Everyday Money Habits · Classroom packet
Which account, and why.
You clicked a box during onboarding (Roth or Traditional), or you never touched it and a default chose for you. Either way, that box was a real tax decision. This packet is the one that makes it on purpose. The idea underneath: an account is a tax wrapper around your investments, not the investment itself, and each wrapper is a different deal with the tax collector. Fill the grid together, find your own gaps, and everyone leaves with one move.
Lead a group through what each retirement account actually does (the tax deal behind the wrapper) and the deliberate Roth-vs-Traditional choice, and name one move each.
You're running a class, small group, or kitchen-table session for adults who are saving but treat their accounts as a black box, and want a no-prep handout on which account and why.
For the leader
Anyone can run this — a teacher, a small-group or mentorship leader, a parent at the kitchen table — for two people or a full room. No math background needed. Four beats:
- Open with the question — don't name the idea yet; let the room argue it first, then reveal the sentence.
- Fill the tax-deal grid together — check where each account dodges the tax. The pattern is the lesson.
- Everyone ticks the personal check; the first unchecked box is their next move.
- Before you close, everyone names one move — confirm a Roth/Traditional choice, open an account — and a date.
- 0–4 Open with the question; then name the idea.
- 4–13 Fill the grid — guess first, then reveal.
- 13–19 Find your spot — tick the personal check.
- 19–27 Talk it through — the Roth-vs-Traditional choice.
- 27–30 One move each.
"Most of us picked our retirement accounts by accident: a box checked at a new job, or left on its default. Today we work out what an account actually is — and whether that accidental choice was the right one — before I put a name to any of it."
The grid is the warm-up; the decision is the point. Don't let naming the accounts eat the clock — the value is in the Roth-vs-Traditional talk and each person's one move. And keep it to which account: the order you fund them is a different session.
1 · The whole idea, in one sentence
Two people buy the exact same investment — one inside a Roth account, one inside a Traditional. Decades later they have very different amounts to spend. If the investment was identical, what made the difference?
The account is a tax deal, not the investment — and Roth vs. Traditional is a choice you make on purpose, not a default someone else made for you.
Two different decisions get tangled together. One is what you invest in: a fund, usually a low-cost index or target-date fund. The other is which account holds it — the wrapper. The wrapper doesn't change what you own; it changes how the money is taxed. That's this session. The most consequential wrapper question is Roth versus Traditional, and most people have never truly decided it.
2 · Fill the tax-deal grid
Money can be taxed at three moments: going in, while it grows, and coming out. For each account, tick every moment where it escapes tax. Guess as a group first — the pattern you find is the whole lesson.
One catch to say aloud: "tax-free coming out" isn't identical everywhere. A Roth comes out tax-free for anything; the HSA and 529 come out tax-free only for their job — medical costs and school.
3 · Find your spot
Now make it personal. Tick what's already true for you. The first unchecked box, reading top to bottom, is your next move — and box one is the big one.
- I know whether my 401(k) goes in Traditional (before tax) or Roth (after tax) — and I chose it on purpose, not by leaving the default.
- I have a Roth IRA open in my own name, not just my workplace account.
- If I’m on a high-deductible health plan (a plan with a large deductible; look for "HDHP" on your open-enrollment paperwork), my HSA is open and invested, not sitting in cash.
- I could explain, in one sentence, what tax break each account I use actually gives me.
- I’ve picked an investment inside each account (usually a low-cost index or target-date fund), not left the money as cash.
- When my income changed (a raise, a new job, marriage), I revisited my Roth-vs-Traditional choice.
- I know which of my accounts are taxed later (Traditional) and which are already tax-free (Roth, HSA) — my "tax buckets" for retirement.
4 · Talk it through
- Someone says, "Roth or Traditional, it's a wash — just pick one." When are they right, and when does that shrug quietly cost them?
- The math says Roth and Traditional tie if your tax bracket never changes. So why does this still lean most young savers toward Roth?
- The HSA is the only account taxed nowhere — going in, growing, and coming out. If it's that good, why doesn't everyone use one?
- Which account are you not using yet that you probably should be — and what's the one thing stopping you from opening it this week?
A case to argue
A friend changed jobs a few months ago and left a $12,000 401(k) at their old employer. The old plan just emailed asking what they'd like to do with it. "I was thinking I'd just cash it out," they say. "It's only twelve grand, and I could use it."
What would you tell this person?
5 · One move, this week
The outcome is a single line: my next account move is X. For most people it's quick: log into your workplace plan, find the Roth-vs-Traditional setting, and confirm or change it on purpose. If your HSA is sitting in cash, invest it; if you don't have a Roth IRA yet, open one at a low-cost provider like Fidelity, Vanguard, or Schwab. Go around the group; each person names one move and a date.
Answer key · for the leader
Keep this page back, or hand it out after the grid. The point isn't a perfect score — it's the two surprises: the HSA escapes tax at all three moments, and a Roth and a Traditional differ only in when you pay.
- Traditional 401(k) or IRA: escapes tax going in, growing. Tax break going in, grows untaxed, then taxed as ordinary income (your normal tax brackets, the same as a paycheck) coming out.
- Roth IRA (or Roth 401(k)): escapes tax growing, coming out. No break going in; grows and comes out tax-free, for anything, no strings.
- HSA: escapes tax going in, growing, coming out. The only account taxed nowhere: pre-tax in, grows untaxed, tax-free out for medical costs.
- Taxable brokerage: escapes tax nowhere. No break and no limit; you owe tax on dividends and gains along the way.
- 529: escapes tax growing, coming out. After-tax in; grows and comes out tax-free, but only for school.
Look at the top two rows: a Traditional and a Roth each dodge tax at two of the three moments; they just swap which end. Traditional gives you the break now and taxes you later; Roth pays now and never again. The rule of thumb, then: choose Roth if you expect your tax rate in retirement to be the same or higher than today, Traditional if you expect it lower. Most young savers are in a low bracket now and headed higher, which tilts toward Roth. If your bracket never changes, the two tie — so you can't lose badly either way.
A dollar in a Traditional account isn't a whole dollar: it's taxed on the way out. At a 22% rate, that dollar is worth about 78¢ in spendable money; a Roth dollar is worth the full dollar. Same-size balances, different value. That gap is the Roth-vs-Traditional decision itself. One behavioral thumb on the scale: the Traditional break only pays off if you invest the tax you saved, and most people spend it, which quietly favors Roth.
The Roth-vs-Traditional calculator on the site runs a saver's bracket-now against bracket-later and shows the after-tax result side by side. The lesson on being auto-enrolled in a Roth 401(k) is the story version of this session's opening scene.
Any answer that separates the two decisions works — e.g. "the fund is what I own; the account is the tax deal around it, and Roth vs. Traditional is when I pay the tax."
A strong answer separates the low-stakes choice from the two real traps. Three of the four doors — leave it, roll it into the new 401(k), or roll it into an IRA — all keep the money invested and tax-sheltered; the difference is mostly convenience, and an IRA is the usual default (the widest low-cost choice). The door not to walk through is cashing out: before 59½ that's a 10% penalty plus ordinary income tax, about a third gone — and the real loss is the roughly $138,000 that $12,000 was on its way to becoming by 65. And the trap for people doing it right: if the plan mails a check, 20% is withheld and a 60-day clock starts. One phrase avoids all of it — ask for "a direct rollover" (trustee-to-trustee), so the check never touches their hands. Drawn from the "what do I do with my old 401(k)?" Moment (M6) on the site.
Based on the Guide to Roth vs. Traditional.
michaelwestfinancials.com · © 2026 Michael West Financials · Education, not financial advice · Last reviewed July 2026