If there’s one word that comes up again and again in our planning conversations…with young savers just getting started, high-earning professionals in their prime, and retirees managing withdrawals… it’s Roth.
Roth accounts got their name from Senator William Roth, who helped introduce the Roth IRA in 1997 as part of the Taxpayer Relief Act. The simple but powerful idea was to allow people to contribute after-tax dollars today in exchange for tax-free growth and withdrawals in retirement. Since then, Roth-style accounts have expanded across the tax code, including into workplace plans, backdoor strategies, and even education savings rollovers. What started as a niche savings tool is now one of the most valuable planning levers we have.
Roth accounts are a cornerstone of thoughtful, forward-looking financial planning because they offer something most investment accounts don’t: tax-free growth and tax-free withdrawals.
At Bowline, we help clients navigate the many ways to take advantage of Roth strategies:
- Roth IRAs for those eligible to contribute directly
- Roth 401(k)s for employees who want to diversify their future tax exposure
- Backdoor Roth contributions for high earners who are phased out of direct contributions
- Roth conversions from pre-tax IRAs, especially useful in lower-income years
- 529-to-Roth rollovers, now possible under SECURE Act 2.0 for unused education savings
- Custodial Roth IRAs for minors with earned income, helping kids get a head start
Each of these tools comes with its own set of rules, eligibility thresholds, and ideal timing. That’s where we come in. A big part of our ongoing value is helping clients steer dollars toward Roth accounts with intention, as part of a broader tax allocation strategy designed to give them more flexibility and control in the future.
A Quick Reality Check on Roth Contribution Limits
One of the more confusing quirks of the tax code is that the Roth IRA has a relatively low contribution limit (just $7,000 or $8,000 if over age 50) and still comes with income restrictions. High earners are often surprised to learn they’re not eligible to contribute directly.
Meanwhile, the Roth 401(k) offers a much higher contribution limit of $23,500 (plus a $7,500 catch-up if you’re over 50), and it has no income restrictions. On top of that, you still receive your employer match, even if you contribute solely to the Roth portion. And yes, those Roth 401(k) dollars can be rolled into a Roth IRA when you change jobs or retire. Yet many employees aren’t even aware this option exists.
A Case in Point: Building Tax-Free Wealth at 30
Let’s take a high-income professional in their early 30s…we’ll call her Sarah. She earns $210,000 a year and recently crossed the income threshold for making direct Roth IRA contributions. But Sarah is in a good position. She has no existing pre-tax IRA assets, which makes her a great candidate for a backdoor Roth IRA strategy, so she contributes $7,000 to a non-deductible traditional IRA and then quickly converts it to a Roth IRA without triggering any unnecessary taxes. At the same time, she maxes out her Roth 401(k) at work with a $23,500 contribution. That’s $30,500 going into tax-free accounts this year, and she’s only 30. If she continues that strategy and earns a 7% average return, those dollars alone could grow to more than $3 million of tax-free retirement assets over the next 30 years.
Short-Term Pain, Long-Term Gain
Think of Roth contributions and conversions as a classic example of short-term pain for long-term gain. You’re paying taxes today, on your terms, in exchange for future withdrawals that are completely tax-free.
Yes, it requires some intentionality and planning. But if you believe, like we do, that taxes are unlikely to go down in the future, paying taxes now can be one of the most impactful moves you make for your future self.
At Bowline, we don’t just focus on how much you save. We help guide where and how you save to build the most flexible, tax-efficient future possible. Roth is often one of the smartest places to start.
