Roth vs. Traditional IRA: In-Depth Comparison

Roth IRA vs. Traditional IRA: Which Is Better for High Earners?

Deciding between a Roth and Traditional 401(k) or IRA is a difficult and confusing process for high earners.

Both accounts offer tax advantages, but the “better” option depends on your income, tax bracket, career stage, and long-term goals.

In this guide, we’ll compare Roth IRAs vs. Traditional IRAs and explain which option may make more sense if you’re a high-income professional.

Roth IRA vs. Traditional IRA: The Key Difference

The main difference comes down to when you pay taxes.

• Traditional IRA: You may get a tax deduction today, but withdrawals in retirement are taxed.

• Roth IRA: You pay taxes today, but qualified withdrawals in retirement are tax-free.

The right choice depends on your tax situation both now and in the future.

How Traditional IRAs Work

How contributions are taxed

Traditional IRA contributions may be tax-deductible, depending on:

• Your income

• Your filing status

• Whether you’re covered by a workplace retirement plan

For many high earners, deductions are limited or phased out entirely.

How withdrawals are taxed

• Withdrawals in retirement are taxed as ordinary income

• Required Minimum Distributions (RMDs) begin at age 73 (under current law in 2026)

How Roth IRAs Work

How contributions are taxed

• Contributions are made with after-tax dollars

• No upfront tax deduction

How withdrawals are taxed

• Qualified withdrawals are completely tax-free

• No RMDs during your lifetime

This makes Roth IRAs especially attractive for:

• High earners expecting higher future tax rates

• Investors seeking tax diversification

• Those planning to leave assets to heirs

Contribution Limits and Income Restrictions

IRA contribution limits

• Annual limit: $7,000

• Age 50+: Additional $1,000 catch-up

Income limits (important for high earners)

• Roth IRA contributions phase out at higher income levels

  • This can be avoided using a Backdoor Roth IRA

• Traditional IRA deductions are limited if you have an employer plan

Side-by-Side Comparison

Which Is Better for High Earners?

When a Roth IRA May Be Better

A Roth IRA often makes sense if you:

• Expect higher tax rates in the future

• Want tax-free income in retirement

• Are early or mid-career with income growth ahead

• Want flexibility and no RMDs

Even if you can’t contribute directly, strategies like the Backdoor Roth IRA may still apply.

When a Traditional IRA May Be Better

A Traditional IRA may make sense if you:

• Are in a peak earning year

• Expect lower income in retirement

• Can fully deduct contributions

• Need immediate tax relief

However, many high earners cannot deduct Traditional IRA contributions, limiting the benefit.

What About Backdoor Roth IRAs for High Earners?

Because of income limits, many high earners use a Backdoor Roth IRA strategy:

• Make a non-deductible Traditional IRA contribution

• Convert it to a Roth IRA

When structured properly, this allows continued access to Roth benefits, but tax rules (like the pro-rata rule) must be managed carefully.

🔗 Related: Backdoor Roth IRA Explained

Common Mistakes High Earners Make

• Assuming Roth IRAs are “off limits” forever

• Ignoring the pro-rata rule

• Failing to file Form 8606

• Over-focusing on tax deductions instead of long-term flexibility

• Not coordinating IRA decisions with employer plans

Final Thoughts

For high earners, the Roth vs. Traditional IRA decision is rarely black-and-white. The best choice depends on tax planning across your entire financial picture — not just this year’s return.

At Virgil Wealth, we help clients evaluate IRA strategies alongside investments, tax planning, and retirement goals to make informed decisions with confidence.

Want personalized advice? Schedule a free 15 minute consultation below!

Backdoor Roth IRAs: A Guide for High Earners

If your income is too high to contribute directly to a Roth IRA, but you want to save additional after-tax income in a tax-advantaged way, there is a solution: Backdoor Roth IRAs can allow high earners to continue building tax-free retirement savings when done correctly.

In this guide, we’ll explain how Backdoor Roth IRAs work, who they’re best for, and common mistakes to avoid.

What Is a Backdoor Roth IRA?

