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ROTH ACCOUNT ????

2FORCEFULL

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What is it and how does it work, I think you have to fund with taxed funds.... but how does it work and what does it do??? is there a limit? as in how mucf can you start with... and where do you go to open a roth??? and why would you do it or not do it????
 

RodnJen

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Think of it like and IRA but yes, it is funded with after tax dollars. You can use it to save for a first home or pay for education without paying a penalty or being taxed on the withdrawals. It has a limits that get phased out based on income. You are not taxed on investment earnings nor are you taxed on distributions in retirement.

The Roth rules can also be applied to 457 plans. The max contribution is the same, but a portion of your contributions can be deposited in a Roth then the rest in a traditional savings plan depending on your goals and tax strategy.
 

PaPaG

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Check this site out, it is very easy to follow and understand. ROTHS are great when starting out and during your lifetime but you can't do it if you make a lot of dough.

 

2FORCEFULL

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When investors are deciding where to stash their cash for retirement, there are several options.

Americans rely more and more on saving in their employer-sponsored 401(k) plans — which are heavily funded by tax-deferred salary deferrals from the employee and tax-deferred employer matching contributions.




Once employment ends, these 401(k) plan accounts are often rolled over into an individual retirement account for purposes of managing the portfolio and continuing the tax advantages previously enjoyed in the 401(k).

However, a big opportunity often missed in this area is Roth savings. The current landscape and rules around retirement savings provide a number of strong incentives for you to consider setting up a Roth IRA this year.

More from Fixed Income Strategies:
 

2FORCEFULL

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Think of it like and IRA but yes, it is funded with after tax dollars. You can use it to save for a first home or pay for education without paying a penalty or being taxed on the withdrawals. It has a limits that get phased out based on income. You are not taxed on investment earnings nor are you taxed on distributions in retirement.

The Roth rules can also be applied to 457 plans. The max contribution is the same, but a portion of your contributions can be deposited in a Roth then the rest in a traditional savings plan depending on your goals and tax strategy.
lets say you have a million or so in a 401k,.. and lets say you retire... can you roll the 401k to a roth,.. without the 10% penalty... lets also say that you are in a 32% tax bracket... I know you have to start withdrawing 401k's at 70.... I think you have to let the sleeping dog lay, addind a 401k incme tax to the already high brackeT could push it to a higher bracket, and adding the 401k to the income tax would mean the million just turned to 620k....

also lets say you have 500k or so in the bank, would you move it to a fidelity invest account... or just let it sit... fidelity account is taxed yearly right>??? that would add to the 500k yearly income and bump you to a higher bracket????
 

RodnJen

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lets say you have a million or so in a 401k,.. and lets say you retire... can you roll the 401k to a roth,.. without the 10% penalty... lets also say that you are in a 32% tax bracket... I know you have to start withdrawing 401k's at 70.... I think you have to let the sleeping dog lay, addind a 401k incme tax to the already high brackeT could push it to a higher bracket, and adding the 401k to the income tax would mean the million just turned to 620k....

also lets say you have 500k or so in the bank, would you move it to a fidelity invest account... or just let it sit... fidelity account is taxed yearly right>??? that would add to the 500k yearly income and bump you to a higher bracket????
Cut and paste answer:
"What you can do. Roll over a traditional 401(k) into a traditional IRA, tax-free. Roll over a Roth 401(k) into a Roth IRA, tax-free. Roll over a traditional 401(k) into a Roth IRA—this would be considered a "Roth conversion," so you'd owe taxes."

Your funds get taxed yearly regardless of where they are invested unless you are in a structured, IRS approved savings account like a 401k or Roth. As for the higher tax bracket, it a a graduated tax schedule so the more you earn the more you pay. You pay the highest tax rate only on the highest income.
 

LowRiver2

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I have a 457 plan which is through work (similar to Roth)

Best thing any new employee can do is get in on it as early as possible.
Here is a quick explanation of both:


Was talking to a Havi buddy last weekend and we agreed people with wealth have real estate. For those that don’t , a Roth or 457 is a great way for a pretty secure retirement source of income.
Having a solid financial planner with the plan helps too. Our plan allows us to invest on our own as well with our actual plan money.
Some guys are doing well on their own, others become obsessed with it and stress the hell out over it.

I dabble a little with a small percentage of mine for fun, but my planner has done extremely well with my overall plan.

Great investment option for the long run regardless.
 

