Suze Orman Says This Retirement Account Might Be Your Best Option

• Suze Orman recommends Roth 401(k) plans over traditional 401(k)s because withdrawals are tax-free in retirement.

• Roth 401(k) withdrawals do not count as taxable income and will not result in taxes on Social Security benefits or higher Medicare premiums.

• Roth 401(k) contribution limits are higher than Roth IRA limits and allow for more tax-advantaged retirement savings.

• If you’re thinking about retiring or know someone who is, there are three quick questions that make many Americans realize they may retire earlier than expected. take 5 minutes to learn more here

When it comes to investing for retirement, Suze Orman, a leading financial expert, author, and television personality, has many strong opinions.

One of those opinions concerns which account you should invest in. Specifically, Orman believes that, for many people, a particular retirement plan carries very special tax advantages and may be the ideal plan for most current workers and future retirees.

Here’s the plan Orman believes is the right one, along with some details on why he thinks this account is his best option.

When talking about retirement investing, Orman has been clear about her preferred account, including in this blog post, where she evaluates different types of accounts. As Orman has made clear in this post and in other online comments and interviews, she believes a Roth 401(k) is your best option if it’s available to you.

An increasing number of employers offer Roth 401(k) accounts, as Orman explains. They also offer you tax breaks during retirement, rather than when you make contributions. For example, with a traditional 401(k), if you invested $10,000 in 2025, this would reduce your 2025 taxable income by the $10,000 you contributed. The government subsidy would make investment easier because take-home pay is not affected as much. The tax savings offset some of the contributions you made.

However, if you choose a Roth 401(k), you won’t get that $10,000 in tax savings. Instead, you contribute after-tax money. However, in exchange, the money doesn’t just grow tax-free (as it also does in regular 401(k) plans). He it is also withdrawn tax-free as a retiree, as long as you meet some basic requirements. So you’re basically skipping your tax savings now in favor of more tax savings later.

So why is Orman in favor of Roth 401(k)s?

It’s simple: you want people to be able to take advantage of the big tax savings they offer.

That’s the same reason she’s also a fan of Roth IRAs, which are an alternative to traditional IRAs. Like traditional 401(k) plans, traditional IRAs give you the tax break up front, while Roth IRAs delay it. However, while Orman likes this feature of Roth IRAs, he has also noted that the contribution limits for a Roth IRA are lower than the contribution limits for a Roth 401(k). So if you choose to take advantage of Roth benefits, the Roth 401(k) gives you the opportunity to do more with more money.

Orman also suggests using Roth instead of traditional accounts because not only do you avoid taxes on withdrawals as a retiree (which can be important if you’re on a fixed income), but you also also You may be able to avoid taxes on Social Security benefits and avoid higher-than-normal Medicare premiums. This is because both Social Security taxes and Medicare costs are affected by taxable income, but income from a Roth 401(k) will not count toward whether you will have to pay taxes on benefits or pay more for your Medicare coverage after age 65.

A Roth 401(k) is worth considering, especially if you’re in a lower tax bracket right now but expect future tax rates to be higher, either because you think overall rates will increase or because you expect to be in a higher tax bracket as a retiree. A financial advisor can help you determine if this is likely your situation and therefore whether a Roth 401(k) is the right choice for your retirement savings efforts.

You might think retirement is about picking the best stocks or ETFs, but you’d be wrong. Even large investments can be a drawback during retirement. The difference comes down to something simple: accumulation versus distribution. The difference is causing millions of people to reconsider their plans.

The good news? After answering three quick questions, many Americans find they can retire earlier than expected. If you are thinking about retiring or know someone who is, take 5 minutes to learn more here.