I think investors should always put their cash to work, especially In 2024, we'll start to see more market diversification. I'm hoping to invest about $350k of my savings in stocks against next year. Hope to make millions in 2025
Since risk is at an all-time high right now, perhaps you should be a little more patient and return when it has decreased. Alternatively, you can consult a trained financial expert for strategy.
Yes true, I have been in touch with a brokerage Advisor. With an initial starting reserve of $80k, my advisor chooses the entry and exit commands for my portfolio, which has grown to approximately $550k.
My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
If you are a high earner looking to lower tax now because with a traditional Roth assuming you will be in a lower tax bracket when you retire, what about if you make too much to get any tax benefits now for a traditional Roth?
Inherited IRAs are carved out largely because they remain titled in the original owner's name and I believe TIN. The actual inherited IRA should be titled something like, “John Doe (deceased June 2019) Inherited IRA FBO of Jane Doe, Beneficiary.
I do both, although I had to do a reverse rollover to clear out my IRA. Thankfully, I have a good 401k from my employer, and it has (basically) the same things I'd be putting money into it anyway - a series of Fidelity timed index funds, basically. My theory is that it's the money I save due to doing a standard 401k, as opposed to a Roth 401k - ie, about a 6k difference.
Since my wife and I are high income earners and we both participate in 401(k)s, our traditional IRA contributions are not tax deductible. So wouldn't we end up paying taxes on the contribution and on the Roth conversion?
You would be making a non-deductible contribution to your Traditional IRA. Meaning you do not deduct the contribution from your taxable income. On the conversion from your Traditional IRA to your ROTH IRA, the non-deductible contribution is already non-deductible , so you're good. You're paying income tax on the contribution the whole time, the one time. If you already have IRA funds though, that can be tricky, because of the pro rata rule they mentioned, where the conversion of non-deductible and tax-deferred funds have to be proportionate to the basis contributions up to the point of conversions. Investopedia has great resources for this stuff.
If the pro rata rule is going to affect you, I would think REALLY hard about whether doing anything with an IRA is worth it. You might be contributing too much.
Yeah, this is the scenario in which the backdoor Roth was developed. 1. You can do Roth conversions (from a Traditional IRA and into a Roth) anytime you want. Personally, when I was making less income (and had a lot of my investments in my IRA), this is what I did instead of contributing to a backdoor Roth - I'd spend my "investment" income every year converting ~40k or so into my Roth. (I had done the math, and determined that I would probably retire into the 24% tax bracket...so therefore a 24% conversion tax rate was an OK thing to do.) 2. The issue you're thinking of is the pro rata rule - which basically says "you pay taxes proportionally when you do a Roth conversion, based on how much non-taxed and taxed investments you have in your IRA." 3. So if you had 94k in pre-tax money in your IRA, and contributed 6k post-tax, and then did a Roth conversion on 6k, you wouldn't get to "choose" to convert that 6k in post tax. You'd have to convert ~5,7k in pre-tax (and thus pay taxes on it), and ~0.3k in post-tax money (and thus not pay taxes on it.) 3. However, if you don't have any money in your account to begin with, then adding in 6k of taxed income means the pro rata rule works in your favor: 100% of the money has already been taxed, so you don't pay any additional taxes. 4. Note that the Pro rata rule is calculated for the year, on December 31st - so you need to keep your account clean between the time you put the post-tax money in and do the conversion, and the end of the year. 5. Cleaning your account out beforehand is fine: just make sure you don't accidentally get any additional money into the account before January 1st. 6. Mainly I've been caught by clearing out my account, then adding in 6k, doing the conversion, and then receiving some late-breaking mutual fund dividends in the 4th quarter. (usually just a few hundred dollars, or something - you get the dividends based on how long you held the stock since the last payout, even if you've sold it between now and then.) It's not all that big a deal - assuming it's not too much, you can just do a Roth conversion on that money as well (and pay the taxes on it), and your account will be clean.
@@kevinschultz6091 Thank you so much. This is very helpful. I have a question that might seem a bit silly: I already have a balance in my Traditional IRA (which is tax-deferred). If I were to transfer $7,000 from my bank account (which is funded with after-tax salary) to a Roth IRA, how do Fidelity or the IRS know that this $7,000 is the amount that was already taxed? I’m concerned that I might end up being taxed twice.
