Shelly Freemole

Sep 26 2018

Wealth Management Spotlight: Roth or Pre-Tax, Part 2 of 2


Deciding whether to contribute to your 401(k) plan on a Roth or Pre-Tax basis can seem like a tough decision, but it doesn’t have to be. Here are 4 things to consider when deciding how to contribute to your 401(k) plan:

Learn more about 401(k) contribution considerations:

  1. Think about your tenure in your profession. Generally speaking, if you are young and just starting your career, you are probably earning less now than you will in the future. It may seem counter-intuitive, but in the years that you earn less money, because you’ll be in a lower tax bracket, you will want to make more Roth contributions and pay taxes in those years.
  2. Your age and amount of tax deductions also make a big difference. People in their 20s or 30s often have children and a mortgage which result in tax deductions that push them into a lower tax bracket. Now, if the reverse is true, and you think you are paying at a higher tax rate now than you will be during your retirement, it makes sense to contribute on a pre-tax basis.
  3. Keep in mind that within a 401(k) Plan, you can make changes to the way you are contributing over time, as your situation changes. So for example, you may start your career by contributing on a Roth basis, but as you gain experience and your salary grows, you may want to contribute more pre-tax. You can do both! Many plans will allow you to contribute on both a Roth and a pre-tax basis simultaneously. This can be beneficial if you simply aren’t sure if you are in a higher tax bracket now compared to where you will be later.
  4. No one knows what tax rates will be in the future, so contributing on both a Roth and pre-tax basis is a way of hedging your bets and maximizing significant tax flexibility in your retirement years. Check with your tax advisor to help you decide which contribution option is best for you.

If you have any questions about the benefits of participating in your plan on either a pre-tax or Roth basis, please visit us at or contact me directly at

View the complete Roth Series:

  • Wealth Management Spotlight: Roth or Pre-Tax, Part 1 of 2
  • Wealth Management Spotlight: Roth or Pre-Tax, Part 2 of 2
Some trust products and IRA contributions/balances are not a deposit, not FDIC insured by any federal government agency, not guaranteed by the bank, and may go down in value.
Shelly Freemole

About Shelly Freemole

Shelly Freemole is a Trust and Wealth Management Officer at Hills Bank’s North Liberty location on Forevergreen Road. Shelly has been at Hills Bank since June of 2017. She specializes in retirement plan administration and has worked with retirement plans since 2002. Shelly can be reached at 1-800-899-8858 or at

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