Unsure which retirement account to choose? We have some tips

Summary

---

Life Kit – "Unsure which retirement account to choose? We have some tips"

Host: Marielle Segarra (NPR)
Guests: Amanda Holden (Financial Educator, Author), Mark Gallegos (CPA, Tax Partner), Mary Childs (Financial Journalist)
Original Air Date: May 7, 2026

---

Episode Overview

In this practical and approachable episode, Marielle Segarra tackles a common financial dilemma: choosing the right type of retirement account. Joined by financial educator Amanda Holden and CPA Mark Gallegos, the episode demystifies the world of IRAs, 401(k)s, Roths, and traditional accounts, focusing on tax advantages, misunderstandings, and practical steps for getting started—regardless of which option you choose.

---

Key Discussion Points & Insights

1. The Basics: Why Use a Retirement Account?

• Retirement accounts serve as tax shelters, not just savings vehicles
  • They let investments grow shielded from annual taxes, unlike regular bank accounts.
  • The stock market has higher growth potential, making retirement accounts a key part of long-term financial health.

“Retirement accounts are not just a vehicle to let your money grow over time for when you’re ready to stop working. They also have tax benefits.”
— Marielle Segarra (04:10)

2. Traditional Retirement Accounts (401(k), Traditional IRA, 403(b))

• How They Work:
  • Money is contributed pre-tax (not taxed now).
  • Investments grow tax-free.
  • Taxes are paid later, when withdrawing funds (ideally in retirement).
• Why It Matters:
  • Most people have lower income (and thus lower tax rates) in retirement.
  • Saves on taxes both during earning years and maximizes post-tax value in retirement.

“It would save you $5,000 in tax savings.”
— Mark Gallegos, on a $20,000 401(k) contribution at a 25% tax rate (05:31)

“As it’s growing, as it’s earning dividends, interest, capital gains…you’re paying zero tax on any of that money in a given year.”
— Mark Gallegos (05:38)

“In a way, you’re using the government’s money to help grow your retirement.”
— Mark Gallegos (05:49)

Key Takeaway:
With traditional accounts, pay taxes later, likely at a lower rate.

3. Roth Retirement Accounts (Roth IRA, Roth 401(k), Roth 403(b))

• How They Work:
  • You pay income tax now on contributions.
  • Investments grow tax-free.
  • Withdrawals (contributions and gains) are tax-free in retirement.
• When They’re Ideal:
  • Best for people currently in a low tax bracket/income (typically younger workers).
  • Withdrawals of contributions can be made anytime, penalty-free; gains have restrictions.

“Roth is the reverse. You are paying income taxes up front, but later on you won’t have to pay any income taxes when you pull the money out, which means you’ll never pay taxes on your investment profits.”
— Amanda Holden (09:27)

“When they decide to start taking that money out when they’re retired…that amount of income coming out, 50,000, 100,000, whatever, in a given year, tax-free.”
— Mark Gallegos, on compound growth inside Roth accounts (10:14)

4. Roth vs. Traditional: How to Choose? (Or Do You?)

• Consider Your Current Tax Rate:
  • High earners: Traditional accounts may make more sense.
  • Lower earners: Roth accounts could be better; “give this gift to your future self” by paying taxes now.
• No Crystal Ball for Tax Law:
  • Tax laws change, future rates are unpredictable.
  • Most important: Start investing instead of worrying about perfect timing.
• Tax Diversification:
  • Having both types offers increased withdrawal flexibility in retirement.

“All retirement accounts are good because all of them allow you to grow your money tax free.”
— Amanda Holden (11:47)

“Maybe the best thing we can do is give ourselves a little bit of tax diversification and do some of both. But the best thing you can do is not let it be a roadblock to getting started and just pick one and get to moving.”
— Amanda Holden (12:08)

“The more options you have, the more you control you have in retirement, the better you’re off.”
— Mark Gallegos (12:34)

5. Employer Match: Always Take the Free Money!

• If your employer offers a match, invest enough to get the full match first.
  • A match is essentially extra salary for your retirement—don’t leave it on the table!