Yes - I do this. a Roth 401k is held by your employer, while your Roth IRA is held by you. You get funds into a Roth IRA by doing Roth conversions on your Traditional IRA. You get money into your Traditional IRA either by adding in money directly, or else doing rollovers from your 401k. (If you roll over a Roth 401k, it goes directly into your Roth IRA, I believe.) Personally, I did a lot of standard Roth conversions about a decade ago, and so have a nice chunk of change in my Roth IRA. Once I got my current job, I did a reverse-rollover of my IRA, in order to clear out my IRA into my 401k, so that I could then start in on doing backdoor Roth conversions. (my tax rate was high enough that it didn't make sense to do any more conversions.) As such, "backdoor Roth" just refers to the process of 1. Zeroing out your IRA 2. contributing the maximum amount you can (usually 6k or so) of post-tax income into the IRA, and then 3. Doing a Roth conversion into your Roth IRA. 4. (And then make sure you don't have any non-tax money in the account for the rest of the year.) As discussed above, you can do (regular) Roth conversions into your Roth IRA any time you have money in your traditional IRA account - it's just that there are a series of rules that let you do a Roth conversion with no additional taxes, if you meet the above criteria.
Can low income people utilize the backdoor and megabackdoor? Also can this strategy be used to surpass the 6500 limit in a single year assuming the Roth IRA is already maxed out for the year?
Wouldn’t make sense to do regular back door unless you make over the Roth IRA income limits. Mega back door is actually completely different. Your job has to allow after tax contributions to your 401k. Those contributions can then be rolled over to your Roth IRA with a limit of 66k. My employer does not allow after tax (different from Roth contributions) so I can’t take advantage of mega back door. Always consult your tax professional as well!
The 6500 contribution limit is amongst all IRAs, ROTH or Traditional. If you're low-income, you should be able to just contribute to your ROTH IRA directly. If you have Traditional funds from a previous 401(k), other employer plan, or some Traditional IRA that you've contributed before, you can do conversions from Traditional to ROTH whenever you want and however much you want, you would just have to add it to your taxable income for the year.
As others have said - you can use a MBR if your employer allows it in the 401k; personally, I have a check button on my Fidelity page to use it, and then I add whatever percentage I want in another form. That being said - if you're low-income, you're probably best served just using the Roth option in your 401k (assuming you have that option), plus maxing out the 6.5k Roth contribution. If you're hyper-saving, it's probably still a better idea to use the 401k+roth option, as it's easier to deal with and requires less moving parts. Once you've maxed THAT out, and you still have some savings left over? Sure, use that MBR option. That does mean you're probably saving in the 50% range or more, though. However - I tend to treat the Roth, backdoor Roth, and MBR as something you use before you use a traditional brokerage account. Assuming you're investing for retirement, though - if you're doing a mid-range saving plan, such as saving up for a down payment on a house in 5 years or something, then yeah: use a brokerage. But for retirement? Max out the 401k/Roth/Backdoor Roth/MBR first, THEN use a brokerage.
@@_Maxitoyes, I'm aware of direct contribution. I just wanted some confirmation on the indirect side for people who can do directly who have maxed out their direct already. Based on what you've said, this means people who already maxed out their direct contribution can transfer their 401k or whatever into their Roth IRA (assuming their pre tax account allows the move) which will theoretically allow the person to inject more than the annual roth ira limit in a single year. (This was the main intent of my question). Edit: I am aware that the transferred funds will be taxed on.
For the backdoor Roth IRA. For someone who contributed the max to their traditional IRA and does not take the tax deduction. Is that money that was intended for tax deduction used to pay the taxes when rolling over the funds from traditional to Roth?