LowRiver2

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if you are past 65, none of this will make $ and sense... ???
I’d say in general you are correct. It’s designed for long term growth.
The one plus would be if you had intentions for it to be passed on to your kids, an adviser would have the answer to that.
 

2Driver

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if you are past 65, none of this will make $ and sense... ???
We are sort of at the same point.

I think you are where you are with tax deferred accounts at this point, especially if you still have good income. You have to draw at 70 but it is a very small amount that is required yearly. I may leave my IRA behind for my kid , but those laws recently changed too. fuckers.

The only trick I didn’t pencil out was to convert to a Roth in March 2020 when the account had tanked - ie less tax gain, then letting the Roth double tax free.
Doubt that opportunity will ever happen again. Do the math - if your IRA tanked by 40%, then you converted that to Roth and it doubled in a Roth starting at the bottom of the market. Now with 100% tax free withdrawals, I think your 1M is up a good 3-400k tax free?
 
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Instigator

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Income limits, 139K single, 206K married,
Also contribution limits are low compared to a traditional 401K, 6K under 50 and 7K over 50
You can also do a backdoor Roth if you are over the limits too.
Good employers offer a tradition 401K as well as a Roth 401K.
Major differences between 401K and IRAs are the contribution limits.
401K limits are something like 19,000 and 26500.00 if your over 50 years old while IRA limits are 6000 and 7500.00 if your over 50 years old.
One should always contribute enough to traditional 401K to get any match offered and then max out the Roth 401K option. Then add a Roth IRA whenever possible. If over 50 years old you can do traditional 401K for say 4% to get the company match and the the remaining 22,500.00 in Roth 401K for a total of 30,500.00 employee and employer combined total plus another 7500.00 in Roth IRA. That's 38,000.00 per person per year of you can swing it. Best part is that 30,000.00 of it plusbits earnings are tax free after the contribution.
That way when you retire the only taxes you will have to pay is on a portion of your Social Security and whatever is withdrawn from traditional 401K. All withdrawals from any type Roth account are tax free.
I can't wait to give the F U to the tax man when we retire.
 
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RandyH

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A big fat IRA is a great way to fund grandkids education. If you don't need it yourself... My Father in law did this. With RMD amounts dragged out to those that inherit them, Continued Good investments and Time value of money, you can pay for alot of Education and have some left over for First Time Home downpayments.
 

racektm

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You can also do a backdoor Roth if you are over the limits too.
Good employers offer a tradition 401K as well as a Roth 401K.
Major differences between 401K and IRAs are the contribution limits.
401K limits are something like 19,000 and 26500.00 if your over 50 years old while IRA limits are 6000 and 7500.00 if your over 50 years old.
One should always contribute enough to traditional 401K to get any match offered and then max out the Roth 401K option. Then add a Roth IRA whenever possible. If over 50 years old you can do traditional 401K for say 4% to get the company match and the the remaining 22,500.00 in Roth 401K for a total of 30,500.00 employee and employer combined total plus another 7500.00 in Roth IRA. That's 38,000.00 per person per year of you can swing it. Best part is that 30,000.00 of it plusbits earnings are tax free after the contribution.
That way when you retire the only taxes you will have to pay is on a portion of your Social Security and whatever is withdrawn from traditional 401K. All withdrawals from any type Roth account are tax free.
I can't wait to give the F U to the tax man when we retire.
But if you make too much money, you cant contribute at all...
I max out my 401K, but make too much for the Roth.
 

Flatsix66

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If you have $1M and dont know what to do with it EXACTLY I would recommend calling a fee only financial advisor and have them make a plan for you. It will cost ~$2500 but well worth it in the long run. We have used these guys and would recommend them https://purefinancial.com/
 

Boat 405

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What is it and how does it work, I think you have to fund with taxed funds.... but how does it work and what does it do??? is there a limit? as in how mucf can you start with... and where do you go to open a roth??? and why would you do it or not do it????
Pay tax when putting money in. No tax upon taking out with gains. You can’t make over a certain amount to fund a Roth. Best deal in town if you can do it.
 

bowtiejunkie

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But if you make too much money, you cant contribute at all...
I max out my 401K, but make too much for the Roth.
With a Roth 401k, there is no income limitation. As a result, the back door terminology.

With our 401k, any combination of pre-tax and Roth up to IRS 401k limit is allowed and subject to company match (5%). Beyond the IRS 401k limit, you can then contribute additional after tax dollars and have them immediately converted to Roth funds. There is a ceiling on these additional funds. As a result, you could sock away a lot of Roth funds via a 401k if employer offers this feature. Nice work around for those making too much income to setup a Roth IRA account otherwise.