---

Timestamps for Important Segments

• 00:26–01:09 — Why thinking about retirement accounts is important all year long
• 03:38–04:10 — What makes retirement accounts unique (investment growth & taxes)
• 04:52–06:41 — Traditional account mechanics and tax timing explained
• 09:13–10:26 — Roth accounts: tax treatment and early withdrawal advantage
• 11:17–12:38 — Guidance on choosing between Roth and traditional (and the “both” strategy)
• 12:38–13:53 — Don’t stress: Start saving, consider both, maximize employer match
• 13:53–14:59 — Quick recap of four main takeaways

---

Notable Quotes & Memorable Moments

• "The taxation of retirement accounts is probably the most misunderstood concept of investing. And what I hate is that it creates this real roadblock to people getting started."
  — Amanda Holden (00:42)

• "Tax law in the US is like this haunted patchwork doll that has been added to and amended over time. And you can think of retirement accounts as just one cursed limb of the creation."
  — Amanda Holden (01:09)

• "It couldn't just be simple."
  — Amanda Holden, on why there are so many account types (04:48)

• “Don’t let confusion stop you from getting started.”
  — Marielle Segarra (13:53)

---

Four Simple Takeaways

1. Retirement accounts provide tax benefits in addition to long-term growth.
2. Traditional accounts let you avoid taxes now and pay later—ideally at a lower future rate.
3. Roth accounts require taxes up front, but all growth and withdrawals are tax-free. Withdrawals of your contributions can be made anytime without penalty.
4. Don’t overthink the decision. Choose either, or both. Most importantly, get started now and take any employer match offered—it’s free money.

---

Summary Tone & Feel:
The episode is pragmatic, reassuring, and approachable—emphasizing action over indecision. The expert guests use analogies and plain language to clarify confusing concepts, making the steps feel doable for anyone, regardless of financial literacy.

---

Transcript

[NPR Announcer]

This message comes from Great Wolf Lodge. There's adventure for the whole family, including an indoor water park that's always 84 degrees, attractions, spacious suites and more. You're just a short drive away from an unforgettable family getaway. Learn [e-mail] you're listening to Life Kit from NPR.

[Marielle Segarra]

Hey, it's Marielle. Tax day has passed, so you don't have to think about your taxes for another year, right? Nah, that's wrong. You could be making better choices now that'll save you money in taxes in 2026, like putting some money into a retirement account.

[Amanda Holden]

The taxation of retirement accounts is probably the most misunderstood concept of investing. And what I hate is that it creates this real roadblock to people getting started.

[Marielle Segarra]

This is Amanda Holden, financial educator and author of the book how to Be a Rich Old Lady. Now, the thing is, many of us were never taught how to do all this, and even if we know a little bit about it, the details get complicated.

[Amanda Holden]

What we know is that tax law in the US Is like this haunted patchwork doll that has been added to and amended over time. And you can think of retirement accounts as just one cursed limb of the creation.

[Marielle Segarra]

Spooky. But don't worry. On this episode of Life Kit, I'm going to walk you through this. We will talk about how retirement accounts save you money on taxes, what the two main types of accounts are, and why it often doesn't matter that much which one you prioritize. That's after the break.

[NPR Announcer]

This message comes from Babbel. Babbel's conversation based language technique teaches you useful words and phrases to get you speaking quickly about the things you actually talk about in the real world with lessons handcrafted by over 200 language experts and voiced by real native speakers. Start speaking with Babbel today. Get up to 55% off your Babbel subscription right now at babbel.com NPR spelled B A B-B-E-L.com NPR Rules and Restrictions may apply.

[Podcast Sponsor Announcer]

Support for this podcast and the following message come from Strawberry Me. If you could go back and talk to your younger self, would you tell yourself that you have a job that truly makes you happy? Many people are stuck in jobs they've outgrown or never really wanted. A career coach from Strawberry Me can help you move on to something you actually love. Benefit from having a dedicated coach in your corner, and get 50% off your first coaching session at Strawberry Me.