Generally speaking, yes - ie. 1. Contribute to the traditional IRA with post-tax money. 2. Immediately convert that to your Roth IRA. 3. At the end of the year, DON'T claim a tax deduction on the money you put into the IRA. 4. Note that you need to be aware of the pro rata rule - which basically says that the money in your IRA gets converted propotionally pre- and post-tax. So if you had (say) 94k pre-tax in your IRA, contributed 6k post-tax, and then converted 6k, you wouldn't be able to do it fully tax-free: you'd have to pay taxes on ~5.7k (94%), and not pay taxes on 0.3k (6%). 5. Also, the pro rata rule is judged at the end of the year: so you'll need to keep your IRA zeroed out (once you do the Conversion) until January 1st. 6. That rule above is the reason backdoor Roths are a bit more complex - you need to ensure that you don't have any non-taxable money in the account before you do the conversion. 7. However, you can do just a straight Roth IRA conversion any time you want - you'll have to pay the taxes on it, but it's a decent way to clean out your Traditional IRA if you don't have too much money in there. 8. If you want to clear out your traditional IRA without paying for a full Roth conversion, you can do a reverse-rollover, which is basically taking all of your IRA funds and putting them into your current employer's 401k. This is fine if you HAVE a 401k, and if it has decent options in it. If you don't have a 401k, or if the options are bad (ie, no timed index funds, high fees, etc.), it might be a better idea just to leave your IRA alone.
However, let's say you have 10k in your IRA, untaxed. You add 6k in, post-tax. In this scenario, you can do a Roth conversion on the full 16k; you'll just have to pay the conversion tax on the 10k bit. The whole idea of a "pure backdoor Roth" is just a few different rules about 1. contributions (if you're above the contribution limit, you can still contribute 6k a year, post-tax) and 2. conversions (the pro rata rule says you have to convert pre- and post- tax money proportionally) which 3. come together to make the backdoor Roth (if you dump 6k post-tax into an empty IRA account, convert it, and keep it empty until the end of the year, you won't have to pay any additional tax.) If you're beneath the post-tax contribution limit, and you don't have a 401k, you can still do a backdoor Roth - but you can use your full contribution amount if you want to. In that scenario, it's not even a "backdoor" Roth - it's just "doing a conversion every year on your IRA contribution."
FOO is for everyone. The 25% is a goal to strive and work towards! Incrementally add a percent every year once you’re ready for step 6. It also includes employer match so if you’re fortunate enough to have one that helps a ton. Keep your head up you got this!!
Median income in my state is 84k. As a single man with no debt aside from my mortgage, I had no problems saving 20k a year when I had the median income. It was basically "max your your 401k" - not even that, if you get matching funds. Now, you may have other issues, such as a larger family, more debt, or a higher-cost of living area. However, to say that it's impossible on a median income? Nah.
I do 38k to Roth every year. 8k individual Roth plus 30.5k into Roth 401k, both include catch up contributions In addition one can convert traditional 401k to Roth 401k. Ones growth will always outweigh contributions. Which one do you want to pay taxes on?
Roth accounts are probably KEEPING YOU POOR. Learn how to dodge the taxes you defer later, don't just give up and pay taxes on your retirement savings.
@@lianatrevino1848 the deferring is just the pre-tax contribution. To avoid ever paying it, you have to control your future tax bracket. Basically, the object of the game is to have to distribute as little of that account as possible after deductions. Those deductions vary from person to person, but I'm in real estate and will probably borrow against my properties to keep from taking from my tax-deferred retirement accounts.
@@lianatrevino1848 - Well, the non-questionable way would be to max out your 401k, then do Roth conversions at a later date when your tax bracket is lower....which is one of the options the Money Guy show recommends, if it matches up with your lifestyle. (Also why they recommend folks in the 32% tax bracket do regular 401k - the savings is enough that if you're doing Roth conversions at a later date, it's worth it. It's assumed you're using the 6k or so in savings to max out your backdoor Roth, or something similar, though.)
I think investors should always put their cash to work, especially In 2024, we'll start to see more market diversification. I'm hoping to invest about $350k of my savings in stocks against next year. Hope to make millions in 2025
Since risk is at an all-time high right now, perhaps you should be a little more patient and return when it has decreased. Alternatively, you can consult a trained financial expert for strategy.
Yes true, I have been in touch with a brokerage Advisor. With an initial starting reserve of $80k, my advisor chooses the entry and exit commands for my portfolio, which has grown to approximately $550k.
I’ve been looking to switch to an advisor for a while now. Any help pointing me to who your advisor is?
My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
I searched for her full name online, found her page, and sent an email to schedule a meeting. Hopefully, she responds soon. Thank you
You earn money from 9 to 5, save from 5 to 9, but growing money never stops-it's 24/7.
