Everyday Money Habits · Worksheet

Fill the tax-deal grid.

An account isn’t the investment — it’s a tax wrapper around it. The same funds inside get a different deal with the tax collector depending on the wrapper. This sheet fills in what each one does, then settles the one choice that’s yours to make on purpose: Roth or Traditional.

Beginner

Name

Date

Audience: For anyone whose accounts feel like a black box
Time: About 20 minutes
Materials: Your workplace-plan login (to check one setting) · a pen

Objective

Fill in what each account does with the tax collector, then make the Roth-vs-Traditional choice on purpose.

Use this when

You’re saving into a 401(k) or IRA but treat the account itself as a black box, and want to know which wrapper does what.

1 · The three moments money can be taxed

Money can get taxed at three moments: going in (the year you earn it), growing (dividends and gains along the way), and coming out (when you finally spend it). Every account escapes tax at some of these and pays at others — that’s the whole difference between them. In the grid below, tick every box where you think that account escapes tax. The answers are right underneath.

2 · The grid — tick where each account escapes tax

AccountGoing inGrowingComing out

Traditional 401(k) or IRA

Roth IRA (or Roth 401(k))

HSA (Health Savings Account)

Taxable brokerage

529 (college savings)

How it fills in: a Traditional account escapes going in (a tax break now) and pays coming out. A Roth pays going in, then escapes growing and coming out — for anything. The HSA is the only account taxed nowhere: in, growing, and out (for medical costs). A taxable brokerage escapes nowhere. A 529 escapes growing and coming out, but only for school. The pattern: the HSA wins all three, and a Roth and a Traditional differ only in when you pay.

3 · The one that’s yours to choose — Roth or Traditional

The rule is short: 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 Roth — and if your bracket never changes, the two tie, so you can’t lose badly either way. One nudge: a dollar in a Traditional account isn’t a whole dollar. At a 22% rate it’s worth about 78¢ once it’s taxed on the way out; a Roth dollar is worth the full dollar.

My tax bracket todaylow, middle, or high — a rough sense is enough

Where I think it’s headed by retirementsame, higher, or lower than today

So my contributions should go in asRoth if same-or-higher, Traditional if lower

4 · One move

The outcome is a single line: my next account move is ___. For most people it’s quick — log into your workplace plan, find the Roth-vs-Traditional setting, and confirm or change it on purpose. Keep it to which account; the order you fund them is a different sheet.

My next account move isconfirm my Roth/Traditional setting · open an HSA · start a Roth IRA

The date I’ll do it bya default left unchecked is still a choice — just not yours

This sheet stays at heuristic altitude — no contribution limits or income cut-offs. Look those up for your plan year when you set the amount; a Roth IRA needs earned income from a job to fund.

5 · Reflection

Which account surprised you — did one do more, or less, than you assumed?

The setting you’ll check first, and what you expect to find:

Based on the Guide to Roth vs. Traditional.