[NPR Announcer]

NPR this message comes from NPR sponsor Carvana Making buying a car 100% online with real transparent pricing and customizable financing that fits your budget. Browse thousands of cars and get yours delivered. Visit Carvana.com today. Delivery fees and terms may apply. This message comes from Designer Shoe Warehouse. You know that feeling when you find shoes you love at a great price and want to tell everyone about it? Find something to brag about at Designer Shoe Warehouse like the latest styles from brands you love, the trends everyone's obsessing over, and shoes that make you feel like you. Head to a DSW store or dsw.com today for shoes that get you at prices that get your budget dsw. Let us surprise you.

[Marielle Segarra]

As a financial educator, Amanda is constantly getting this question, what's better, a 401k or a Roth IRA? Her answer?

[Amanda Holden]

All retirement accounts are good.

[Marielle Segarra]

Retirement accounts are basically bank accounts that hold investments. And one reason everybody's always telling you to put money in them is that the stock market allows you to generate much higher returns than if you just put your savings in a regular bank account. This is former Planet Money co host Mary Childs. As the economy around you is growing and more transactions are happening and businesses

[Podcast Sponsor Announcer]

are growing, stocks are going to be

[Marielle Segarra]

going up and you want to be a part of that. You don't want to get left behind. So that's a reason to invest in general, a good one, but the reason to put your retirement savings into one of these special retirement specific accounts that is all about taxes. Amanda writes in her book that you can think of retirement accounts as a kind of tax shelter for your investments, a container where your money can grow shielded from taxes while it does. And that's takeaway one. Retirement accounts are not just a vehicle to let your money grow over time for when you're ready to stop working. They also have tax benefits. Now there are two main types of retirement accounts because of course they had

[Amanda Holden]

to make multiple different types of retirement accounts. It couldn't just be simple.

[Marielle Segarra]

On the one hand, you have your traditional accounts that could be an IRA, a 401K, a 403B, something like that. With these, you take a certain amount of your income and shield it from taxes. Mark Gallegos is a CPA and a tax partner at the accounting firm Porty Brown in the Chicago area. He gave me an example.

[Mark Gallegos]

Let's just say I decided to contribute $20,000 to my 401.

[Marielle Segarra]

And let's say he currently pays about 25% of his income to the government in taxes. Now he won't have to pay taxes on $20,000 of that income because it's going into a tax shelter. So the math is 25% savings on $20,000.

[Mark Gallegos]

It would save you $5,000 in tax savings.

[Marielle Segarra]

And then after you invest the money, it grows tax free.

[Mark Gallegos]

As it's growing, as it's earning dividends, interest, capital gains, and the values going up, you're paying zero tax on any of that money in a given year.

[Marielle Segarra]

So that's the cool thing, right?

[Mark Gallegos]

In a way, you're using the government's money to help grow your retirement.

[Marielle Segarra]

You will only pay taxes once you start making withdrawals, ideally in retirement. The reason this setup works to a lot of people's advantage is that you will very likely have a lower tax rate when you retire than you do now because your income will probably be lower. So take somebody with a 25% tax rate, they retire with a million dollars in their 401k and they withdraw what they need to live their life.

[Mark Gallegos]

But they don't have the same level of income in that given year because, you know, now they're retired. Maybe they have a little bit of, you know, investment income like interest, dividends. They got their Social Security, but their income is substantially lower. So maybe they're in the 10% tax bracket. So that's the benefit. When you pull the money out, your income is substantially lower because you're really not working anymore. Hypothetically, therefore, you're paying tax on this grown nest egg at a lower tax rate.

[Marielle Segarra]

Takeaway 2. With the traditional kind of retirement account, the 401k, the 403b, the IRA, you take a certain amount of your income and you shield it from taxes. Then your money grows tax free and you only pay taxes to when you start withdrawing it later on. And the thinking here is that you'll likely have a lower tax rate in retirement than you do now because your income will probably be lower. After the break, I'll walk you through the other main type of retirement account and its benefits. And we'll also talk about how to choose between them. Spoiler. You don't necessarily have to choose.