Ss this comment cuz it’s so real💪💪
Stealing this sir. Great quote
Pin this!
I keep telling my wife that Backdoor is important for everyone
what if you don't qualify because your income is too low? i assume you can just do a normal IRA, so the backdoor is not for everyone then
@@harjimbaugh4234 You mean he can do normal Roth IRA, not just normal IRA.
@@harjimbaugh4234 You didn't get the joke :(
@@CampusMania You also didn't get the joke :(
@@BarSalad huh what joke?
If you are a high earner looking to lower tax now because with a traditional Roth assuming you will be in a lower tax bracket when you retire, what about if you make too much to get any tax benefits now for a traditional Roth?
Inherited IRAs are carved out largely because they remain titled in the original owner's name and I believe TIN. The actual inherited IRA should be titled something like, “John Doe (deceased June 2019) Inherited IRA FBO of Jane Doe, Beneficiary.
If I have an existing rollover ira, I won’t be able to do this?
I don't bother with the backdoor Roth, but I do use the megabackdoor (luckily for me, it's completely automated).
I do both, although I had to do a reverse rollover to clear out my IRA. Thankfully, I have a good 401k from my employer, and it has (basically) the same things I'd be putting money into it anyway - a series of Fidelity timed index funds, basically.
My theory is that it's the money I save due to doing a standard 401k, as opposed to a Roth 401k - ie, about a 6k difference.
Since my wife and I are high income earners and we both participate in 401(k)s, our traditional IRA contributions are not tax deductible. So wouldn't we end up paying taxes on the contribution and on the Roth conversion?
You would be making a non-deductible contribution to your Traditional IRA. Meaning you do not deduct the contribution from your taxable income. On the conversion from your Traditional IRA to your ROTH IRA, the non-deductible contribution is already non-deductible , so you're good. You're paying income tax on the contribution the whole time, the one time. If you already have IRA funds though, that can be tricky, because of the pro rata rule they mentioned, where the conversion of non-deductible and tax-deferred funds have to be proportionate to the basis contributions up to the point of conversions. Investopedia has great resources for this stuff.
If the pro rata rule is going to affect you, I would think REALLY hard about whether doing anything with an IRA is worth it. You might be contributing too much.
@@braceyourselvesfortruth2492 That makes sense. I'll just keep plugging away at the 401(k) and brokerage acct.
Yeah, this is the scenario in which the backdoor Roth was developed.
1. You can do Roth conversions (from a Traditional IRA and into a Roth) anytime you want. Personally, when I was making less income (and had a lot of my investments in my IRA), this is what I did instead of contributing to a backdoor Roth - I'd spend my "investment" income every year converting ~40k or so into my Roth. (I had done the math, and determined that I would probably retire into the 24% tax bracket...so therefore a 24% conversion tax rate was an OK thing to do.)
2. The issue you're thinking of is the pro rata rule - which basically says "you pay taxes proportionally when you do a Roth conversion, based on how much non-taxed and taxed investments you have in your IRA."
3. So if you had 94k in pre-tax money in your IRA, and contributed 6k post-tax, and then did a Roth conversion on 6k, you wouldn't get to "choose" to convert that 6k in post tax. You'd have to convert ~5,7k in pre-tax (and thus pay taxes on it), and ~0.3k in post-tax money (and thus not pay taxes on it.)
3. However, if you don't have any money in your account to begin with, then adding in 6k of taxed income means the pro rata rule works in your favor: 100% of the money has already been taxed, so you don't pay any additional taxes.
4. Note that the Pro rata rule is calculated for the year, on December 31st - so you need to keep your account clean between the time you put the post-tax money in and do the conversion, and the end of the year.
5. Cleaning your account out beforehand is fine: just make sure you don't accidentally get any additional money into the account before January 1st.
6. Mainly I've been caught by clearing out my account, then adding in 6k, doing the conversion, and then receiving some late-breaking mutual fund dividends in the 4th quarter. (usually just a few hundred dollars, or something - you get the dividends based on how long you held the stock since the last payout, even if you've sold it between now and then.) It's not all that big a deal - assuming it's not too much, you can just do a Roth conversion on that money as well (and pay the taxes on it), and your account will be clean.
