An important pre-tax vs Roth argument that is often missed, from “Why Pre-Tax Retirement Contributions Are Better Than Roth In Peak Earning Years (Even If Tax Rates Increase)“:
The most powerful argument for a pre-tax account as a retirement savings vehicle is that it comes with the option to convert the pre-tax dollars in the account to Roth at any time. That is to say, the account owner can choose when they want to be taxed on the funds in the account (which is what happens when pre-tax funds are converted to Roth), and make those dollars tax-free from that point on. Which makes it very useful to have pre-tax funds available to convert to Roth in years with lower-than-normal income, such as the years between retiring and beginning Social Security and/or RMDs. During this time, the funds can be converted to Roth and taxed at a lower rate than they would have been during high-income working years, or in later years when Social Security and RMDs push the owner into a higher tax bracket.
Notably, Roth accounts do not have this option: There’s no way to move funds from a Roth to a traditional account and take a tax deduction in a higher-than-normal income year (i.e., the opposite of what someone would do with a Roth conversion). The ability to choose when income is recognized only goes in one direction, from traditional to Roth. So from a tax timing perspective, it’s more valuable to have pre-tax funds, with the possibility of converting them to Roth during lower-income years, than to have Roth funds that stay Roth no matter what.
Which is ultimately why, even if tax rates are expected to go up at some point in the future, it can still make sense to contribute to a pre-tax traditional retirement account. Whether or not tax rates increase, the tax timing opportunities to recognize income from pre-tax accounts will still exist. For higher earners, if there’s a reasonable chance of having several low- or zero-income years after retirement, it can make sense to defer the recognition of some of their income from a higher-tax year into a lower-tax year by making pre-tax retirement contributions.
As in, the Roth conversion option gives high-earners the benefits of a Roth contribution without committing to high taxes upfront. Play your cards right and you could even take out some of that pre-tax money tax-free in retirement too. The article’s discussion of historical taxes is worth the read.
The important counterargument is that, in real life, the effective investment between a maxed-out pre-tax and Roth account is already not apples to apples. As in, $10k in a Roth has already been taxed and is therefore reflects a greater than $10k investment. Many people (including presumably most doctors) investing in pretax accounts do not take the extra money they would need to max out a Roth and invest that in a taxable account alongside their pretax contribution. It’s all a set-and-forget it payroll deduction. So, optimized tax considerations aside, many retirees will end up with more money to spend with the Roth contribution just because they saved more money upfront. The option for a Roth conversion is powerful, but it adds complexity and requires timing, two things investors often struggle with.
Both types of accounts have strengths, and all outcomes are a combination of math and behavior in a largely unpredictable tax context.