The Personal Finance Podcast

Host: Andrew Giancola
Episode: Should You Stop Using a Roth 401(k) After a Certain Income? (Money Q&A)
Date: September 6, 2025

Episode Overview

Andrew Giancola hosts a Q&A episode focused on practical personal finance, investments, and retirement strategies. He covers listener questions on topics such as tax implications of moving investments within accounts, tax loss harvesting, retirement income planning, Roth 401(k) vs. traditional 401(k) choices and income thresholds, saving for kids’ expenses, emergency fund placement, and planning for retirement with a pension. Throughout, Andrew maintains a clear, actionable, and accessible tone, providing nuanced guidance and emphasizing long-term, mindful planning.

Key Discussion Points & Insights

1. Do You Get Taxed When Moving Investments Within the Same Account?

[01:49 – 07:59]

• Tax-Advantaged Accounts (Roth IRA, Traditional IRA, 401(k), HSA):

  • No taxes are triggered when you sell or move investments within these accounts.
  • For Roth IRA: Contributions are after-tax, all growth and qualified withdrawals are tax-free.
  • For traditional 401(k)/IRA: Tax is deferred until withdrawal, but buying/selling isn’t taxed inside the account.
  • For HSAs: Tax-free growth and withdrawals if used for qualified medical expenses.

• Taxable Brokerage Accounts:

  • Selling for profit incurs a capital gains tax.
  • Long-term gains (>1 year) taxed at 0%, 15%, or 20%, depending on income.
  • Short-term gains (<1 year) taxed at ordinary income tax rates, often higher.
  • “This is why I don’t like day trading. ... Instead, you need to be a long-term investor because long-term capital gains is significantly lower.” (Andrew, [05:56])

• Example:
  If you sell a $10,000 investment grown to $12,000:

  • No tax if inside a retirement account.
  • $2,000 capital gain taxed in a taxable account.

2. How Does Tax Loss Harvesting Work?

[07:59 – 13:22]

• Definition:
  Selling investments at a loss in a taxable account to offset gains elsewhere and reduce overall tax bill.

• Steps:

  1. Sell the losing investment—e.g., you bought for $5,000, sold at $3,000 = $2,000 loss.
  2. Offset gains—Apply the loss to offset gains from other sales that year, or up to $3,000 from regular income (excess losses roll forward).
  3. Reinvest in similar, not identical, assets (“wash sale rule”):
     • E.g., sold VTI for a loss, repurchased SCHB (similar exposure).
     • Cannot buy same/similar fund within 30 days before/after sale, or the loss is disallowed.

• Nuance:
  More valuable for high earners or those with large taxable portfolios; not cost-effective for small accounts.

  • “If you have a $10,000 portfolio and you don’t have high income this year, it is not worth your time to try to figure out how to tax loss harvest.” (Andrew, [11:56])

3. Does the 75–80% Retirement Income Rule Refer to Gross or Net Income?

[13:22 – 17:38]

• The 75–80% rule refers to gross (pre-tax) income.

• But: The goal is to replace your after-tax spending.

• In retirement, taxes are often lower (no payroll taxes, possibly lower bracket, or tax-advantaged withdrawals like Roth IRA).

• Andrew advises aiming for a higher replacement to cover interests, inflation, and healthcare inflation.

  • “I want your retirement plan to be bulletproof ... I don’t want you to have to ... figure out ways to earn extra money in retirement because you did not plan accordingly.” (Andrew, [15:57])

• Best Practice:
  Use a detailed annual retirement planning spreadsheet, review/update it each year, consider all income sources and inflation.

4. Should You Max Out a Roth 401(k) Early in the Year (Front-loading) for Lower Tax Rates?

[17:38 – 21:33]

• Front-loading can be beneficial if:

  • You’re in a lower tax bracket at the year’s start.
  • You have enough cash flow flexibility.
  • Lump sum investing gets dollars working sooner.

• Caution:

  • Employer matches are often per paycheck, not per year—front-loading can mean missing match dollars later unless employer provides a “true-up.”
  • Ensure you’re not hurting monthly cash flow by doing so.

• “If you contribute early, you’re effectively paying 10% less tax on the same money going into your Roth, which is a big long-term win.” (Andrew, [19:18])

5. When Should You Switch from a Roth 401(k) to Traditional 401(k) Based on Income?

[28:04 – 34:24]

• Thresholds:

  • Start considering switching at the 24% marginal tax bracket; strongly consider traditional at 30%+.
  • High earners benefit from tax deferral today via traditional 401(k).

• Rule of Thumb:

  • 24–30%: Begin weighing the benefits and consulting a CPA.
  • Above 30%: Traditional often wins, unless you expect low retirement income or want tax diversification.

