Roth or Traditional? | Intentional Finance

The Decision Should Follow Your Income

Most sales reps pick one and stick with it. Roth or traditional. Set it and forget it.

The problem is that your income isn't flat. Some years you hit $300K. Some years you have a soft patch and land at $140K. Those are two completely different tax situations, and they call for two different decisions.

High-income years

When you're deep in a high bracket, traditional contributions reduce your taxable income right now -- when the tax hit is highest. A $23,500 traditional 401(k) contribution in a $280K income year could save you $6,000+ in federal taxes today.

That's real money. Don't give it away just because someone on the internet said Roth is always better.

Down years are a window, not a setback

Here's the reframe most people miss. When your income drops, so does your tax bracket.

That's a planning opportunity.

If you have pre-tax money sitting in an IRA or an old 401(k), a down year is often the best time to convert some of it to Roth. You pay taxes at a lower rate. The money grows tax-free from there. Future withdrawals are tax-free.

Down years feel like a step back. In tax planning terms, they're often a green light.

Tax Planning for Sales Reps

The Down Year Window

YEAR 1	YEAR 2	DOWN YEAR	YEAR 4	YEAR 5
$260K	$295K	$130K	$240K	$310K
32% bracket	35% bracket	22% bracket	32% bracket	37% bracket
Traditional	Traditional	Convert to Roth	Traditional	Traditional
Lower income = lower bracket = cheaper Roth conversion

What if you're riding the ridge?

Some sales reps aren't clearly in one camp or the other. You're probably here if:

Your income swings between $150K and $250K depending on the year
You're not sure what bracket you'll be in at retirement
You have money in both Roth and traditional accounts but no strategy connecting them

When you're riding the ridge, the answer is usually a split. Traditional for the dollars that land in the higher bracket. Roth for the rest. Conversions in softer years to keep things moving in the right direction.

Roth vs. Traditional

Riding the Ridge

TRADITIONAL

THE RIDGE

ROTH

High-income year

$250K+ income

32% or 35% bracket

Expect lower income in retirement

Need to reduce taxable income now

Split + convert

Income swings year to year

Unclear retirement bracket

Mix of both account types

Convert in down years, save in high years

Down year

Under $150K income

22% or 24% bracket

Expect higher income later

Time to convert old pre-tax accounts

Traditional is not the enemy

Traditional money isn't a permanent decision.

You can convert pre-tax IRA money to Roth strategically -- a little at a time, in lower-income years. This is called a Roth conversion, and it's one of the most underused tools in a sales rep's financial plan.

And if your income is too high to contribute directly to a Roth IRA, there's the backdoor Roth -- a two-step process that works around the income limits entirely.

Tax Planning for Sales Reps

The Income Spectrum

ROTH ZONE	GRAY ZONE	TRADITIONAL ZONE
Under $120K	$120K -- $220K	$220K+

Roth Zone -- Contribute to Roth now. Convert old pre-tax accounts while the tax rate is low.

Gray Zone -- Split contributions. Convert in the softer years. The answer changes annually.

Traditional Zone -- Take the deduction now. A $23,500 contribution at 32% saves $7,500+ in taxes today.

The people telling you "always Roth" are simplifying for a reason. Simplicity goes viral.

But you're not trying to go viral. You're trying to build wealth.