[NPR Announcer]

This message comes from Babel. Babbel's conversation based language technique teaches you useful words and phrases to get you speaking quickly about the things you actually talk about in the real world with lessons handcrafted by over 200 language experts and voiced by real native speakers. Start speaking with Babbel today. Get up to 55% off your Babbel subscription right now at Babbel.com NPR spelled B-A-B-B-E-L.com NPR rules and restrictions may apply. This message comes from Thumbtack Avoiding your unfinished home projects because you're not sure where to start. Thumbtack knows homes, so you don't have to don't know the difference between matte paint, finish and satin or what that clunking sound from your dryer is. With Thumbtack, you don't have to be a home pro, you just have to hire one. You can hire top rated pros, see price estimates and read reviews all on the app. Download Today

[Podcast Sponsor Announcer]

the world changes every hour. So do we on NPR News now, the podcast that brings the latest headlines in five minutes with new episodes posted at the top of every hour. Clear, fact based and ready when you are. Listen to NPR News now on the NPR app or wherever you get your podcasts. This message comes from Whole Foods Market Save on seasonal favorites at Whole Foods Market. Start in the vibrant produce department stocked with organic fruits and veggies. Then head to prepared foods for easy grab and go lunches and dinners. There are so many ways to save. Those yellow sale signs are just about everywhere. Plus, prime members can find extra in store deals every Tuesday and Friday. And the low priced $3.65 by Whole Foods Market brand never sacrifices on quality. Save today and every day at Whole Foods Market.

[Marielle Segarra]

Before the break, we talked about traditional retirement plans. On the other hand, you have Roth accounts and you'll recognize these because they all say Roth in the title. Roth Ira, Roth 401K. Roth 403.

[Amanda Holden]

Roth is the reverse. You are paying income taxes up front, but later on you won't have to pay any income taxes when you pull the money out, which means you'll never

[Marielle Segarra]

pay taxes on your investment profits. Roth accounts are an especially good option for folks who currently have a low tax rate, for instance, because they have a low income. Here's one scenario Mark gave me.

[Mark Gallegos]

Let's just say an 18 year old is working through school and they're making part time job and they decide, hey, I've got some earned income, I'm going to contribute a bunch of it, you know, to my Roth IRA that I just set up. And then I start working and I got a Roth 401k and I'm maxing this Roth out along the way. And now that money grows to two or three million dollars by the time they're 65 years old, okay? When they decide to start taking that money out when they're retired, guess what? They didn't get a deduction along the way for any of that because it's after tax money, but that amount of income coming out, 50,000, 100,000, whatever, in a given year, tax free.

[Marielle Segarra]

But that's not the only reason to put money in a Roth. Here's another advantage they have over traditional plans. If you make early withdrawals from a traditional plan, you'll pay a penalty. But because you've already paid taxes on your contributions to a Roth, you can withdraw those at any time, penalty free. There are more restrictions about when you can withdraw the investment gains. You're incentivized to wait until retirement for that money. There are other differences between the accounts too, having to do with income limits and contribution limits. We won't get into those details here because they're very complicated and depend in part on what plans are available to you. But takeaway 3 Roth retirement accounts are also tax advantaged, but they work in a different way. You pay taxes up front, but then you'll never have to pay taxes on all your investment gains. Now, Amanda says which type of account you should prioritize right now, traditional or Roth, depends in part on your current tax rate.

[Amanda Holden]

If you are a higher earner right now, it may make sense to push those taxes until later when you're going to have a much lower tax rate in retirement. If you're somebody that's not earning a lot right now, hey, go ahead and pay the taxes, give this gift to your future self and never have to worry about income taxes again on that money.

