nobody knows what future tax brackets will be, Ari. wonder how many folks regretted doing Roth conversions in previous years when the current tax law was enacted? just something to consider. keep up your great work!
Take or leave it, my opinion is to have a mix of 401k, Roth and after-tax...and don't forget your HSA. I'm currently retired and doing Roth conversions because I'm heavy in 401k. At a minimum start a Roth brokerage account so your investment options are wide open.
You are likely in a lower tax rate right now than you will be going forward. Why? 1) tax rates are likely to rise (yet we don't know that for sure), but 2) as you progress in your career you will make more money and move into higher tax brackets. Take advantage of the lower bracket you're in right now. But do contribute to your 457(B) at least up to the amount matched by your employer, as that is free money. But of course since I am an internet rando lol these are ideas to provoke thought and further research. 🙂
The problem with the qualified charitable distribution is that you paid social security taxes on the deferred income a long long time ago, which has compounded greatly over time. So there’s not really much benefit for QCD over regular donation.
Retired early at 55. I wanted to do Roth conversions but can’t for these main reasons. I’m withdrawing funds from my 401K for retirement and since I’m under 59 1/2. I need to keep the 401K so I can use the Rule of 55 to take out money penalty free, although I still need to pay taxes. If I convert a portion to a Roth, then that money is not touchable without penalty until I’m 59 1/2. Second, since I am a living off of the 401k, I really do not have money outside of it to pay the Roth conversion (for taxes) and I don’t want to take taxes from the conversion since it will take that much longer for it to recoup the taxes paid with any investment profit made. I wish I had viewed these videos well before retiring at 55 so that I could have saved money in a brokerage to pay for the Roth conversions, save cash for whatever emergency needs are in the future, and would have changed my 401K to a Roth 401K since my employer offered that. But I am retired and am happy so can’t really complain if I need to pay more in taxes
I'm doing rule of 55 myself. I'm 47 years old. I'm doing Roth 401k from ages 47 to ages 55, so I can get those Obamacare subsidies. at least you are spending down your pretax 401k, so your RMDs taxes won't be huge!
Blah, blah, blah. Give us numbers to better understand if we need to do conversions or not. $500k - no, $1 mil - maybe, $2 mil - yes. It’s that simple.
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Is 401k in anyway related to Roth or something?
I don’t really fit in!
What's the first step in determining the right Roth conversion plan?
I’d start here: th-cam.com/video/Ga___w7l534/w-d-xo.htmlsi=xnHQty9XKx2_dC8b
In order to determine a good Roth conversion, you can probably assess your current tax bracket and income.
Consider your retirement goals and timeline.
Also evaluate your current traditional IRA or 401(k) balance.
Determine your desired tax-free income in retirement and consider consulting a financial advisor.
I use online tools to model different conversion scenarios.
It assesses your ability to pay taxes on converted amounts.
How many are they?
Thanks Ari for another very informative video!
My pleasure!
nobody knows what future tax brackets will be, Ari. wonder how many folks regretted doing Roth conversions in previous years when the current tax law was enacted? just something to consider. keep up your great work!
All you can do is make the best decision with the information you have at the time.
What about just changing some contributions to a Roth 401k instead of a regular 401k? Have 15 years or so to work yet.
Take or leave it, my opinion is to have a mix of 401k, Roth and after-tax...and don't forget your HSA. I'm currently retired and doing Roth conversions because I'm heavy in 401k. At a minimum start a Roth brokerage account so your investment options are wide open.
30 year old here, on pace to retire at 55. Should I focus on maxing out my ROTH IRA and not my 457(B).
You are likely in a lower tax rate right now than you will be going forward. Why?
1) tax rates are likely to rise (yet we don't know that for sure), but 2) as you progress in your career you will make more money and move into higher tax brackets. Take advantage of the lower bracket you're in right now. But do contribute to your 457(B) at least up to the amount matched by your employer, as that is free money.
But of course since I am an internet rando lol these are ideas to provoke thought and further research. 🙂
@@go2gym much appreciation for your input! Thank you for taking the time to reply
The problem with the qualified charitable distribution is that you paid social security taxes on the deferred income a long long time ago, which has compounded greatly over time. So there’s not really much benefit for QCD over regular donation.
QCDs and DAFs (Donor Advised Funds) both have their place for specific plans - it comes down to timing of execution for optimal benefit.
9:20. Feel free to say “and you just inherited this account from
your parent”
Retired early at 55. I wanted to do Roth conversions but can’t for these main reasons. I’m withdrawing funds from my 401K for retirement and since I’m under 59 1/2. I need to keep the 401K so I can use the Rule of 55 to take out money penalty free, although I still need to pay taxes. If I convert a portion to a Roth, then that money is not touchable without penalty until I’m 59 1/2. Second, since I am a living off of the 401k, I really do not have money outside of it to pay the Roth conversion (for taxes) and I don’t want to take taxes from the conversion since it will take that much longer for it to recoup the taxes paid with any investment profit made. I wish I had viewed these videos well before retiring at 55 so that I could have saved money in a brokerage to pay for the Roth conversions, save cash for whatever emergency needs are in the future, and would have changed my 401K to a Roth 401K since my employer offered that. But I am retired and am happy so can’t really complain if I need to pay more in taxes
The good news is you are retired. Don’t beat yourself up. Always something we should have done, and I don’t let my clients have “headtrash”.
I'm doing rule of 55 myself. I'm 47 years old. I'm doing Roth 401k from ages 47 to ages 55, so I can get those Obamacare subsidies. at least you are spending down your pretax 401k, so your RMDs taxes won't be huge!
I'm surprised you didn't mention the Widow's Tax Trap in regard to RMDs with implication of a Roth Conversion plan.
I'll surely make a video about it in future.
She or he, that's it.
Blah, blah, blah. Give us numbers to better understand if we need to do conversions or not. $500k - no, $1 mil - maybe, $2 mil - yes. It’s that simple.
You lost me at pronouns.