For 2FF, you’d have to calculate the tax benefits of converting non-Roth funds to Roth, if you are under the income limits. May or may not make sense. Roth funds are not subject to required minimum disbursements though (beneficiaries may be required to do so), so there is that angle to consider.
 

Cdog

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MY understanding is doing the conversion from an old employer 401k or traditional IRA to Roth you are subject to income tax on the amount converted since the money invested is pre tax.

So your'll lose a certain % during the conversion based on your tax bracket. In other words you'd have to structure 1 million over however many years to stay in a reasonable tax bracket.

Being self employed I've always done a traditional when not phased out due to income limits.

The big fear I hear about is the bastards will eventually change the law to tax the Roth out of its benefits. Meanwhile you just took a 24% hit on your funds to end up in the same place as your traditional IRA.

This maybe tinfoil hat stuff but anything is possible these days.....
 
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samsah33

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You can also do a backdoor Roth if you are over the limits too.
Good employers offer a tradition 401K as well as a Roth 401K.
Major differences between 401K and IRAs are the contribution limits.
401K limits are something like 19,000 and 26500.00 if your over 50 years old while IRA limits are 6000 and 7500.00 if your over 50 years old.
One should always contribute enough to traditional 401K to get any match offered and then max out the Roth 401K option. Then add a Roth IRA whenever possible. If over 50 years old you can do traditional 401K for say 4% to get the company match and the the remaining 22,500.00 in Roth 401K for a total of 30,500.00 employee and employer combined total plus another 7500.00 in Roth IRA. That's 38,000.00 per person per year of you can swing it. Best part is that 30,000.00 of it plusbits earnings are tax free after the contribution.
That way when you retire the only taxes you will have to pay is on a portion of your Social Security and whatever is withdrawn from traditional 401K. All withdrawals from any type Roth account are tax free.
I can't wait to give the F U to the tax man when we retire.
^^^^^👍👍👍
Check with your employer, many 401(k) plans have a Roth option if you max out on contributions to the 401(k). Keep an eye on your catch-up contributions (over 50 years old), those are not subject to nondiscrimination testing, which causes some plans to refund contributions to "highly compensated" (per IRS regs) employees (catch-up contribs will not get refunded, even if normal contribs do...!). And like Instigator said, always make sure you contribute enough to max out your employer match - that's free money to you, don't leave it on the table...
 

Your ad here

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401K you need a sponsor. That's why you find 401K associated with an employer. If you dont have a sponsor it's not called a 401K, it's called an individual retirement account, AKA IRA. They are the same thing but just a different name depending on sponsor status. 401K you can contribute pre tax or post tax. IRA for the most part is post tax contributions. You should be able convert no problems but only need to based on employment.
My advice to everyone is start a 401K if your employer offers it or an IRA, like last week. Going on 10 years with mine. Just keep a monthly contribution going into it and it will have good growth. My contributions are automatically deducted each month and has been the best savings account.
 

Flatsix66

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Pre-tax 401k is great but is taxed as ordinary income when taking it out. No free ride with Uncle Sam, he wants that tax money at some point. At age 72 you need to start taking it out as required minimum distributions RMD, big penalty if you do not (like 50%!). Its sort of a time bomb because its taxed as ordinary income and launches you into a higher tax bracket if you have big pre-tax savings. Medicare costs are affected as well as other benefits if you show a high income after 65, so it's beneficial to have a low reported income. Converting your pretax into ROTH is a great strategy if you are or will be in a lower tax bracket, and convert up to the top of a low bracket. It may not make sense to convert if you are at the top tax bracket now at 65 and think you will be until 72. Just don't forget to take your RMDs on time!
 

Flatsix66

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There is a ton of misinformation on here. I do this for a living, 19 years deep.
This! Talk to a pro. Get a professional plan for your situation. Lots of money at stake at this point in your life, don't give the government a big tip they don't deserve.
 

WildHorses24

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There is a ton of misinformation on here. I do this for a living, 19 years deep.
I've also been working in this space 23 yrs, are you surprised with this forum? Sad part is, there are some really intelligent members in all fields who give advice then immediately disproven by our resident "experts" !

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sintax

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I've also been working in this space 23 yrs, are you surprised with this forum? Sad part is, there are some really intelligent members in all fields who give advice then immediately disproven by our resident "experts" !

