High Earners, Still Do Roth?

Summary

Jill on Money with Jill Schlesinger: Episode Summary

Episode Title: High Earners, Still Do Roth?
Release Date: July 29, 2025
Host: Jill Schlesinger, CFP®
Guest: William (from New Jersey)
Guest Co-host: Mark

---

1. Introduction to the Episode

In this episode of "Jill on Money," host Jill Schlesinger delves into the complexities faced by high earners when deciding between Roth and traditional retirement accounts. The primary focus is on how substantial income affects tax strategies and long-term financial planning.

---

2. Guest Introduction and Financial Background

Jill welcomes William from New Jersey, a long-time listener who previously reached out in 2021. William and his wife, both in their early thirties with two young children, share an impressive combined annual income of approximately $511,000. Their financial discipline has led them to accumulate significant savings:

• Pre-Tax Accounts: $706,000
• Roth Accounts: $516,000
• After-Tax Accounts: $380,000
• Total Savings: Over $1.6 million

Notable Quote [05:04]:
William: "We've really focused on the Roth. And at that time we were making $240,000."

---

3. The Core Issue: Roth vs. Traditional Accounts

William seeks advice on whether to continue maximizing Roth contributions or to pivot towards traditional pre-tax retirement accounts due to their increased income and resulting tax burdens.

Notable Quote [08:52]:
William: "Should we basically go back to a pre-tax retirement contribution because our tax bracket has gone up substantially?"

---

4. Co-host Mark's Perspective

Mark, Jill's co-host, weighs in by emphasizing the long-term benefits of Roth accounts for high earners. He argues that high-income individuals like William and his wife are unlikely to see a reduction in their tax brackets in the future, making Roth contributions more advantageous.

Notable Quote [10:10]:
Mark: "Everything is Roth or brokerage and that's it. [...] It's highly unlikely you're not going to be high earners going forward."

---

5. Jill's Analysis and Long-Term Tax Implications

Jill underscores the concept of the "ticking tax bomb," referencing financial expert Ed Slott. She explains that while reducing taxable income now may offer short-term relief, it can lead to substantial tax liabilities in the future when funds are withdrawn from traditional accounts.

Notable Quote [11:50]:
Jill: "It's just that you're kicking the can down the road. So weirdly, even though you make a half a million dollars a year... you're concentrating on the wrong thing."

---

6. Tax Credits and Deductions Considerations

William brings up concerns about qualifying for tax credits and deductions, such as the Child Tax Credit, under his current income level. He questions whether reducing taxable income to access these benefits is worth the trade-off.

Notable Quote [09:38]:
William: "We could go from 511 and we could contribute and be below 400 grand of, of you."

---

7. Practical Recommendations

Jill advises William to consult with a CPA to perform a detailed tax analysis, considering the impact of recent tax laws like the SALT deduction cap. However, she leans towards maintaining Roth contributions given their long-term benefits and the uncertainty surrounding future tax rates.

Notable Quote [14:05]:
Jill: "Have you ever heard us talk on the show when we're talking to somebody and they're like, I want to reduce my income because I want to not pay that extra fee when I get Medicare... We're like, what are you talking about?"

---

8. Final Thoughts and Conclusion

Mark reinforces his stance against shifting to traditional accounts, emphasizing that the growth of pre-tax savings will inevitably lead to higher tax brackets upon withdrawal. Jill wraps up by highlighting the importance of focusing on long-term financial health over short-term tax strategies.

Notable Quote [17:45]:
Mark: "Not one dollar to pre-tax. That's my last word."

Jill's Closing Remarks [17:47]:
Jill: "William, keep rocking on. Put some more money in that 529 plan. Call us in a few years. Hope there's not a pandemic in between."

---

9. Key Takeaways

• High Earners Benefit from Roth Accounts: Given the likelihood of maintaining or increasing their income and tax brackets, Roth contributions offer tax-free withdrawals in retirement.
• Long-Term Tax Strategy Over Short-Term Relief: While reducing taxable income now may offer immediate benefits, it can lead to significant tax liabilities later.
• Professional Financial Advice is Crucial: Consulting with a CPA can provide personalized insights, ensuring tax strategies align with overall financial goals.
• Diversification of Savings Accounts: Maintaining a mix of pre-tax, Roth, and after-tax accounts can offer flexibility and resilience against future tax changes.

