It’s hard to believe that we’re approaching the 100th episode of The Guided Retirement Show. But before we release that special episode later this season, we want to reflect on The Guided Retirement Show’s first two episodes. They were released back in 2019 and focused on Roth vs. traditional IRAs.

Along with looking back at what all has changed in the tax code that impacts the Roth vs. traditional decision, we need to take a forward-looking approach during this discussion. That’s because there are new tax laws scheduled to start in 2026 after the Tax Cuts and Jobs Act sunsets.

There a lot of things that need to be considered when choosing between Roth and traditional. Modern Wealth Management Managing Directors Dean Barber and Bud Kasper and Director of Tax Corey Hulstein, CPA are going to review those considerations.

In this podcast interview, you’ll learn:
• The Difference between Roth vs. Traditional
• Tax Rates Are Scheduled to Go Up in 2026
• Some of the Key Changes with SECURE 2.0
• The Ins and Outs of the Roth Five-Year Rules

Timestamps:
00:00 – Introduction
03:07 – Breaking Down Roth and Traditional
07:05 – SECURE Act and SECURE 2.0
09:25 – 401(k)s and Roth or Traditional
16:52 – Why Roth vs. Traditional Matters
18:06 – Even Social Security Needs Factored In
19:20 – Do Roth Conversions Make Sense
21:03 – IRMAA & Medicare Considerations
22:31 – The 5-Year Rule & Roth Conversions
27:29 – The Rothification of the US
28:32 – One Scenario a Roth Doesn’t Fit
31:06 – The Bottom-Line on Roth vs Traditional

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Roth vs. Traditional – What’s Best?

When it comes to retirement savings, one of the most important decisions is whether to contribute to a Roth IRA or a traditional IRA. While both options offer valuable tax benefits, it’s essential to understand the differences between the two and determine which is best suited for your financial circumstances. In this episode of the Guided Retirement Show, hosts Bud Kasper and Corey Hulstein tackle this topic head-on to help you make an informed choice.

The traditional IRA is the more traditional route for retirement savings. With this option, contributions are made on a pre-tax basis, meaning you can deduct the amount from your taxable income in the year of contribution. This provides an immediate tax break, reducing your current tax liability. The funds in a traditional IRA grow tax-deferred until withdrawn during retirement when they are subject to income taxes.

On the other hand, a Roth IRA offers a different approach. Contributions to a Roth IRA are made with after-tax dollars, meaning you don’t get an immediate tax deduction. However, the growth and withdrawals from a Roth IRA are entirely tax-free, as long as certain conditions are met. This can be advantageous for individuals who anticipate being in a higher tax bracket during retirement or want to provide tax-free income to their beneficiaries.

So, which option is best for you?

Kasper and Hulstein explain that it ultimately depends on your current financial situation, future expectations, and goals. If you are in a higher tax bracket now and expect to be in a lower tax bracket during retirement, a traditional IRA may make more sense. The upfront tax deduction can reduce your current tax liability, and you’ll pay taxes on the withdrawals at potentially lower rates in retirement.

Conversely, if you are in a lower tax bracket now and believe you will be in a higher tax bracket in retirement due to factors like expected portfolio growth, increased income, or potential tax law changes, a Roth IRA may be the better choice. The tax-free withdrawals can provide significant savings in the long run.

Another factor to consider is the potential for tax diversification in retirement. By having both traditional and Roth IRA accounts, you can create flexibility in managing your taxable income during retirement. This allows you to strategically withdraw money from accounts that will minimize your tax liability.

It’s important to note that income limits apply to Roth IRA contributions, so high earners may not be eligible to contribute directly to a Roth IRA. However, there are alternative methods like the “backdoor Roth” that can still provide the benefits of a Roth IRA for those individuals.

In conclusion, the decision between a Roth IRA and a traditional IRA depends on various factors, including your current and future tax brackets, overall financial goals, and potential tax law changes. Speaking with a financial advisor or retirement planning specialist is crucial in order to fully understand your options and make an informed decision. Consider listening to this episode of the Guided Retirement Show to gain valuable insights into the Roth vs. Traditional debate and make the right choice for your retirement savings.