The Smartest 401(k) Move You Can Make in Your 40s

"A 44-year-old earning $130,000 as a single filer, after the standard deduction, has a taxable income of around $117,000, placing them in the 24% bracket. A Roth contribution costs 24 cents per dollar today, but if income grows to $160,000 by their mid-50s, the same contribution costs 32 cents per dollar."

"A 44-year-old who saves exclusively in a traditional 401(k) for 25 years and retires with $2 million in pre-tax assets faces a mandatory withdrawal problem starting at age 73. The first required minimum distribution at 73 runs roughly $75,000 to $80,000, which counts as ordinary income."

In your 40s, tax rates and retirement timelines align favorably for Roth contributions. The IRS allows significant contributions to 401(k) plans, with options for Roth or traditional accounts. A 44-year-old earning $130,000 faces a 24% tax rate, making Roth contributions cost-effective. As income rises, the cost of Roth contributions increases. Additionally, relying solely on traditional 401(k) savings can lead to high mandatory withdrawals in retirement, impacting overall income and Medicare premiums.

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