---

10. Notable Quotes with Timestamps

• William on Past Focus [05:04]:
  "We've really focused on the Roth. And at that time we were making $240,000."

• William's Central Question [08:52]:
  "Should we basically go back to a pre-tax retirement contribution because our tax bracket has gone up substantially?"

• Mark on Roth Strategy [10:10]:
  "Everything is Roth or brokerage and that's it. [...] It's highly unlikely you're not going to be high earners going forward."

• Jill on Tax Implications [11:50]:
  "It's just that you're kicking the can down the road. So weirdly, even though you make a half a million dollars a year... you're concentrating on the wrong thing."

• Jill Advises Consultation [14:05]:
  "Have you ever heard us talk on the show when we're talking to somebody and they're like, I want to reduce my income because I want to not pay that extra fee when I get Medicare... We're like, what are you talking about?"

• Mark's Final Word [17:45]:
  "Not one dollar to pre-tax. That's my last word."

• Jill's Closing [17:47]:
  "William, keep rocking on. Put some more money in that 529 plan. Call us in a few years. Hope there's not a pandemic in between."

---

This episode provides valuable insights for high earners contemplating their retirement savings strategies. By weighing the immediate benefits against long-term implications, Jill and Mark offer guidance to navigate the complex landscape of tax-efficient investing.

Transcript

[Robert Half]

Need contract help for those workload peaks and backlog projects. You're not alone. Robert half found that 67% of companies surveyed said they will increase their use of contract talent. That's why their recruiters leverage their experience and use award winning AI to quickly find the skilled candidates you want. Learn about their specialized talent in finance, accounting, technology, marketing, legal and administrative support at Robert Half. They know talent. Visit roberthalf.com talent today.

[Carvana Representative]

Thanks for selling your car to Carvana. Here's your check.

[William]

Whoa.

[Jill Schlesinger]

When did I get here?

[Carvana Representative]

What do you mean?

[William]

I swear it was just moments ago that I accepted a great offer from Carvana online.

[Jill Schlesinger]

I must have time traveled to the future.

[Carvana Representative]

It was just moments ago. We do same day pickup. Here's your check for that great offer.

[Jill Schlesinger]

It is the future. It's.

[Carvana Representative]

It's the present and just the convenience of Carvana. Sorry to blow your mind.

[William]

It's all good.

[Jill Schlesinger]

Happens all the time. Sell your car the convenient way to Carvana.

[Relay Representative]

Pick up.

[Jill Schlesinger]

Times may vary and fees may apply. Welcome to the Jill on Money Show. It's Tuesday, July 29th and we are here trying to help you make better financial decisions. Sometimes you're on this path and you're like, okay, things are going well, things are great. And then all of a sudden something changes. Like I spoke to somebody recently and they're like, I got a new boss and this new boss is fantastic. I thought I was going to leave. I hated my job. I thought I hated the industry. No, I just hated my boss. And so of course the reverse can be true. You're working your whole life and you have some situation. Maybe there's a change of ownership or maybe there's a new boss and now you're like, oh, I hate what I'm doing. And if that's you or some conditions have changed or you're just thinking about how do you do something different in your financial life. Get in touch with us. Go to jillonmoney.com, click the contact us button, it's in the upper right hand corner and just write us the note. And then if you've got the guts to come on the air live with us. Definitely not that big a deal, guys. It's not. Do me a favor, just check the little box. Mark does everything else. It's so easy. Also, just want to thank everybody who has been sending me all of these great ideas for a new song. Remember, I'm doing this crazy 275 mile bike ride in three days. Ann sent me note. Let's get it started. I Like that one from the Black Eyed Peas. Very good idea. And then this guy Brad, who is friends with my pal J. James, who's the anchor at wina, and he was like, oh, my God, I won't back down by Tom Petty. Now that is a very good one. I think they're sometimes like thematic songs. And then he says, the second is going to make you sweat. I had that on my list already. It's by CNC Music Factory. So anyone else who's got an idea for a song that should be added to my training playlist, please, please let me know. I'm doing a three hour bike ride after I get off doing this show right now. So I got things to do and I need a lot of music to help me out. Okay. Today we are talking to William, who joins us from New Jersey. William, welcome to the program. What can we do for you?