• Nuance:

  • It depends on individual future tax expectations (uncertain).
  • Roth is “almost always the winner” for young/early career savers due to tax-free growth.

• “If you’re in your highest earning income years and making $600,000 per year, then you likely want to ... try to reduce your taxable income now.” (Andrew, [30:45])

6. Saving For Kids’ Weddings, Cars, etc.: High-Yield Savings or Brokerage?

[34:24 – 38:28]

• Time Horizon (<5 years): Use a high-yield savings account (safety, FDIC insurance, avoid market volatility).

• Time Horizon (>7 years): Consider brokerage account for growth.

• 5–7 years: Gray area; could split or err toward more safety.

• Tips:

  • Use savings accounts with “buckets” (e.g., Ally, Capital One).
  • Automate transfers for disciplined saving.

• “If you need the money soon, protect it. If you don’t for a while, grow it.” (Andrew, [37:28])

7. Best High-Yield Options for Emergency Fund Storage

[38:28 – 42:00]

• Top Choices:

  1. High-yield savings account (3.5–4.5%+ APR).
  2. No-penalty CDs (lock in rates, still liquid).
  3. T-Bills (short-term, US government-backed, considered risk free).
  4. Money market funds (esp. for high earners for tax efficiency).

• What NOT to use:

  • Stocks, ETFs, real estate, crypto, checking accounts.

• “The High Yield Savings Account is my number one for sure for most people.” (Andrew, [41:36])

8. How to Plan for Retirement with a Pension

[42:00 – 47:05]

• Checklist:

  1. When are you eligible?
  2. How much will you get monthly?
  3. Is it inflation-adjusted (“COLA”)?
  4. Survivor options?
  5. Is the pension safe and fully funded?

• Integration:

  • Calculate your pension + Social Security, subtract from needed income—the gap is filled with your savings/investments.
  • Still need to save independently for flexibility and to diversify tax situation.
  • If retiring early, check if pension reduces payouts; make sure to factor in health care costs before Medicare eligibility.
  • Pensions usually fully taxable at ordinary rates.

• “A pension is an incredible base layer ... but you just want to make sure that you don’t stop there. You also need to stack on savings, ... protect against inflation.” (Andrew, [46:15])

Notable Quotes & Memorable Moments

• “This is why I don’t like day trading. … Instead, you need to be a long-term investor because long-term capital gains is significantly lower.”
  – Andrew Giancola ([05:56])

• “If you have a ten thousand dollar portfolio and you don’t have high income this year, it is not worth your time to try to figure out how to tax loss harvest.”
  – Andrew Giancola ([11:56])

• “I want your retirement plan to be bulletproof ... I don’t want you to have to ... earn extra money in retirement because you did not plan accordingly.”
  – Andrew Giancola ([15:57])

• “If you contribute early, you’re effectively paying 10% less tax on the same money going into your Roth, which is a big long-term win.”
  – Andrew Giancola ([19:18])

• “If you’re in your highest earning income years and making $600,000 per year, then you likely want to ... try to reduce your taxable income now.”
  – Andrew Giancola ([30:45])

• “If you need the money soon, protect it. If you don’t for a while, grow it.”
  – Andrew Giancola ([37:28])

• “The High Yield Savings Account is my number one for sure for most people.”
  – Andrew Giancola ([41:36])

• “A pension is an incredible base layer ... but you just want to make sure that you don’t stop there. You also need to stack on savings, ... protect against inflation.”
  – Andrew Giancola ([46:15])

Additional Advice: Data Breach Response

[21:33 – 24:12]

• Discussed a recent TransUnion data breach:
  • Freeze your credit at all bureaus.
  • Enroll in credit monitoring.
  • Monitor financial accounts and beware of phishing.
  • Consider services (e.g., Delete Me) for removing personal info from data brokers.
• Real-life stories shared to stress the risk and importance of proactive steps.

Conclusion

Andrew systematically addressed each listener question with actionable tips tailored to different situations and income levels. The overall message was a blend of conservative planning, maximizing tax efficiency, and regular portfolio reviews as one’s personal and financial lives evolve. The episode serves as a practical, nuanced guide for investors at various stages of their wealth-building journeys.

Timestamps for Main Segments

• [01:49] – Episode theme/introduction
• [01:49–07:59] – Taxation when moving investments within accounts
• [07:59–13:22] – Tax loss harvesting explained
• [13:22–17:38] – Decoding retirement income needs
• [17:38–21:33] – Timing Roth 401(k) contributions
• [28:04–34:24] – Roth vs. Traditional 401(k) at higher incomes
• [34:24–38:28] – Saving for kids’ weddings/cars: account choices
• [38:28–42:00] – Best places for emergency funds
• [42:00–47:05] – Retirement planning with pensions
• [21:33–24:12] – Data breach advice

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