A Backdoor Roth IRA is a two-step strategy, not a separate account:

1. Contribute to a Traditional IRA (non-deductible)

2. Convert that contribution to a Roth IRA

Because the original contribution was made with after-tax dollars, the conversion itself is often tax-free if structured properly.

Who Is a Good Candidate for a Backdoor Roth IRA?

Backdoor Roth IRAs are typically best for individuals who:

• Earn too much to contribute directly to a Roth IRA ($150k if single filer; $236k if married filing jointly)

• Have little or no pre-tax money in Traditional IRAs

• Want tax-free growth and flexibility in retirement

• Have already maximized their 401(k) or employer plan

This strategy is especially popular with:

• Physicians

• Corporate executives

• Business owners

• Dual-income households

2025 Contribution Limits

• IRA contribution limit: $7,000

• Age 50+: Additional $1,000 catch-up

• Income limits apply only to direct Roth contributions, not conversions

The Pro-Rata Rule (The #1 Mistake to Avoid)

The pro-rata rule determines how much of your conversion is taxable.

If you have any pre-tax money in:

• Traditional IRAs

• SEP IRAs

• SIMPLE IRAs

The IRS requires your conversion to be treated as a proportionate mix of pre-tax and after-tax dollars.

Example:

• You contribute $7,000 after-tax

• You already have $93,000 in pre-tax IRAs

Only 7% of your conversion is tax-free, and unfortunately, the rest is taxable.

How to Avoid the Pro-Rata Trap

Strategies may include:

• Rolling pre-tax IRA assets into an employer 401(k) (if allowed)

• Delaying the strategy until IRA balances are cleared

• Using alternative tax-efficient investment vehicles

Every situation is different, but Virgil Wealth can help you navigate your particular situation.

Step-by-Step: How a Backdoor Roth IRA Works

1. Open a Traditional IRA

2. Make a non-deductible contribution

3. Convert the funds to a Roth IRA

4. Invest the money inside the Roth IRA

5. File IRS Form 8606 to track after-tax contributions

Tax Reporting: What You Need to File

Each year you do a Backdoor Roth IRA, you must file:

• Form 8606, which reports non-deductible contributions and conversions

Poor reporting can result in double taxation or IRS notices.

Is a Backdoor Roth IRA Worth It?

Pros:

• Tax-free growth

• No required minimum distributions (RMDs)

• Greater flexibility in retirement

• Valuable estate planning tool

Cons:

• Complex tax rules

• Not ideal for those with large pre-tax IRAs

• Requires careful coordination with your tax return

There are pros and cons, but when done correctly, backdoor Roth IRAs can supercharge your savings.

Final Thoughts

A Backdoor Roth IRA can be a powerful tool for high earners — but mistakes can erase the benefits quickly. Understanding the rules, timing, and tax implications is critical.

At Virgil Wealth, we help clients integrate Roth strategies into a comprehensive financial plan, ensuring every decision aligns with their long-term goals.

Tax-Loss Harvesting: A Simple Guide to Reduce Taxes and Improve After-Tax Returns

Tax-Loss Harvesting: A Simple Guide to Reduce Taxes and Improve Your Investment Strategy

As 2025 comes to a close, many investors start thinking about taxes, and tax-loss harvesting is one of the most effective, legal ways to reduce your tax bill while keeping your investment strategy on track.

At Virgil Wealth, we help clients use tax-loss harvesting thoughtfully as part of a broader financial plan. In this guide, we’ll explain exactly how it works, when to use it, and mistakes to avoid.

What Is Tax-Loss Harvesting?

Tax-loss harvesting is the process of selling investments at a loss to offset gains elsewhere in your portfolio.

You’re not trying to time the market.
You’re simply using the tax code to your advantage.

When you sell an investment below your purchase price, the loss can be used to:

• Offset capital gains (short-term or long-term)

• Reduce up to $3,000 in ordinary income per year

• Carry forward unused losses into future years

In other words: you’re turning market declines into tax savings.

