Age 55 and Retiring in 6 Years? Here's the Roth 401(k) Math
Switching to Roth contributions at 55 isn't obvious. Here's what to weigh before you move a dollar.
You're 55, the finish line is six years out, and you're staring at your 401(k) wondering if you should flip the switch to Roth. The short answer: it depends on your tax bracket now versus retirement — but the clock is ticking and the decision matters more than most people realize.
Vanguard data shows workers are still dragging their feet on Roth workplace plans. That hesitation is understandable — pre-tax contributions feel like free money today. But if you expect to be in the same or higher bracket in retirement, paying taxes now with Roth dollars is the smarter play. Six years is enough runway to make the move count.
Read more Why Maxing Your 401(k) Right Now May Be a Mistake →
The core trade-off is simple. Traditional 401(k) gives you a tax break today and a tax bill in retirement. Roth flips that equation — you pay now, withdraw tax-free later. At 55, with Social Security, required minimum distributions, and possibly a pension all stacking up in your future, your retirement income might be higher than you think. That could push you into a bracket where you'll wish you'd gone Roth.
One move worth considering: don't go all-in either way. Split contributions between traditional and Roth to hedge your tax exposure across both phases of life. That flexibility is especially valuable when future tax rates are genuinely uncertain — and right now, they are. The 2017 tax cuts are set to sunset, which could push rates higher for everyone.
Bottom line — if you're in your peak earning years and sitting in a high bracket today, max the traditional and invest the tax savings. If your income is moderate or you expect a fat retirement income stack, start shifting toward Roth now. Don't let inertia make the choice for you. Continue reading at MarketWatch.com
