Rule 1: Prefer Roth if in 22% Bracket or Below
The 22% federal bracket (roughly $47,150-$100,525 taxable income for single filers in 2025) is a meaningful dividing line. Below 22% the case for Roth is very strong — taxes are near historically low levels. Above 22% the case for Traditional becomes increasingly compelling as the deduction value rises.
IRA rules of thumb with key exceptions
| Rule | The Guideline | Key Exception |
|---|---|---|
| #1 Bracket threshold | Prefer Roth at 22% and below | High state taxes can shift toward Traditional even at 22% |
| #2 Capture match first | Always get full employer match before IRA type matters | No exception — match is always first |
| #3 Avoid RMDs at any cost | Choose Roth to eliminate RMD risk | Close to retirement with low Traditional balance — RMDs may be manageable |
| #4 Never cash out on job change | Always roll to IRA never cash out | No exception — cash out is always wrong |
| #5 Contribute early in the year | January contribution beats December | December is better than never |
Rule 2: Always Capture Full Employer Match First
The employer 401k match is a guaranteed 50%-100% return on your investment — far superior to any IRA tax advantage. Before deciding between Roth and Traditional IRA make absolutely certain you are contributing enough to the 401k to capture every dollar of employer matching. This single rule is more valuable than any IRA optimization.
1) Capture full employer match. 2) Max HSA if eligible. 3) Max Roth or Traditional IRA. 4) Max 401k beyond match. 5) Taxable brokerage. This order is correct for most working Americans regardless of income level.
Retirement savings priority order
| Action | Guaranteed Return | Annual Value on $75K | Priority |
|---|---|---|---|
| Capture 100% employer match | 100% guaranteed return | $1,500 free | 1st always |
| HSA contribution | Triple tax advantage | $4,300 + tax savings | 2nd if eligible |
| Max Roth IRA | Tax-free growth | $7,000 tax-free | 3rd |
| Max Traditional IRA | Tax deduction now | $7,000 deferred | 3rd alternative |
| Additional 401k | Tax-deferred growth | Up to $16,500 more | 4th |
Rule 3: Roth to Avoid Future RMD Problems
If you are a diligent saver who expects to accumulate $1M+ in retirement accounts, Roth IRA contributions now prevent RMD-driven tax bracket creep at age 73. A $1.5M Traditional IRA generates ~$56,000 in mandatory RMDs at 73 — pushed on top of Social Security and other income, this creates a surprisingly high retirement tax rate that Roth assets would have avoided.
- 22% or below: prefer Roth — taxes are historically low and will likely rise
- 32% or above: lean Traditional — deduction value high; may genuinely retire at lower rate
- Always get full employer 401k match before deciding on IRA type
- Use Roth IRA to reduce future RMD obligations if you are an aggressive saver
- Contribute January 1st each year — not December 31st
Test the Rules Against Your Situation
Enter your income and bracket to see which IRA rules apply to your specific situation.