How Tax-Loss Harvesting Works (Simple Example)

For example:

• You bought an ETF for $50,000

• Today, it’s worth $40,000

If you sell it, you realize a $10,000 capital loss.

That loss can be used to:

• Offset gains from selling another investment at a gain

• Reduce your taxable income (up to certain limits)

• Carry forward unused amounts to future years

If you want to stay invested, you simply reinvest the money into a similar—but not identical—investment so your portfolio remains aligned with your strategy.

The Wash-Sale Rule (Critical to Understand)

You can't sell an investment at a loss and rebuy “substantially identical securities” within 30 days before or after the sale.

If you do, the IRS disallows the loss for tax purposes.

Examples of wash-sale violations:

• Selling one S&P 500 index fund and buying a different S&P 500 index fund

• Selling a specific stock (like Apple) and buying it back within 30 days

• Automatically reinvesting dividends into the same investment you sold

Ways to avoid wash-sale issues:

• Turn off automatic dividend reinvestment temporarily

• Use a different fund category (e.g., S&P 500 fund → total stock market fund)

• Wait 31 days before repurchasing the same security

Financial advisors can help automate this correctly.

Good Candidates for Tax-Loss Harvesting

Tax-loss harvesting works best when:

• Markets are down

• Specific investments lag the broader market

• You're rebalancing your portfolio anyway

• You received large taxable gains earlier in the year

It is especially valuable for:

• High-income earners

• Taxable brokerage accounts

• Investors planning major sales (property, business, concentrated stock)

Important: tax-loss harvesting does not apply in retirement accounts (401(k), IRA, Roth IRA).

Short-Term vs. Long-Term Capital Gains

Capital gains come in two types:

• Short-term: Held less than 1 year (taxed at ordinary income rates)

• Long-term: Held longer than 1 year (lower tax rates)

When you harvest losses, the IRS applies them in this order:

1. Offset short-term gains

2. Offset long-term gains

3. Reduce ordinary income (up to $3,000 per year)

4. Carry forward losses indefinitely

Offsetting short-term gains is typically the most valuable use of losses.

Common Mistakes to Avoid

1. Triggering wash sales
Rebuying too soon can erase deductions.

2. Selling investments in retirement accounts
Losses in tax-advantaged accounts are not deductible.

3. Holding cash and missing a rebound
Replace with a similar investment immediately to stay invested.

4. Harvesting without a plan
Random selling can cause portfolio drift.

Tax-Loss Harvesting + Long-Term Strategy

Tax-loss harvesting is not market timing; it is portfolio maintenance plus tax efficiency.

When done correctly, it can:

• Improve after-tax returns

• Reduce volatility

• Keep asset allocation on target

• Turn downturns into strategic opportunities

It is especially powerful when combined with:

• Rebalancing

• Roth conversions

• Capital gains planning

• Diversification strategies

At Virgil Wealth, we evaluate tax opportunities year-round, not just in December.

Conclusion + Call to Action

Market declines are not pleasant, but they can be productive. Tax-loss harvesting helps you take advantage of volatility, reduce taxes, and strengthen your long-term financial plan.

If you’d like a second set of eyes on your portfolio, we’re here to help.

A Retirement Planning Guide for Procter & Gamble Employees: Understanding Your Savings Plan, STAR Award, and P&G Stock Exposure

P&G employees enjoy a comprehensive benefits package, but that also means retirement planning can feel overwhelming. Between the P&G Savings Plan, the STAR award, and the PST, it’s easy to end up with a portfolio that’s unbalanced or unclear.

This guide breaks down the key components of your P&G retirement benefits and outlines considerations to help you make informed decisions as you plan for financial independence.

1. Understanding the P&G Savings Plan

The P&G Savings Plan is the core retirement savings vehicle for employees — similar to a 401(k), but with some unique features.

Traditional vs. Roth Contributions

Employees can contribute to:

• Traditional (pre-tax): lowers taxable income today by lowering your Adjusted Gross Income dollar-for-dollar

• Roth (after-tax): grows tax-free and withdrawals in retirement are tax-free

Choosing between them depends on current vs. future tax expectations, cash flow, and long-term planning. Virgil Wealth would be happy to walk you through an analysis of your specific situation.