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yup, and it causes the experts to keep their mouths shut next time a real question pops up. It kinda sucks for the people who actually value the infos.
 

SKIDMARC

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You can also do a backdoor Roth if you are over the limits too.
Good employers offer a tradition 401K as well as a Roth 401K.
Major differences between 401K and IRAs are the contribution limits.
401K limits are something like 19,000 and 26500.00 if your over 50 years old while IRA limits are 6000 and 7500.00 if your over 50 years old.
One should always contribute enough to traditional 401K to get any match offered and then max out the Roth 401K option. Then add a Roth IRA whenever possible. If over 50 years old you can do traditional 401K for say 4% to get the company match and the the remaining 22,500.00 in Roth 401K for a total of 30,500.00 employee and employer combined total plus another 7500.00 in Roth IRA. That's 38,000.00 per person per year of you can swing it. Best part is that 30,000.00 of it plusbits earnings are tax free after the contribution.
That way when you retire the only taxes you will have to pay is on a portion of your Social Security and whatever is withdrawn from traditional 401K. All withdrawals from any type Roth account are tax free.
I can't wait to give the F U to the tax man when we retire.

You are correct about the back door Roth if you make to much. Thats what my accountant told me at least. But there is a 6k max per person, 12k if you married.
 

Instigator

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You are correct about the back door Roth if you make to much. Thats what my accountant told me at least. But there is a 6k max per person, 12k if you married.
unless your 50 or older then you get a 1500.00 per person catchup.
 

DILLIGAF

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nope... I watched too much american greed on tv... fuc them crooks...including unions
my guy has been with me for 30 years. You would not try to do surgery on yourself, right?

whatever works for ya though
 

WildHorses24

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unless your 50 or older then you get a 1500.00 per person catchup.
Or $1000....

If anyone is following this thread looking for advice, I'd say the only solid thing I've heard so far is "call a professional". First be clear on what you're trying to achieve and between your CPA and CFP come up with a plan.

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Havasu blue label

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The average age of a financial advisor is 75 and still working they hand out great advice but why are they still working at eighty .
 

Halvecto

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But if you make too much money, you cant contribute at all...
I max out my 401K, but make too much for the Roth.
Roth Conversions don't have any income limitations. Just the Roth Contributions. Your company 401k impacts the "deductibility" of a Traditional IRA contribution, but not the possibility. The deduction amount, if any, is "phased-out" by income when your employer has a 401k or other sponsored Retirement Plan. But non-deductible contributions to Trad IRA are not disallowed, except by normal amount limits. Don't forget, even if wife is not working, you can do spousal Trad IRA for her (same deductibility rules if filing joint), then convert to Roth IRA. Kids too (if they have income).
 
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WildHorses24

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The average age of a financial advisor is 75 and still working they hand out great advice but why are they still working at eighty .
Interesting RDP stats again, where are you finding these numbers?

I'm not 75, shit I'm almost half that! clients only live, on average, 7 years after retirement. Most will argue, without purpose you parish. Once you figure out you're working your ass off JUST to retire, you've wasted your life. I personally don't plan on ever retiring, why would I? This business is the best annuity I could ever invest in. I'm living my "golden years" now with my kids, I'll work when I'm old and have nothing else to do.

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2FORCEFULL

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my guy has been with me for 30 years. You would not try to do surgery on yourself, right?

whatever works for ya though
but I don't need surgery...I own a milk cow business, building and every thing inside paid for, and multiple re deals that pay monthly comerical rental thats 10k per mp. and a house rental, I have brand new rv garage home in havasu paid for and one in vegas....... now here's the bad new... I'm sliding right under the 37% bracket... any withdrawals from a 401k will be horrible... I don't have a 401k.... my with does, it was packet to the max for 40 yrs... so about 1.3m as it sits.... she don't have to with draw till 2032.. she get a big retirement from the gas company where she worked for 38 yrs, she finally retired...next year I will for sure be in the 37% tax bracket.... more my question was if you start putting some in a roth, when the kids get the money it's tax free???? right???taking money out of 401k would be at 37% tax,... so my thought is to just let it sit....???? right or wrong.... but, the last thing I would pay some one to do with "MY" money is tell me what to do with it... starting from a kid on welfare and only going to the 9th grade, I think I did all right.... I had a fin. advisor tell me that I should put a mortage on my comerical and home property and put the money to work.... that was around 2006 or 7.....Next time I saw him he was renting a house... his got repoed...
 
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