[William]

Hey, Jill and Mark. How you guys doing?

[Jill Schlesinger]

We're good.

[William]

Thanks for having me. First of all, before I ask my question, I just really want to say thank you guys for everything you do. I've been a listener since the pandemic. So I called back in 2021, and my question today is kind of similar to my question in 2021, but there have been some changes.

[Jill Schlesinger]

Okay.

[William]

So that's why I wanted to talk to you guys again.

[Jill Schlesinger]

I can't believe it. 2021. If the time goes by so fast. William, here we are. All right, so what's going on today? Let's forget about 2021. What do we got on your plate today?

[William]

So my wife and I, like I said, we live in New Jersey. We have two kids. We're relatively young. I'm 33 and she's 30. So we're not really concerned about retirement in terms of, you know, trying to retire.

[Jill Schlesinger]

Yeah.

[William]

However, we're worried about our tax situation.

[Jill Schlesinger]

Uh. Oh.

[William]

Yep.

[Jill Schlesinger]

Why? What happened? You make too much money.

[William]

It's a good problem to have, but yes.

[Jill Schlesinger]

I knew it. Okay. All right, so wait a second. How old are your kids?

[William]

Three and two.

[Jill Schlesinger]

Okay. Are you guys both working full time? Are both you and your wife working full time?

[William]

Yes, we are.

[Jill Schlesinger]

How much do you guys earn together?

[William]

It's about $511,000.

[Jill Schlesinger]

Oh, my gosh. That's a good problem to have. You're so young. Incredible. Are you putting money into retirement accounts?

[William]

Yes, we both are. And this is where it gets a little bit complicated. We have a lot of retirement accounts, different options.

[Jill Schlesinger]

Yeah.

[William]

We're both contributing. And for my last call in 2021, we've really focused on the Roth. And at that time we were making $240,000.

[Jill Schlesinger]

Oh.

[William]

So now the question is what should.

[Jill Schlesinger]

You now go to? Back to the traditional.

[William]

Yes. And yeah, I do have one, one wrinkle I want to throw out at you is we've also, you know, been lucky that we saved quite a bit as well.

[Jill Schlesinger]

Yeah.

[William]

And you know, before we. For context. Right. We have about 706,000.

[Jill Schlesinger]

Wait a second. What is going on? You guys drug dealers? How are you saving so much money?

[William]

I've been working for about 12 years.

[Jill Schlesinger]

Oh my God, you're incredible. You guys are like, this is amazing. 30 somethings, Mark. Can you believe it? And they got kids. This is amazing. The 700 grand, where is that? Is that in retirement accounts or combined retirement brokerage? Where's the money allocated right now?

[William]

So the $706,000 is all pre tax account. We have other money.

[Jill Schlesinger]

Of course they do.

[William]

Yeah.

[Jill Schlesinger]

What else?

[William]

You have 516 of Roth accounts.

[Jill Schlesinger]

God. Okay.

[William]

And I don't think this is too important for today's question, but after tax we have about 380.

[Jill Schlesinger]

It's insane. You guys are killing it. It's incredible. It really is.

[William]

Yes. I want to say we've been very lucky and working in the period when the market has done well. Being favored.

[Jill Schlesinger]

Yeah.

[William]

Done well to us. But the reason why I wanted to put that context out there is I'm also worried about. We already have a pretty high pre tax balance.

[Jill Schlesinger]

Yes.

[William]

So should we. Although I really focused on trying to reduce income based on, you know, having, you know, I saw my taxes last year, let's put it that way.

[Jill Schlesinger]

Yeah. It's rough, right? It's like a real number. And you live in a high tax state.