Company Contributions

P&G provides company contributions based on your pay and tenure. This is a significant benefit and forms the foundation of many employees' retirement portfolios.

Investment Menu Overview

The plan usually offers:

• Lifecycle/Target-Date Funds

• Core Index Funds (U.S. equity, international equity, bonds)

• Stable Value or Guaranteed Funds

• Company Stock (PG)

• Self-Directed Brokerage Window (optional for advanced investors)

Each option carries different levels of risk, diversification, and cost. Many employees unknowingly end up with:

• Too much in the default fund

• Too conservative or aggressive allocations

• High exposure to P&G stock through contributions + STAR awards

Regularly reviewing your allocation helps ensure your investments align with your goals, time horizon, and risk tolerance.

2. How the P&G STAR Award Works

The STAR Award (Short-Term Achievement Reward) is one of P&G’s most valuable employee benefits, reserved for full-time banded employees (not BTAs), with Long-term Incentive Plan (LTIP) reserved for Band 3 and above. It typically is rewarded in cash and stock, but employees may sometimes elect to receive in stock options or Restricted Stock Units (RSUs) in lieu of cash. STAR awards are granted based on a formula, derived from both overall company performance and business unit performance. The formula can be confusing, and we are here to help with any questions.

3. The P&G Profit Sharing Trust (PST)

The PST is another company-funded retirement account, with annual grants of P&G common and preferred stock (preferred stock discontinued in 2025) given to employees.

Why it matters for retirement planning

The PST often create unintended concentration in P&G stock, especially for long-tenured employees. Over 10–20 years, awards accumulate and compound, meaning:

• Portfolio risk increases

• Retirement savings depend heavily on one company

• A downturn in P&G stock could significantly affect your net worth

Understanding how much of your PST is vested, unvested, or tied to performance helps you plan for taxes, diversification, and timing of sales.

4. The Hidden Risk of a Concentrated P&G Stock Position

Many P&G employees hold a significant amount of their total retirement assets in PG shares — often without realizing it.

Why concentration is risky

Holding a single stock increases:

• Volatility risk

• Career + portfolio risk overlap

• Retirement timing risk (if the stock declines right before retiring)

Even great companies like P&G can experience:

• Periods of underperformance

• Industry disruptions

• Shifts in consumer behavior

• Regulatory or economic shocks

What’s a healthier approach?

You don’t have to sell all PG stock, but diversification helps:

• Reduce risk

• Smooth returns

• Improve long-term financial stability

A customized, diversified portfolio may use:

• U.S. ETFs

• International ETFs

• Bond ETS

• Real Estate

The goal: avoid one company determining your financial future.

5. How to Build a Balanced Plan Using P&G Benefits

Here’s a framework that can help P&G employees take control of their retirement strategy:

Step 1 — Evaluate your current allocation

• What percentage is in PG stock?

• How is the rest distributed among stocks, bonds, and cash?

Step 2 — Review your P&G Stock exposure

• Track vested and unvested shares

• Review when awards vest or convert to shares

• Understand tax implications of selling

Step 3 — Set target allocation based on your goals

• Time until retirement

• Risk tolerance

• Income needs

• Other sources of savings or pensions

Step 4 — Decide on a diversification strategy

Options include:

• Rebalancing within the Savings Plan

• Selling vested shares over time

• Redirecting new contributions to diversified funds

Step 5 — Revisit your plan annually

Life changes. Markets change. Tax laws change.
A yearly review helps keep your strategy aligned with your goals.

Conclusion

Procter & Gamble’s retirement benefits create an amazing foundation for financial independence, but only if managed with intention. Understanding your Savings Plan options, STAR award mechanics, and stock concentration risks can help you build a more resilient, tax-efficient, and long-term strategy.

At Virgil Wealth, we work with many P&G employees and retirees to create personalized retirement plans that simplify these decisions and bring clarity to every stage of your career.

