When it comes to building wealth for retirement, corporate executives often face a paradox: high income opens the door to many opportunities, but it can also close off access to some of the most tax-efficient savings tools—like Roth IRAs, which phase out at relatively modest income levels.
But there’s one Roth strategy that’s still on the table, regardless of income: the Roth 401(k).
If you’re a corporate executive and earning a high salary, your retirement savings decisions now may shape your tax exposure, income flexibility, and lifestyle options down the road.
A Roth 401(k) can help with tax minimization, but to use this tool effectively, we feel you need a coordinated strategy, expert analysis, and thoughtful execution.
DISCLAIMER: When we say “Roth 401(k)”, we are also referencing Roth 403(b) accounts which are nearly identical. The main difference between a Roth 401(k) and a Roth 403(b) is that the 403(b) is strictly for government and non-profit employees while the 401(k) is for employees of companies in the private sector.
What Is a Roth 401(k)?
A Roth 401(k) is an employer-sponsored retirement account that allows you to contribute after-tax dollars and withdraw your savings—and all earnings—tax-free in retirement, assuming certain conditions are met (typically age 59½ and the account being open at least 5 years).
The key difference between a traditional 401(k) and a Roth 401(k) lies in when you pay taxes:
- Traditional 401(k): You can defer taxes now and pay them later in retirement.
- Roth 401(k): You pay taxes now or before money goes into your Roth 401(k) account so that you can enjoy qualified tax-free withdrawals later in life
How can you get money into a Roth 401(k)
There are two common ways to get money into a Roth 401(k):
Roth 401(k) Contributions
Similar to contributing money to a traditional 401(k) through payroll deductions, you can also contribute money to a Roth 401(k) if your retirement plan permits Roth contributions. The contribution limits are the same as the traditional 401(k) limits:
- In 2025, you can contribute up to $23,000, or $30,500 if you’re 50 or older. There is also a special catch-up contribution
- You can split those contributions between traditional (pre-tax) and Roth (after-tax), based on what works best for your financial picture.
Roth Conversions
Roth 401(k) conversions involve transferring money from your employer’s traditional 401(k) account balance into your Roth 401(k) account. The amount of pre-tax funds converted in a year are taxed during that tax year. For plans that offer conversions, there are no income restrictions. Plans may allow you to convert up to 100% of your traditional 401(k) account balance.
There are some other creative ways to get money into a Roth account from a retirement plan, which may include (depending on your plan document and eligibility criteria):
- Rolling over after-tax money in a 401(k) into a Roth IRA (if permitted by your plan)
- Roll over pre-tax money into a rollover IRA (step one) and then convert a portion of the IRA into a Roth IRA (step two) when the employer does not permit Roth conversions or contributions. For this strategy to work, you need to be eligible for rollovers which is typically when you are no longer working with the employer or have reached a certain age such as 55, 60, or 65.
Why Roth 401(k)s Matter for Executives
At first glance, Roth 401(k) contributions and Roth 401(k) conversions might seem counterintuitive for high earners. If you’re in a high tax bracket now, why voluntarily pay taxes today?
The answer lies in strategic tax diversification.
If all of your retirement savings are in pre-tax accounts—traditional 401(k)s, deferred comp plans, pensions—you’re building a future where nearly all of your income will be taxed. That could limit your flexibility in retirement and increase your Required Minimum Distributions (RMDs).
By contributing to a Roth 401(k), or by converting dollars from a pre-tax 401(k) into a Roth 401(k), you’re working to build a pool of qualified tax-free income that could give you more control over your money later. That flexibility could help:
- Manage your tax bracket in retirement
- Avoid Medicare premium surcharges (IRMAA)
- Reduce the taxable impact of large one-time expenses
- Minimize income taxes related to Social Security retirement income benefits
- Leave tax-free assets to heirs
- Minimize potential estate taxes upon your death
- Take advantage of opportunities to realize income (from Roth conversions or by shifting pre-tax 401(k) contributions to Roth 401(k) contributions) with the recent changes to the standard deduction and deductions for seniors under the recent tax bill.
Below is a screenshot of these new limits:
For executives thinking long-term, this could be an appropriate potential hedge against future tax rate increases, income surprises, and changes in future estate tax rates.
How do you know if making Roth 401(k) contributions or conversions could benefit you?
Assuming you are eligible to make Roth 401(k) contributions or conversions, we believe it’s critical to run some hypothetical tax planning scenarios in your financial plan (more on planning later) to determine the potential impact of getting more money into a Roth 401(k).
For example, in the two Roth conversions scenarios below (we’ll call them Corporate Executive A & Corporate Executive B), we see very different outcomes.
Corporate Executive A:
In this scenario, we view a hypothetical Roth conversion strategy, that targets filling up the 35% tax bracket, which could increase the family’s tax adjusted ending assets (how much the family keeps after taxes) by over $37 million compared to no conversions!
For illustrative purposes only
Corporate Executive B:
In this scenario (image below), Corporate Executive B, we see a much different result, where the family has over $6 million less in tax adjusted ending assets at the end of life. The only difference in these two hypothetical scenarios is that Executive B did NO ROTH CONVERSIONS compared to 35% in the Executive A scenario.
