Pretax or Roth Contributions: Which is Better For You?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Understanding Pre-Tax Retirement Accounts

Pre-tax retirement accounts allow you to contribute pre-tax income, reducing your annual taxable income. This immediate tax benefit can be substantial, especially for high earners. Your investments grow tax-deferred, and you pay taxes upon withdrawal during retirement, typically when you may be in a lower tax bracket. Common pre-tax retirement accounts include:

Key Pre-Tax Accounts

Benefits of Pre-Tax Accounts

  • Immediate Tax Savings: Reduces your taxable income for the current year.
  • Tax-Deferred Growth: Investments grow without being taxed until withdrawal.
  • Potential Lower Tax Bracket: Withdrawals in retirement may be taxed at a lower rate if your income decreases.


  • Required Minimum Distributions (RMDs): Must start taking RMDs at age 73, regardless of need.
  • Taxable Withdrawals: All withdrawals are taxed as ordinary income.

Exploring Roth Retirement Accounts

Roth retirement accounts are funded with after-tax dollars, meaning contributions do not reduce your current taxable income. However, qualified withdrawals in retirement are tax-free, including both your contributions and the investment earnings. Common Roth retirement accounts include:

  • Roth 401(k): Employer-sponsored, after-tax contributions with tax-free withdrawals.
  • Roth IRA: After-tax contributions for personal retirement, with tax-free withdrawals.
  • Roth 403(b): After-tax contributions for public school employees and non-profits, with tax-free withdrawals.
  • Roth 457(b): After-tax contributions for state and local government employees and non-profits, with tax-free withdrawals.
  • Roth Thrift Savings Plan (TSP): After-tax contributions for federal employees and uniformed services, with tax-free withdrawals.

Benefits of Roth Accounts

  • Tax-Free Withdrawals: No taxes on qualified withdrawals in retirement.
  • No RMDs: Roth IRAs do not require withdrawals during the account holder’s lifetime; as of 2024, Roth 401(k)s and Roth TSPs also do not require RMDs.
  • Flexibility: Beneficial if you expect to be in a higher tax bracket in retirement.


  • No Immediate Tax Benefit: Contributions do not reduce current taxable income.
  • Contribution Limits: Combined contribution limits with traditional accounts.
Employee Pre Tax Vs Roth

Pre-Tax vs. Roth: A Direct Comparison

Tax Treatment

  • Pre-Tax Contributions: Reduce your taxable income now, with withdrawals taxed as ordinary income in retirement.
  • Roth Contributions: Made with after-tax dollars, with tax-free withdrawals in retirement.

Immediate vs. Future Benefits

  • Pre-Tax Contributions: Provide immediate tax savings, reducing your taxable income for the current year.
  • Roth Contributions: Offer future tax benefits, allowing for tax-free withdrawals in retirement.

Required Minimum Distributions (RMDs)

  • Pre-Tax Accounts: Require RMDs starting at age 73.
  • Roth Accounts: As of 2024, Roth IRAs, Roth 401(k)s, and Roth TSPs do not require RMDs.

Contribution Limits

  • Pre-Tax and Roth Accounts: Share combined contribution limits for the same type of plan (e.g., 401(k), 403(b), TSP).
Pre Tax Vs Roth

Pre-Tax vs. Roth Calculator

How We Can Help

At The Annuity Expert, we understand the complexities and emotional stress of planning for retirement. As an insurance agency, annuity broker, and retirement planner with 15 years of experience, we are committed to finding the best solutions at the lowest costs. We know that choosing between pre-tax and Roth accounts can be daunting, and we are here to simplify the process for you.

Our core mission is to help you achieve financial security and peace of mind. We recognize the symptoms of uncertainty and confusion that many face when planning for retirement. These feelings can be overwhelming and cause anxiety about your financial future. By demonstrating our expertise and understanding, we aim to earn your trust and guide you toward the best decisions for your unique situation.

What We Recommend

Step 1: Schedule a Consultation

Contact us to schedule a free consultation. During this initial meeting, we will discuss your financial goals, current situation, and retirement plans. The main benefit is gaining clarity on your options and feeling more confident about your retirement strategy.

Step 2: Personalized Retirement Plan

We will create a personalized retirement plan tailored to your needs based on the information gathered. This plan will outline the best combination of pre-tax and Roth accounts for maximizing your savings. The main benefit is having a clear, actionable plan that aligns with your goals.

Step 3: Implementation and Ongoing Support

We will assist you in implementing your retirement plan, including setting up accounts and managing investments. We provide ongoing support and adjustments as needed. The main benefit is continuous guidance and support, ensuring your plan stays on track.

Features and Benefits

  • Expert Advice: Access to seasoned professionals with extensive knowledge.
    • Benefit: Make informed decisions with confidence.
  • Customized Plans: Tailored strategies to fit your unique situation.
    • Benefit: Maximizes your savings and minimizes taxes.
  • Ongoing Support: Continuous monitoring and adjustments.
    • Benefit: Keep your plan aligned with your goals.

Common Objections and Rebuttals

  • Objection: “I can handle my retirement planning on my own.”
    • Rebuttal: While self-management is possible, our expertise can help you optimize your savings and avoid costly mistakes.
  • Objection: “I don’t want to pay for financial advice.”
    • Rebuttal: Our services often pay for themselves through tax savings and better investment performance.

Failing to work with us may result in missed tax savings and optimized growth opportunities. On the other hand, partnering with us can lead to a secure and prosperous retirement. You will experience relief from financial stress, confidence in your financial future, and the satisfaction of knowing you are on the right path.

Contact us today for free advice or a free quote and take the first step towards a secure retirement.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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