Overview
- Advisers say a temporary switch to a traditional IRA or 401(k) may be prudent when income jumps, capturing an immediate deduction versus continuing Roth contributions.
- Traditional accounts lower taxable income now but later require minimum distributions, while Roth accounts use after-tax dollars with tax-free growth and withdrawals.
- If the higher income is short-lived, savers can return to Roth funding in future years or use Roth conversions when income falls, recognizing conversions are taxable in the year done.
- For 2026, workers can contribute up to $24,500 to a 401(k) and $7,500 to an IRA, setting the ceiling for how much can be shielded during a high-earning year.
- Income-based rules affect Roth eligibility and IRA deductibility, and many 401(k) plans offer employer matches that IRAs generally lack.