roth versus a traditional account, and compare that to your likely retirement tax rate on traditional withdrawals.
    • Check whether your workplace plan allows in-plan conversion to its Roth 401(k) while you still work; if not, roll the money to an IRA when you leave the job.
    • Once in an IRA after retirement, plan Roth conversions in any amount each year, sized against your tax analysis, targeting the years before Social Security and Medicare begin.
    • Fill up a chosen tax bracket (the video mentions 12% or 15%, possibly 22%) with conversions in low-income years, using a Roth conversion planning tool that models how much to convert to reach that bracket.
    • Model your tax situation with the tool's income-by-bracket view, focusing on effective tax rate rather than bracket alone, since Social Security taxation and IRMAA are affected by income.
  • Timing example from the video: a 55-year-old retiree (with a spouse still working, filing jointly) may have a low taxable income window, and the speaker notes he's seen cases where the standard deduction wipes out tax liability entirely for four or five years in such a window; no specific number of years before Social Security/Medicare was stated for this individual.
  • The strategy applies to IRAs too, but the rules differ: Roth IRA contributions have income limits, and traditional IRA deductions depend on circumstances.
  • The speaker is not a tax expert and recommends consulting a CFP or tax professional before acting, since mistakes can have significant consequences.

Bottom Line

Planning around the gap between early retirement and Social Security or Medicare is the core opportunity, but the right mix of traditional and Roth depends on your specific income, state, and filing status, so verify the numbers with a qualified professional before committing.