Retirement Planning Checklist: What to Do 5 Years Before Retiring

You’ve spent decades saving and working toward retirement, but the final five years before you stop working are the most important.
This is when your focus shifts from building wealth to preserving and distributing it wisely.

At Virgil Wealth, we help clients simplify this transition so they can step into retirement with confidence, clarity, and peace of mind.

1. Estimate Your Retirement Expenses and Income

Your retirement plan starts with understanding what your lifestyle will actually cost and where your income will come from.

Steps to take:

• Estimate monthly expenses, including healthcare, travel, housing, and hobbies.

• Review projected income from Social Security, pensions, and investment accounts.

• Identify any income gaps and plan how to fill them.

2. Plan Your Social Security and/or Pension Strategy

Timing is extremely important when it comes to Social Security and pension distributions.

Evaluate:

• The best age to begin benefits; delaying until age 70 can significantly increase payments.

• Spousal and survivor benefits if you’re married.

• Coordination with other income sources to manage taxes.

3. Create a Tax-Efficient Withdrawal Plan

Without careful planning, taxes can erode your retirement income. We will help prevent that from happening!

Checklist:

• Decide the order to draw from accounts (taxable → tax-deferred → tax-free).

• Consider partial Roth conversions before RMDs (Required Minimum Distributions) begin.

• Plan withdrawals to stay in lower tax brackets and manage Medicare surcharges.

4. Prepare for Healthcare and Long-Term Care Costs

Healthcare is one of the largest retirement expenses, and in our experience, often underestimated.

Steps:

• Review Medicare options (Parts A, B, D, and supplemental plans).

• Consider long-term care insurance or hybrid life/long-term care policies.

• Build medical costs into your retirement budget.

5. Update Estate and Legacy Plans

Your estate plan ensures your wealth is transferred smoothly and according to your wishes.

Key items to review:

• Create or update wills, trusts, and beneficiary designations.

• Review powers of attorney and healthcare directives.

• Discuss charitable giving (direct or through Donor-Advised Funds) or legacy goals.

6. Meet With a Fiduciary Financial Advisor

A trusted advisor can coordinate your investments, taxes, estate, and retirement income strategy, helping you avoid costly mistakes and optimize your retirement.

At Virgil Wealth, we specialize in guiding clients through the final stretch before retirement, ensuring every detail of your plan is aligned with your goals.

The five years before retirement are critical. By refining your plan now, you’ll be positioned to enjoy the freedom you’ve worked so hard to achieve. Schedule a free 15 minute consultation by clicking the button below.

Financial Planning for Physicians - Smart Strategies

We know that physicians routinely face unique financial challenges, including grappling with significant student debt loads, handling complex compensation negotiations, buying/selling practices or practice-related real estate, etc. Here are some strategies Virgil Wealth recommends:

Build a solid foundation during residency

• Build and stick to your budget. Income will likely never be lower in your professional career, so build the habits early so they stick with you later

• Start your saving now! Create an emergency fund that can last 4-6 months if needed

• Establish a Roth IRA while income is low to start the long-term compounding effect

Tackle Med School Debt Wisely

We can help you weigh the pros and cons of different repayment options.

• Understand your rate and amortization. Let us help you explore refinancing options if and when they make sense

• Will you be earning a low salary during and after residency? Look into income-driven repayment plans

• If you plan to work in an academic hospital or a non-profit, explore Public Service Loan Forgiveness; this can save you thousands and thousands of dollars if you qualify

Protect your assets from Day 1

Your ability to earn is your most valuable asset. At Virgil Wealth, we suggest three different types of insurance:

• Disability insurance: Choose a policy tailored to your specialty.

• Umbrella liability insurance: Adds an extra layer of protection above home/auto coverage.

• Malpractice coverage: Review regularly to ensure limits match your risk profile.

Conclusion

From residency to retirement, physicians face financial decisions unlike any other profession. By addressing debt, protecting income, and planning proactively, you can achieve lasting financial independence — without sacrificing your quality of life.

At Virgil Wealth, we help physicians navigate every step of that journey with personalized, fiduciary advice. Schedule a free 15 minute consultation with us today to go deeper on these issues