For illustrative purposes only
IMPORTANT: Roth conversions may or may not make projections to improve your future tax bill, depending on your individual circumstances.
It’s critical to run a customized analysis that works to explore optimal Roth 401(k) contribution and conversion strategies, since potential outcomes can vary wildly based on:
- How much you have in Roth assets
- How much you have in tax-deferred assets
- The goals in your financial plan, which can impact your income
- Your time horizon for assets to experience growth
- Income tax assumptions
- Your life expectancy
- Your future income sources
- And so much more!
We Believe Three Steps Can Help Make a Roth 401(k) Work for You
The Roth 401(k) isn’t a one-size-fits-all solution. To determine whether and how to use it, we feel you need a clear plan and an appropriate support team. Here’s how you can work to make the most of this opportunity:
1. You Need a Financial Plan to Know If Roth 401(k) Fits Your Strategy
Before deciding if you pursue getting money into a Roth 401(k) through conversions, contributions, or if you have a mix of pre-tax and Roth contributions, we believe you need to understand your broader financial picture by creating a financial plan that allows you to run Roth specific tax minimization scenarios
Your financial planning software, and a qualified fiduciary advisor, can help you work through the following questions to determine what Roth 401(k) strategy is in your best interest:
- Do you expect your tax rate in retirement to be higher or lower than it is now?
- How much of your existing retirement savings is already in pre-tax accounts?
- Will RMDs push you into a higher bracket later on?
- Are you planning to work in retirement or take phased withdrawals?
- What is an appropriate strategy for Roth 401(k) contributions (pre-tax, Roth, or a mix of both)?
- What is an appropriate Roth conversion strategy, and are conversions permitted by your plan?
A comprehensive financial plan can help you evaluate how Roth contributions may affect your retirement income, taxes, and long-term flexibility. This isn’t about guessing, it’s about modeling different scenarios to help you make confident, informed decisions.
💡At One Life Financial Group, we run multiple-model scenarios for each of our clients to determine an appropriate mix of strategies to help protect your wealth and minimize your taxes, both now and in retirement.
2. You Need a Team to Help Analyze Your Summary Plan Description
We believe there’s a common but frustrating truth: even if your employer offers a Roth 401(k) option, the details might be buried in a dense, legalistic document called your Summary Plan Description (SPD).
This document spells out:
- Whether you’re eligible to make Roth 401(k) contributions
- Whether you’re eligible to make Roth 401(k) conversions
- When and how you can make changes to your elections
- Whether your employer matches Roth contributions (and how those are treated)
- Whether your employer offers after-tax contributions that could be rollover over (tax-free) into a Roth IRA
- Distribution and vesting rules
We think SPDs can be quite complex, and most executives don’t have the time or expertise to decode them. That’s where a professional financial team can step in, help interpret your plan document, and help you make strategic use of your options.
You might not know that at One Life Financial Group, we have team members who specialize in helping our clients work to optimize and manage their 401(k) and other company retirement plan accounts (e.g. 457(b), 403(b), etc)!
3. You Need to Execute the Strategy—or Have a Team That Can Help Implement It for You
Once you’ve confirmed that Roth 401(k) contributions or conversions fit your plan and are allowed by your employer, the final step is execution.
That includes:
- Adjusting your payroll deferral elections appropriately (if working)
- Adjusting your Roth 401(k) conversion strategy if working or retired (and if conversions are permitted by your plan)
- Monitoring your accounts for significant market downturns, which might be optimal times for conversions (before a potential market rebound) since any gains can be tax-free
- Coordinating with your tax advisor to confirm your strategy and your tax withholdings are appropriate and aligned with your best interests
- Monitoring your total annual contributions (including catch-ups and employer match)
- Rebalancing your investment allocation across pre-tax and Roth buckets over time
While a Roth 401(k) can have many benefits, there are also many costly mistakes to make when utilizing one. These mistakes can include overcontributions, misclassified deferrals, or poor coordination with your tax plan – all which have the potential to undo the benefits. That’s why many executives rely on a coordinated team—financial advisor, CPA, and benefits manager—to help keep things clean and aligned.
Final Thought: Ignoring Roth conversion and contribution planning could be costly
Roth IRA conversions and Roth 401(k)s are some of the few retirement tools available to high-income earners that provide true tax-free growth and withdrawal opportunities. These strategies may be especially valuable when used as part of a broader financial planning strategy that balances your current income, retirement goals, and tax exposure.
But like any financial move, success depends on execution.
Remember the three steps we believe you should consider:
- You need a financial plan to understand whether Roth contributions or conversions fit your bigger picture
- You need a team to analyze your Summary Plan Description, because your plan’s fine print matters
- You need to implement the strategy effectively, or work with professionals who can
If you haven’t reviewed your 401(k) strategy in the past year—or if Roth contributions/conversions aren’t currently part of your plan—it might be time to take a closer look.
At One Life Financial Group, we’ve been helping our clients manage their retirement plans since 2015. Our 401(k) planning process explores different opportunities every year to help optimize your portfolio and minimize taxes on retirement withdrawals.
So, schedule a consultation so that you can stop worrying about your 401(k), 403(b), or whatever company retirement plan that you have. Instead, enjoy financial peace of mind knowing that you’ll be ready for retirement when the time comes.