The Roth Revolution: Pay Now, Save Later

This episode of the Deep Dive explores the game-changing impact of the Roth IRA on retirement saving. We break down the history of the Roth IRA, a concept championed by Senator William Roth Jr. of Delaware, and how it flips the script on traditional retirement accounts like the standard IRA or 401(k).

The core of the Roth strategy is simple: pay taxes on your contributions now, so your money can grow completely tax-free, and your withdrawals in retirement are also 100% tax-free. We discuss how this differs from traditional tax-deferred plans, where you get an upfront tax break but pay taxes on withdrawals later.

The conversation also covers the evolution of the Roth idea into employer plans with the Roth 401(k), authorized by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). We highlight the crucial differences and benefits, including higher contribution limits and the potential for employer matches on your Roth contributions.

But is the Roth always the best choice? Not necessarily. We weigh the pros and cons, including when a traditional tax-deferred account might be more beneficial, and reveal a strategic workaround for high-income earners who exceed the direct contribution limits: the Backdoor Roth IRA.

Tune in to learn how choosing when to pay your taxes—now versus later—can dramatically shape your financial freedom and make your retirement savings strategy a truly powerful move.

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