Roth IRA or 401(k)? Where to invest first with Sean Mullaney / 72

Written By Emily + Cassidy

If you’ve spent any time looking for personal finance advice, you’ve probably heard the same thing on repeat: max out your Roth IRA.

And to be clear, that’s not bad advice. But it’s also not always the best advice — at least not for every season of life.

In this episode, we sat down with advice-only financial planner Sean Mullaney to talk through what’s often missing from the conversation. Instead of focusing on one “right” account, we zoomed out and looked at the bigger picture — how taxes work across your lifetime, not just this year, and how small shifts in strategy can actually make a meaningful difference over time.

If you’ve ever felt a little unsure about whether you’re doing this “right,” this is the kind of conversation that helps you exhale a bit and move forward with more clarity.

Episode highlights

  • [00:00] Meet our guest and why “Roth first” isn’t always the best advice

  • [02:00] The two-sentence framework for retirement planning: investing + taxes

  • [04:30] Why traditional 401(k)s can be more powerful than Roth accounts

  • [08:00] What to do if you don’t have access to a 401(k)

  • [12:30] The real order of operations: emergency fund, employer match, then what?

  • [15:30] How taxes actually work in retirement (and why they’re often lower)

  • [18:30] The “hidden Roth IRA” concept explained in plain English

  • [24:30] Capital gains, cost basis, and why your taxable income may be lower than you think

  • [28:00] The “compelling three” framework for investing (and how to use it)

  • [32:00] Where HSAs fit into your overall investing strategy

  • [34:00] The biggest mistake we see in your 20s and 30s — and how to avoid it

  • [36:00] Balancing saving for the future with actually enjoying your life now

The simple framework that changes how you think about investing

It’s easy to get lost in all the retirement account types and rules, but sometimes the most helpful thing is zooming out.

Sean shared a simple way to think about retirement planning that cuts through a lot of the noise:

  • Buy diversified financial assets over time

  • Pay taxes when you pay less tax

That second idea is where things start to click.

A lot of advice focuses on avoiding taxes altogether (which is why Roth accounts get so much attention). But a more grounded question is: When am I actually going to be in a lower tax bracket — now, or later?

For many people, the answer is actually later. Which makes getting a tax break today — like with a traditional 401(k) — feel a lot more compelling.

Why “Roth first” doesn’t always make sense

There’s something comforting about having a clear, go-to rule, and “Roth first” has become one of those defaults.

But real life — and especially taxes — tends to be a little more nuanced.

Roth IRAs are appealing because they’re straightforward: you pay taxes now, and your money grows tax-free. But what often gets left out is what your tax situation might actually look like in retirement.

When you’re no longer earning a full-time income, your tax picture tends to shift. You’re not getting bonuses, your income is often lower, and your spending naturally limits how much you’re pulling out each year.

On top of that, the standard deduction and progressive tax brackets mean a portion of your income in retirement might be taxed at very low rates — or even 0%.

So while Roth accounts absolutely have a place, prioritizing them above everything else can sometimes mean missing out on valuable tax savings today.

The order of operations (with a little more nuance)

We all love a good checklist, but money decisions don’t always fit neatly into one.

A helpful starting point looks something like this:

  • Build an emergency fund (even if it’s small to start)

  • Contribute enough to retirement to get your full employer match (if you have one)

  • Then decide what comes next

That last step is where things get more personal.

A lot of advice says to jump straight to a Roth IRA after getting your employer match. But depending on your income and tax situation, continuing to contribute to your traditional 401(k) might actually be the more strategic move.

Of course, there are exceptions. If your plan has high fees or limited investment options, a Roth IRA might make more sense. But the bigger takeaway is that you have options — and understanding why you’re choosing something matters more than following a rigid formula.

How taxes work in retirement

Retirement taxes can feel confusing at first, and this is where a lot of uncertainty tends to come from.

Sean walks us through some retirement scenarios that clarify what taxes might look like.

For example, say you’re retired and withdrawing money from a taxable brokerage account. When you withdraw money from a brokerage account, you’re only taxed on the gain, not the full amount. So if you contribute $40,000 and it grows to $100,000, you only pay taxes on the $60,000. Plus, long-term capital gains often have lower tax rates — sometimes even 0%, depending on your income.

Sean also introduced what he calls the “hidden Roth IRA.”

In practice, this means that when you withdraw money from a traditional account, part of that income can be offset by the standard deduction. So even though it’s technically taxable, you might not actually owe taxes on it.

It’s one of those details that makes you realize retirement taxes are often more flexible — and often lower — than we expect going in.

The “compelling three” framework

If you’ve ever opened a new tab to research investing and immediately felt overwhelmed, this framework helps bring things back down to earth with Sean’s three general recommendations for where you should start.

Sean’s “compelling three” are:

  • A traditional 401(k) (or similar workplace account)

  • A Roth IRA

  • A taxable brokerage account

Each one plays a different role.

Your 401(k) helps reduce taxes now. Your Roth IRA gives you tax-free flexibility later. And your brokerage account can help fill in the gaps — especially if you want the option to retire early or need access to money before traditional retirement age.

And importantly, these aren’t the only way to do things. They’re just a really practical starting point when you’re trying to figure out where to focus.

The biggest mistake to avoid in your 20s and 30s

With so much information out there, it’s easy to feel like you need to get every decision exactly right.

But that pressure can actually backfire.

The biggest mistake isn’t choosing the wrong account or missing some optimization strategy — it’s not starting at all.

Even if your approach isn’t perfect (and spoiler — it won’t be!), you’re still building something. You’re creating momentum, learning as you go, and giving yourself more options later.

That matters so much more than getting every detail right from day one.

How to balance saving with actually living your life

It’s easy to fall into the trap of thinking you have to choose between enjoying your life now and preparing for the future.

But it doesn’t have to be one or the other.

One idea that came up in this conversation is shifting a bit more toward experiences over stuff. Not in an extreme way — just in a way that feels practical.

Stuff tends to accumulate. It can become something you have to manage, move, and eventually make decisions about. Experiences, on the other hand, tend to stay with you in a different way.

At the same time, building financial assets gives you flexibility and peace of mind later on.

It’s less about getting everything exactly right and more about finding a balance that lets you enjoy your life now while still taking care of your future self.

TL;DR

  • Roth IRAs aren’t always the “best” choice for where to save for retirement

  • Retirement taxes are often lower — and more flexible — than people expect

  • The “compelling three” (401(k), Roth IRA, brokerage account) offer a strong foundation for where to start investing

  • The biggest mistake isn’t doing it wrong — it’s not starting at all

  • You can build your future and enjoy your life at the same time

Resources

Connect with Sean:

Listen to The Finance Girlies beginner-friendly investing episodes:

As Sean mentioned, some capital gains in New Zealand are not subject to tax, but some are. As always, tax rules are nuanced. See the following: 

The discussion is intended for general educational purposes only and is not tax, legal, or investment advice for any individual. Cassidy, Emily, and The Finance Girlies podcast do not endorse Sean Mullaney, Mullaney Financial & Tax, Inc. and their services. 

This content is for educational purposes only and is not personalized financial, tax, or legal advice.

Emily + Cassidy
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