[William]

That's correct.

[Jill Schlesinger]

Right. So you live in New Jersey. There's a high state income tax. Is high federal tax. Do you have any money saved for the kids yet or not?

[William]

A little bit. Yeah, we do. Have. We started 529s for them when they.

[Jill Schlesinger]

You're using that. Are you using the New Jersey plan?

[William]

We decided against it because it kind of like capped you out after. Were you actually using the New York plan?

[Jill Schlesinger]

Okay. All right. New York saves. That's good. Okay. The cash flow that you guys have sounds tremendous. Like, do you own a home? Are you like where, where are you with all the expenses? You're just saving so much money.

[William]

We do own our own in New Jersey, you know, cash flow wise. On a monthly basis. Because we live in New Jersey, actually we spend Quite a bit. So we're not tight. But at the same time money is not just, you know, because we're saving a lot in accounts and the, the options of accounts we have that we just don't have, you know, free cash all the time.

[Jill Schlesinger]

Right.

[William]

Sometimes it does come through, but not all.

[Jill Schlesinger]

But you, you're saving a lot of money anyway. You're putting money into your retirement accounts and then you've got this other money. So I, that it doesn't feel like you have a lot of cash flow, but you are. That includes the fact that you're saving so much. How much is your house worth?

[William]

Actually? I don't know, maybe 600.

[Jill Schlesinger]

Is there a mortgage on it?

[William]

Yes, we still have a 350 balance on that mortgage.

[Jill Schlesinger]

What's the interest rate?

[William]

Oh yeah, Mark, closure years on this.

[Jill Schlesinger]

Oh yeah, here we go.

[William]

2.75.

[Jill Schlesinger]

I like how everyone Mark is now, they're attuned to like Mark. Brace yourself man. So is the basic question at this point because you've got a lot of money, is the basic question should you basically go back to a pre tax retirement contribution because your tax bracket has gone up substantially? Is that the basic question?

[William]

That is the basic question, yes. And I also am asking that question from the context of a lot of what I'm learning as of last year was that you qualify for a lot of credits and deductions based on your income. For our income being so high, should we be worried about reducing it to qualify for those credits?

[Jill Schlesinger]

Yeah, you're not going to qualify but how are you going to qualify for those credits? What are you going to do like oh, I don't think I'll work as much because I mean can you control your income right now?

[William]

So I guess maybe what I meant by was for example, you know, if we switch over to all pre tax accounts we, we could go from 511 and we could contribute and you know, be below 400 grand of, of you.

[Jill Schlesinger]

Mean to get like the child tax credit and have, and have those, have those various little benefits that flow. But the trade off is of course we know what happens in the future, right?

[William]

That's right.

[Jill Schlesinger]

Mark, what are you thinking about William and his wife? I mean first of all, the cash flow king and queen of New Jersey and the saving extraordinary. Right? But what do you think their income is basically doubled?

[Mark]

I don't really need to think.

[Jill Schlesinger]

I mean, oh boy, here we go.

[Mark]

No, I mean I can just, I always like to try and relate it to myself. And you know, William, I live In New York, very high cost of living. We're in the same tax bracket as you. I don't even think twice. We don't do $1 to pre tax. Everything is Roth or brokerage and that's it. Because as Ed Slott always likes to say, you guys are high earners. It's highly unlikely you're not going to be high earners going forward. You already have almost a million dollars in pre tax. That's just going to continue to grow. So it's not even a decision to be made. It would be all Roth or brokerage for me.

