Money Girl's Quick And Dirty Tips For A Richer Life

1032. Do you have extra side hustle income that’s pushing you into a higher tax bracket? In this episode, Laura answers a listener’s question about whether new self-employment earnings mean it's time to switch from a Roth to a traditional 401(k) or IRA. You’ll learn how to use retirement contributions to lower your taxable income today, the fundamental tax differences between these accounts, and how to choose the best strategy for your small business income. Key takeawaysTraditional retirement accounts allow tax-deductible contributions, but withdrawals in retirement are fully taxed.Roth retirement accounts don’t have an upfront tax benefit, but allow your investment growth and future retirement withdrawals to be entirely tax-free.Choosing between a traditional and Roth account depends on guessing about your future tax rate, but could also be a preference for having taxable or tax-free income in retirement. If you believe your tax rate is lower today than it will be in retirement, choose a Roth. If