Roth vs. Pre-Tax 403(b) in the 35% Bracket: Hosts Disagree

Full analysis

A couple in the 35% federal income tax bracket asked whether switching all their 403(b) contributions — a workplace retirement account similar to a 401(k), common in healthcare and education — to Roth made sense. Al Clopine said yes, favoring Roth at any tax rate for the long-run flexibility. Joe Anderson said no: because the couple expects to spend $250,000 a year in retirement, they will likely land in the 24% bracket when they retire, meaning they would pay 35% now to avoid 24% later — a bad trade. The disagreement illustrates a real decision point: if your retirement spending will be materially lower than your current income, pre-tax contributions may still save more in taxes than Roth.