Episode Overview

Podcast: Jill on Money with Jill Schlesinger
Episode: Roth or Pre-Tax 401(k)?
Date: December 10, 2025

In this episode, host Jill Schlesinger fields a listener question from Fred in South Carolina about whether he should switch his retirement contributions from a traditional pre-tax 401(k) to a Roth 401(k). Jill unpacks Fred’s entire financial picture, examining retirement account balances, cash flow, debt, college savings, and insurance needs. She provides practical, jargon-free advice about the impact of taxes on retirement savings, the flexibility needed for future spending, and how to strike a balance between pre-tax and post-tax saving. The episode is candid, light, and advice-packed—perfect for listeners facing similar crossroads in 401(k) choices.

Key Discussion Points and Insights

1. Fred’s Financial Landscape

• Age & Household: Fred, 49, married, wife (44), stepdaughter (12), dog.
• Income: $186,000 salary + variable compensation averaging $240,000 gross per year.
• Current Saving: Maxing out regular (pre-tax) 401(k); $334k in current 401(k), $774k in rollover IRA (pre-tax), $18k in Roth IRA.
• Wife’s Assets: Home-based business, small income. $5-6k in a spousal IRA.
• Debt: $10k car loan, $82k mortgage at 2.75% interest (“Beautiful.” – Jill, 05:55).
• House Value: About $300k (per Zillow).
• Cash Holdings: $27k high-yield savings, $27k Schwab brokerage, $15k in T-bills.
• Child’s College Fund: $7k in a 529, $350/month added.

2. Weighing Roth vs. Traditional 401(k) Contributions

• Fred’s Core Question: Should future retirement savings go into a Roth 401(k) or stay pre-tax?
• Retirement Projections:
  • Continuing with pre-tax contributions could result in >$3 million in retirement accounts by age 72.
  • Required Minimum Distributions (RMDs) would force large annual taxable withdrawals—over $100k per year, possibly more (07:54).
• Tax Implications:
  • Even if tax rates don’t rise, large RMDs could keep Fred in the 22% or 24% tax bracket.
  • “The money that goes into these pre tax dollars must come out at some point in the future. Right?...The year that you the first year of your required minimum distribution, you would be required to remove over $100,000.” – Jill (07:11, 07:54)

3. Balancing and Diversifying Tax Buckets

• Jill’s Recommendation: Add more to Roth to diversify taxable sources in retirement.
• Memorable Quote:

  “Let’s balance some of the allocation out between money that’s been taxed and money that hasn’t been taxed. How’s that sound to you?” – Jill (08:02)

• Negotiated split:
  • Fred is open to shifting 50/50 between Roth and pre-tax.
  • Jill jokes she’d prefer all Roth but proposes: “If I say 50/50, we stop paying down the mortgage.” (08:44)
• Fred’s Compromise: Plans to switch fully to Roth contributions next year to see how the budget adjusts. (09:45):

  “Beginning the first of the year, I could swap it all over into the Roth 401K and then see how the budget shakes out because...All right, let’s do it with the taxes.” – Fred (09:45)

4. Cash Flow and Priorities: Mortgage Payoff & Brokerage Investments

• Jill’s Firm Advice:
  • Stop aggressively pre-paying the ultra-low mortgage (“No!” – Jill, 06:01).
  • Instead, boost investments in the brokerage account for future flexibility.
  • Consider more contributions to the 529 for tax-advantaged college savings.
• Strategic Reasoning:
  • Money is cheap; investing is likely higher yield.

  “The money’s so cheap it doesn’t make a ton of sense to me.” – Jill (09:42)

  • Non-retirement assets provide spending choices between ages 62–70 before Social Security.

5. Insurance and Estate Planning Check-up

• Life Insurance:
  • Fred has 2x salary coverage from work and term policies totaling $1M.
  • Just added a new 20-year $500k term to cover likely working years.
  • Jill’s Attitude: More is good, but hopefully all policies outlive him! (10:40)
• Estate Docs:
  • Will in progress with wife; acknowledgment that second marriages need careful legal guidance.
  • Jill emphasizes necessity of proper documents, especially in blended families.

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote | |-----------|---------|-------| | 05:55 | Jill | “Beautiful. And you’re not making any extra payments on that, are you?” (re: 2.75% mortgage) | | 06:01 | Jill | “No.” (firmly, about stopping extra mortgage payments) | | 07:11/07:54 | Jill | “The money that goes into these pre-tax dollars must come out at some point in the future... The year that you the first year of your required minimum distribution, you would be required to remove over $100,000.” | | 08:02 | Jill | “Let’s balance some of the allocation out between money that’s been taxed and money that hasn’t been taxed. How’s that sound to you?” | | 08:44 | Jill | “If I say 50/50, we stop paying down the mortgage. There’s a negotiation going on here.” | | 09:45 | Fred | “Beginning the first of the year, I could swap it all over into the Roth 401K and then see how the budget shakes out because ... All right, let’s do it with the taxes.” | | 09:42 | Jill | “The money’s so cheap it doesn’t make a ton of sense to me.” (on low mortgage rates) | | 10:40 | Jill | “Let’s hope that all life insurance expires before we do. Not the game plan.” |

Important Segments (with Timestamps)

• [03:23] Fred’s Full Financial Picture: Salary, family details, retirement balances.
• [05:27] Debt, cash flow, house value, and mortgage discussion.
• [06:57] Jill summarizes Fred’s “good news and bad news.”
• [07:53] Required Minimum Distribution “problem” if all saving is pre-tax; tax bracket projections.
• [08:35] Discussion: How much should be shifted to Roth? Negotiation and recommendations.
• [08:59] Guidance on brokerage, 529 contributions, preparing for retirement flexibility.
• [09:42] Debate and advice on the wisdom of paying down the mortgage.
• [10:04] Quick check on life insurance and estate documents.

Tone and Style

Jill is upbeat, approachable, and friendly, with playful negotiation (“If I say 50/50, we stop paying down the mortgage”) and encouragement (“Go get yourself some Roth action. Mark will be very proud of you.”). She’s also unafraid to deliver tough love, particularly about mortgage payments and unnecessary complexity.

Actionable Takeaways

• For high earners with large pre-tax balances: Consider Roth (post-tax) contributions for tax diversification in retirement.
• Don’t rush to pay off super-low-rate mortgages; investing spare cash likely yields better long-term outcomes.
• Build non-retirement brokerage assets for added flexibility before age 70.
• Check life insurance and estate planning, especially in blended family situations.
• Continue or increase 529 contributions for efficient college saving.

This episode is a must-listen for anyone perplexed about 401(k) choices, taxes in retirement, or how to prioritize financial goals without falling prey to conventional wisdom. Jill’s advice is smart, actionable, and never dull.