When Should You Switch From Roth to Traditional?

The decision between contributing to a Roth or a Traditional retirement account is not a one-time choice. As your financial circumstances and career evolve, your retirement strategy should adapt accordingly. Periodically re-evaluating your contribution choice is part of sound financial management. Understanding when to switch your future contributions from a Roth to a Traditional account can significantly impact your financial outcome in retirement.

Core Tax Principles of Roth vs. Traditional Contributions

The foundational difference between Roth and Traditional retirement accounts is their tax treatment, creating the “pay tax now or pay tax later” choice for savers.

Roth contributions are made with post-tax dollars, meaning you have already paid income tax on the money you invest. The primary benefit is that both your contributions and their earnings can be withdrawn completely tax-free in retirement, provided you meet conditions like the five-year aging rule and reaching age 59½.

Contributions to a Traditional 401(k) or a deductible Traditional IRA are made with pre-tax dollars. This provides an immediate advantage by reducing your current taxable income, which can lower your tax bill for the year. The trade-off is that when you withdraw funds in retirement, the entire amount is taxed as ordinary income.

Key Factors for Evaluating a Switch

Current vs. Expected Future Income

The primary factor in choosing between Roth and Traditional contributions is comparing your current marginal tax rate to your expected tax rate in retirement. If you anticipate being in a higher tax bracket in retirement than you are today, a Roth account is more advantageous. Paying taxes on contributions now at a lower rate avoids higher taxes on withdrawals later.

If you are in your peak earning years and expect your income and tax bracket to be lower in retirement, switching to a Traditional contribution strategy is a strong option. Making pre-tax contributions during high-income years provides an upfront tax deduction when it is most impactful. The withdrawals will then be taxed at your anticipated lower rate during retirement.

Career Stage

Your career stage often serves as a proxy for the income analysis. Early-career professionals, who have lower incomes and are in lower tax brackets, may find Roth contributions more suitable. Paying a smaller amount of tax on contributions during these years can lead to substantial tax-free funds in the future.

For mid-to-late career professionals who have reached their highest earning potential, the immediate tax deduction from a Traditional contribution can be more beneficial. This strategy reduces a significant current tax liability when your income is highest.

Roth IRA Income Limitations

A clear trigger for a change in strategy is when your income surpasses the IRS limits for direct Roth IRA contributions. These limits are based on your Modified Adjusted Gross Income (MAGI). For 2025, the ability to contribute to a Roth IRA phases out for single filers with a MAGI between $150,000 and $165,000, and for joint filers with a MAGI between $236,000 and $246,000.

Once your income exceeds these thresholds, you are no longer eligible to contribute directly to a Roth IRA. At this point, savers often turn to making pre-tax contributions to a Traditional 401(k) to continue saving for retirement in a tax-advantaged way.

The Mechanics of Changing Your Contribution Strategy

For Workplace Plans (401(k), 403(b))

If you decide to switch your contribution type within an employer-sponsored plan like a 401(k), the process is straightforward. You will need to access your account through your employer’s benefits or payroll portal. Within the retirement plan section, you can adjust your election for future contributions, changing the allocation from Roth to Traditional.

This change only directs where your new payroll deductions are invested and does not affect funds already in your account. Your existing Roth 401(k) balance will remain and continue to grow under Roth rules, while new contributions build a separate Traditional 401(k) balance.

For IRAs

Switching your strategy for Individual Retirement Arrangements (IRAs) involves ceasing contributions to your Roth IRA for the current tax year. You would then open a new Traditional IRA and begin funding it with your new contributions. It is important to understand that you cannot convert existing Roth IRA assets into a Traditional IRA.

The “switch” only applies to where you direct your new savings, not to the funds you have already invested. The tax treatment of Roth money is permanent once contributed.

Advanced Strategic Considerations

Tax Diversification

Holding retirement assets in both pre-tax (Traditional) and post-tax (Roth) accounts is a strategy known as tax diversification. This approach provides significant flexibility during your retirement years. By having access to different pools of money with distinct tax treatments, you can strategically manage your taxable income each year.

For instance, in a year with higher-than-expected expenses, you could draw more heavily from your Roth account to avoid pushing yourself into a higher tax bracket. In a year with lower income needs, you might take distributions primarily from your Traditional account. This control allows for more efficient tax planning.

Impact on Required Minimum Distributions (RMDs)

A long-term planning point is the effect on Required Minimum Distributions (RMDs). The IRS mandates that you must begin taking annual withdrawals from Traditional IRAs and 401(k)s starting at age 73. These distributions are taxable and can impact your overall retirement income and tax liability.

Roth IRAs, however, are not subject to RMDs for the original account owner. When you switch contributions to a Traditional account, you increase the future balance that will be subject to these mandatory withdrawals. This is a factor for those who may not need the income and wish to let their investments continue to grow.

Estate Planning

The choice between Roth and Traditional accounts also has different consequences for your heirs. Beneficiaries who inherit a Traditional IRA or 401(k) also inherit a tax liability. They will be required to pay ordinary income tax on any withdrawals they make from the account.

In contrast, beneficiaries of a Roth IRA inherit the assets completely tax-free, provided the account has met the five-year holding period. This can be a substantial advantage, passing on a legacy without an embedded tax bill.