[Jill Schlesinger]

Now, William, I know that's a bitter pill to swallow, but there is something to be said for also knowing that the tax liability is not going to make, it's not going to compound, right? I mean, like Mark said, you already have 700 grand, right? That's in the pre tax environment. So the idea of adding to that, that, you know, oh gosh. And you know, by the time you guys are like in your mid-30s, you have a million dollars pre tax, it's just going, getting bigger and bigger. You know what another thing that Ed Slott likes to talk about, and for those of you who haven't listened to Ed Slott, he is fantastic. He talks about the ticking tax bomb. What you're describing is, actually feels better in the moment because you're like, my taxes go down. And yet we have this long fuse for that ticking tax bomb. And if we allow it to just fester, it will go off, it will go off. You will have to pay that. It's just that you're kicking the can down the road. So weirdly, even though you make a half a million dollars a year and you know, listen, most of your money is taxed in like the 32% bracket. But by the way, that 24% bracket is pretty broad. So, you know, you're still in a bracket where you are, you know, you're most likely gonna stay there. You know, like, I don't see a world where you're making that kind of money and saving that kind of money where you're not gonna actually end up being even in the 35% bracket, in the 37% bracket. When we really crunch these numbers. And even with people who are in a high tax bracket, the highest tax bracket, we are also seeing the case to be made for a Roth. Cause when is, is your tax bracket going to go down? You have money in brokerage, your earners, you're going to keep making money. It's very unlikely that that Tax bracket's going down, man.

[William]

Yeah. And Mark, thanks for your perspective. I think one of the things that made me ask this question again, really, was the recent. Let's call it the tax bill that got passed.

[Jill Schlesinger]

Yeah, the big, beautiful bill.

[William]

That's right. Should I really be fussing around trying to qualify for things, you know, with the new salt tax minimums and all that other stuff? Right. Or should I just say, you know what? Bite the bullet, pay the tax now, forget about all those future deductions. And that's what I meant by deduction.

[Jill Schlesinger]

I know what you mean. Because the limitation on the salt tax, by the way, that's only in place for three years and it goes back to 10,000. That tax is a drag. I get it. I'd rather you be more tax efficient with, like, your brokerage account, maybe slide some of that brokerage account money into the 529, which is. Makes it a much more efficient way to invest. Limit that. I don't know if I would play this game. You know, Mark, he makes a case, right? Like he. If he could get himself down under 400, which I don't know if you really can, because it depends really how much money you're making and where all your itemized deductions are. I mean, you know, what you could also do is you can see how this tax year goes. Do you work with an accountant or you do it yourself?

[William]

I probably should work with an accountant.

[Jill Schlesinger]

Probably. But you might as well. You could interview an accountant and you can say to the accountant, here's my, you know, here's what I think I have. Should I. Do you think, you know, what they can look at is really, are you going to be entitled to. Because I'd hate for you to go through this whole process and they're like, guess what? You got phased out anyway.

[Mark]

What are your property taxes? Do you know?

[William]

Yes. About 11k.

[Jill Schlesinger]

No. Then forget it. Oh, my God.

[Mark]

You're gonna do all this for another thousand dollars?

[William]

I guess here's the question, right? You know, in terms of me reducing my income, my. My wife has access to three because she works for the state. She has access to a 401A.

[Jill Schlesinger]

Yeah.

[William]

A 457 and a 403B.

[Jill Schlesinger]

Right. And you're putting money in all of them.

[William]

We're putting money in all of them. And currently all Roth. Right. So. And then on my end, I have access to my 401k. So all combined.

[Jill Schlesinger]

Okay, wait, I'm going to do. I'll do a thought experiment with you. You Ready? What if you went to a CPA and you said, do me a favor, if I did all this, tell me my actual tax position, how it would. You can have a dummy tax return done. Like, you should hire someone. You guys have a lot going on. But okay, so, like, what if it were. If it's like we're talking because remember, these are. Salt is a state and local tax deduction. We're not talking about you qualifying for credits because you're not going to get any credits. You're talking about that your state and local tax deduction will be limited to 40,000. I agree with Mark. Like, if that is what we're talking about, you can literally find out how much money we're talking about. And if you found out that the ultimate difference in your tax bill was like $3,000, right, just because it's a deduction, again, it's not a credit, you might say, what am I making myself crazy for? The bigger problem is going to be this $700,000 that's building up. That's all of a sudden going to be a million in a coup. And now I'm talking about real money, by the way, because now I'm talking about, well, what if I'm in the 40% tax bracket when I retire and I'm quibbling about this? Do you know what I mean? Like, we might be like looking to save a few bucks now, but the long term impact of having that money compound and grow is significant. Have you ever heard us talk on the show when we're talking to somebody and they're like, I want to reduce my income because I want to not pay that extra fee when I get Medicare, that IRMAA fee. We're like, what are you talking about? This is five grand a year. And you're talking about that. You got millions of dollars. You're concentrating on the wrong thing. And so I think this may be your case, William, where you are focusing on this. I get it. It's very much a tantalizing lure. You had something, you lost something, but now you're making so much money, you don't even realize it. You don't realize how big this problem is going to get. I'm still. I mean, I really think that you're in great shape. Maybe go talk to an accountant, even an accountant. Accountants sometimes are dopes also, because they'll be like, oh, no, you can save taxes today. And you say, well, what about the future? Oh, we'll deal with that in the future. This is not something you can deal with. In the future. This is a ticking tax bomb. There's no doubt in my mind.

