Should I choose Roth or Traditional IRA?
Choose Roth if you expect higher taxes in retirement (younger, income will grow, or tax rates rise). Choose Traditional if you're in a high bracket now and expect lower taxes later. For most accumulating workers under 50 in the 22–24% bracket, Roth is preferred because of tax-free growth and no Required Minimum Distributions.
Formula
Compare: Current Tax Rate vs Expected Retirement Tax Rate. If current < retirement → Roth. If current > retirement → Traditional.
Example
Earning $90k (22% bracket) now, expect $120k income in retirement (24% bracket) → Roth wins. Earning $400k (35% bracket) now, expect $80k retirement spending (12-22% bracket) → Traditional + Roth conversion ladder in early retirement.
How it works in detail
The decision comes down to: pay taxes now (Roth) or later (Traditional). Roth wins in three scenarios: (1) you're in a lower bracket now than you will be in retirement, (2) you expect tax rates to increase legislatively, (3) you want flexibility since Roth has no RMDs at 73. Traditional wins if you're in the 32%+ bracket now and plan to live on less in retirement. The Roth conversion ladder is a powerful hybrid: contribute to Traditional during peak earning years, then convert to Roth in low-income early retirement years (between retiring and claiming Social Security).
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How much do I need to retire?
Multiply your annual spending by 25. If you spend $60,000/year, you need $1,500,000. This is the 4% rule from the Trinity Study (1998) — withdraw 4% annually with a 95%+ historical success rate over 30 years.
When should I do a Roth conversion?
Convert Traditional IRA/401(k) to Roth during years when your income is unusually low — early retirement before Social Security, sabbaticals, or gap years. Fill up the 10% and 12% brackets ($0–$47,150 single in 2024) with conversions, paying minimal tax on money that then grows tax-free forever.
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