Too often, retirement planning turns into simply “putting money away” without a clear goal. Traditional contributions may reduce taxes today, while Roth contributions require paying taxes now but allow future growth to be withdrawn tax-free. Both can be valuable—but only when used intentionally.
Many high-income professionals also overlook options like Roth 401(k)s or backdoor Roth strategies, even when their plan design allows for them. With the right guidance, a 401(k) can support both business goals and long-term flexibility.
2026 is an ideal time to review whether your plan still fits what you’re trying to accomplish.
Transcript:
Hey, Smarter Vets®, CJ Burnett here. Today, I’m going to talk a little bit about the difference between traditional and Roth 401Ks.
Seems like more and more, I’m running into a lot of business owners that don’t know that their 401K has a Roth option. And maybe it doesn’t. And if it doesn’t, guess what? The great news is you’re the owner, you can go back and change it.
So, what is the difference between traditional and Roth?
Traditional you put money away, it defers the tax, which is good if you’re trying to defer the tax. If you’re trying to defer the tax, what that really means is you believe you’ll be in a lower income tax bracket when you retire.
Now, if you’re okay with that, which I’m not too sure, like a lot of people, if they’re going to be a lower income tax bracket when they retire, that’s usually what they don’t want – that’s usually what they’re just having to have because maybe they started saving late in life or maybe their business is not going to be worth what they need it to be in order for them to retire.
If you’re going to be in a lower income tax bracket when you retire, I don’t know why that’s a goal. Just saying, right? Don’t want to offend anybody. But it is kind of weird to me that you’re like, yeah, like I’m going to defer the tax because when I get to retirement, I’m going to be in a lower income tax bracket where the time of my life where I have all this time and I’m going to want to do all the things like I’m going to go to Italy, I’m going to go out to eat more because every day is a Saturday effectively. Not sure why you would do that. Don’t want to offend you.
A lot of the time people should defer the taxes though if they started late or if they’re not able to save a lot of their income. If they’re not able to save a lot of income then they’re going to be in the lower tax bracket when they retire.
Now on the alternative a Roth of Roth 401k, whenever you contribute on the Roth portion, you pay the tax on the money that you contributed. So you make if you make 10,000 and you pay taxes of say 2000, and then you put 8000 into the Roth 401k, all of the growth of that $8000 is part is tax free whenever you start withdrawing after the age of 80.
So if you believe you’ll be in a higher income tax bracket when you retire, or if that’s what you’re aiming for, because you want to have more income or about the same income in retirement that you do today, then a lot of people will then say, you know what, I’m gonna try to not deferral as much as possible, maybe put as much as I can into a Roth instead. Backdoor Roths are also a thing for IRAs.
If you’re a business owner and you make more than what they allow you to make a direct contribution to a Roth IRA, you can talk to your CPA, your accountant about a Backdoor Roth where you contribute first to a traditional IRA. Non-deductible, of course, because usually if you have a 401k in the business, you can’t deduct the contributions to an IRA that you have in your own name. But you can do a non-deductible contribution and then backdoor to a Roth. Phenomenal way to get money into a Roth. Granted, you are maxed.
There’s a maximum. So you can’t put like a ton of money into it if you’re a business owner, but you’re at least able to get some money into there. And then if you’ve got a long-time horizon, recognize that all of that growth, perfectly tax-free forever in the future after the age of 60 whenever you retire.
So, you know, you gotta keep in mind that the IRS does constrict you on how much money you can pull out from different retirement accounts before the age of 59 and a half. So if you’re a business owner, hopefully this motivates you to go look at your 401k, maybe start looking at redesigning your 401k.
Think broader about your 401k, of like how it’s serving your financial plan. And remember, you don’t wanna have the product be the plan – A lot of people do that. They make the 401k their financial plan. In fact, I’ve seen a lot of statements, you see 401k statements, people get it it’s like, “this is your 401k plan.”
401k is not a plan. It’s an account named after a tax code from the Revenue Act of 1978. So let’s not think about it as far as a plan. Let’s think about it for what it is, which is an account, that then you have to choose what it’s invested in and then you have to match that up with what your actual world is trying to align, how much you’re contributing, how much you’re going to take in income whenever you get to retirement to make sure that on the other side of putting money in a 401k you don’t regret it whether it was a deferral deferred 401k like a traditional one or if it was a Roth.
My name is CJ Burnett. See you next time.
This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Tom is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Florida Veterinary Advisors and The Next Step Planning Group are not an affiliate or subsidiary of PAS or Guardian. California Insurance License #0K80141. AR Insurance License #15823672. Florida Veterinary Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. The individuals associated with Florida Veterinary Advisors do not maintain specialized licenses or qualifications for the financial services provided to veterinary professionals. 7989827.1 Exp 5/27