[Marielle Segarra]

But keep in mind, we can't tell the future tax law changes a lot. We don't know what rates will be when you retire. So she says we can debate all

[Amanda Holden]

day about whether Roth or traditional is better, but I think it obfuscates the point, which is that all retirement accounts are good because all of them allow you to grow your money tax free.

[Marielle Segarra]

Also, Amanda says when you game this out using different scenarios, a lot of the time you end up with a similar amount of money in the end, whether you used a traditional plan or a Roth.

[Amanda Holden]

Maybe the best thing we can do is give ourselves a little bit of tax diversification and do some of both. But the best thing you can do is not let it be a roadblock to getting started and just pick one and get to moving. Because the much more important thing is what is happening inside of those accounts and the investing happening inside of those accounts.

[Marielle Segarra]

Mark also recommends putting money in both because that gives you flexibility in the future.

[Mark Gallegos]

The more options you have, the more you control you have in retirement, the better you're off.

[Marielle Segarra]

You're going to be one quick note here. If your employer offers you a retirement match that's free money, invest in that account to get the full match. All right, so Takeaway four is don't sweat which type of retirement account to pick. Traditional or Roth? Yes, you can gain this based on your income, but also it's better to have any retirement account than no retirement account. Probably the best thing you can do is put money in both. That gives you more options down the line. But if you take one thing from this episode, it's don't let confusion stop you from getting started. Okay, let's do a quick recap. Takeaway 1 Retirement accounts are not just a vehicle to let your money grow over time for when you're ready to stop working. They also have tax benefits. Takeaway 2 With traditional retirement accounts, the 401K 403B IRA, you take a certain amount of your income and shield it from taxes. Then your money grows tax free and you only pay taxes when you start withdrawing. The thinking here is that you'll likely have a lower tax rate in retirement than you do now because your income will probably be lower. Takeaway 3 Roth retirement accounts are the reverse. You pay taxes up front, but then you'll never have to pay taxes on all your investment gains. They're also nice because you can withdraw your contributions at any time without penalty. Takeaway 4 Don't sweat which one to pick or to prioritize, Traditional or Roth? Yes, you can game this based on your income, but it's also better to have any retirement account than no retirement account. And the best thing you can do is get started and consider putting money in both. Oh, and of course, take advantage of any employer match that you're offered. Think of that as part of your salary that you have to sign up for. Hey, before we go, have you heard of Life Kit? Plus, it allows you to easily access the best parts of Life Kit with our themed curated playlists on popular Life Kit topics. You can sign up today at plus.npr.org lifekit this episode of Life Kit was produced by Sylvie Douglas. Our Digital Editor is Malika Grebe, and our Visuals Editor is CJ Ricolon. Megan Keane is our Senior Supervising Editor and Beth Donovan is our Executive Producer. Our production team also includes Andy Taegle, Claire Marie Schneider, and Margaret Serino. Engineering support comes from Nisha Hyness and co Takasugi Chernovin. I'm Marielle Segarra. Thanks for listening.

[NPR Announcer]

This message comes from Northwestern Mutual. Their financial professionals will build a tailored plan based on your goals looking out for blind spots and new opportunities. Get [e-mail] the Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin this message comes from

[Podcast Sponsor Announcer]

Charles Schwab with their original podcast Choiceology. Hosted by Katie Milkman, an award winning behavioral scientist and author of the best selling book how to Change. Choiceology is a show about the psychology and economics behind people's decisions. Hear true stories from Nobel laureates, historians, authors, athletes, and more about why people do the things they do. Download the latest episode and [e-mail] podcast or wherever you listen.

[NPR Announcer]

This message comes from Simon and Schuster, publisher of Get a Financial Life Feeling Stuck with Money? The classic money guide, Get a Financial Personal Finance in youn 20s and 30s by Beth Kobliner has been updated for today's economic reality. Tackle debt, save smarter, invest wisely and navigate rising costs with confidence with this no nonsense roadmap to financial stability. Start planning for your future. Now read Get a Financial Life by Beth Kobleiner Today.