[William]

No, this is good to hear, children, Mark, because I. I actually do not want to major in the minors. Yeah, that's not my goal. I kind of, like I said, I've put it off. We continue to do Roth. And this only came about because it's like I actually had to write a check last year. So I was like, should I actually reconsider this?

[Jill Schlesinger]

Typically, I think it's good to reconsider anything. I really do. But I think you're in great shape. I wouldn't change a thing. And Mark, would you like to have the last word?

[Mark]

Not one dollar to pre tax. That's my last word.

[Jill Schlesinger]

Hear that? Not one dollar to pre tax. William, keep rocking on. Put some more money in that 529 plan. Call us in a few years. Hope there's not a pandemic in between. But thanks for getting back in touch with us. And hey, if you're wrestling with the raw traditional question, I know that it feels so good in the moment. This is the short term versus the long term. And that's why it's so hard for our little lizard brains to get our minds around it. Like, I want to get that extra deduction. I want to qualify for that tax credit. I really want to avoid paying this IRMAA fee. And we're losing sight of the big picture, which is, oh, my God. William and his wife are kicking it and they're going to have a massive tax bill down the line when they are forced to take out traditional money. We don't know where tax rates are going. I can pretty much guarantee you, gang, they ain't going to be at this level. This little reprieve from the big beautiful bill not going to be the case forever. It's just not. I cannot believe that taxes are going to be at this level. I believe long term tax rates are likely to be higher. That's just my two cents. One girl's opinion. All right, we're going to be done right now. I promise to get off my soapbox. If you've got a question about a Roth versus traditional. If you're young, if you're middle aged, if you're older, does not matter. Get in touch with us. Go to jillonmoney.com, click the contact us button. Let us know if you want to come on the air live. Don't forget to sign up for the free weekly newsletter right there on our website, jillonmoney.com you can subscribe to us here, Jill on money on the Odyssey app. And you can also subscribe to our sister broadcast called Money Watch. So do that or wherever you find your favorite podcast. But subscribe to both of the shows. They are fantastic. Put your hands, metaphorically on someone's back. Change your work, change your wealth, change your life. Thank you for listening and we'll talk to you tomorrow.

[Relay Representative]

As a business owner, you're not chasing the norm. You're building momentum. But your bank wasn't made for modern money management. You need Relay, an online money management platform that moves as fast as you do. With Relay, you can open up to 20 accounts, so you can separate your cash for things like income, payroll or operating expenses. All you need is a few minutes to sign [e-mail] Spotify that's R E L A Y-F I.com S-P O-T-I-F Y Relay is a financial technology company and is not a bank. Bank services provided by Threadbank member FDIC.

[Brian]

Hey there, cats and kittens. It's Brian from the commercial break, the mediocre comedy podcast where my best friend Chrissy and I attempt to make sense of the world. We talk about the absurd, the ridiculous, and the stuff no one asked for, like Internet weirdos, pickup artists, and why everyone is obsessed with crystals and colonics. It's all got to stop. The show is free, it's frequent, and it's probably not for everyone. You can go to tcbpodcast.com [e-mail] the commercial break, or check out the show wherever you listen to podcasts. We'll see you on the next commercial break. And best to you.