@@kevinschultz6091 Thank you so much. This is very helpful. I have a question that might seem a bit silly: I already have a balance in my Traditional IRA (which is tax-deferred). If I were to transfer $7,000 from my bank account (which is funded with after-tax salary) to a Roth IRA, how do Fidelity or the IRS know that this $7,000 is the amount that was already taxed? I’m concerned that I might end up being taxed twice.
To get to 25% I have been maxing my 401K as well as doing MBDR. Any benefit to back door Roth vs MBDR? And is the MBDR subject to pro rata rules?
can you have roth 401k and roth IRA (backdoor in this case) at the same time?
Yes - I do this. a Roth 401k is held by your employer, while your Roth IRA is held by you. You get funds into a Roth IRA by doing Roth conversions on your Traditional IRA. You get money into your Traditional IRA either by adding in money directly, or else doing rollovers from your 401k. (If you roll over a Roth 401k, it goes directly into your Roth IRA, I believe.)
Personally, I did a lot of standard Roth conversions about a decade ago, and so have a nice chunk of change in my Roth IRA. Once I got my current job, I did a reverse-rollover of my IRA, in order to clear out my IRA into my 401k, so that I could then start in on doing backdoor Roth conversions. (my tax rate was high enough that it didn't make sense to do any more conversions.)
As such, "backdoor Roth" just refers to the process of
1. Zeroing out your IRA
2. contributing the maximum amount you can (usually 6k or so) of post-tax income into the IRA, and then
3. Doing a Roth conversion into your Roth IRA.
4. (And then make sure you don't have any non-tax money in the account for the rest of the year.)
As discussed above, you can do (regular) Roth conversions into your Roth IRA any time you have money in your traditional IRA account - it's just that there are a series of rules that let you do a Roth conversion with no additional taxes, if you meet the above criteria.
Why is someone typing into the mic!
thank you for confirming my sanity
Can low income people utilize the backdoor and megabackdoor?
Also can this strategy be used to surpass the 6500 limit in a single year assuming the Roth IRA is already maxed out for the year?
Wouldn’t make sense to do regular back door unless you make over the Roth IRA income limits.
Mega back door is actually completely different. Your job has to allow after tax contributions to your 401k. Those contributions can then be rolled over to your Roth IRA with a limit of 66k. My employer does not allow after tax (different from Roth contributions) so I can’t take advantage of mega back door. Always consult your tax professional as well!
The 6500 contribution limit is amongst all IRAs, ROTH or Traditional. If you're low-income, you should be able to just contribute to your ROTH IRA directly. If you have Traditional funds from a previous 401(k), other employer plan, or some Traditional IRA that you've contributed before, you can do conversions from Traditional to ROTH whenever you want and however much you want, you would just have to add it to your taxable income for the year.
As others have said - you can use a MBR if your employer allows it in the 401k; personally, I have a check button on my Fidelity page to use it, and then I add whatever percentage I want in another form.
That being said - if you're low-income, you're probably best served just using the Roth option in your 401k (assuming you have that option), plus maxing out the 6.5k Roth contribution. If you're hyper-saving, it's probably still a better idea to use the 401k+roth option, as it's easier to deal with and requires less moving parts.
Once you've maxed THAT out, and you still have some savings left over? Sure, use that MBR option. That does mean you're probably saving in the 50% range or more, though.
However - I tend to treat the Roth, backdoor Roth, and MBR as something you use before you use a traditional brokerage account. Assuming you're investing for retirement, though - if you're doing a mid-range saving plan, such as saving up for a down payment on a house in 5 years or something, then yeah: use a brokerage. But for retirement? Max out the 401k/Roth/Backdoor Roth/MBR first, THEN use a brokerage.
@@_Maxitoyes, I'm aware of direct contribution. I just wanted some confirmation on the indirect side for people who can do directly who have maxed out their direct already.
Based on what you've said, this means people who already maxed out their direct contribution can transfer their 401k or whatever into their Roth IRA (assuming their pre tax account allows the move) which will theoretically allow the person to inject more than the annual roth ira limit in a single year. (This was the main intent of my question).
Edit: I am aware that the transferred funds will be taxed on.
For the backdoor Roth IRA. For someone who contributed the max to their traditional IRA and does not take the tax deduction. Is that money that was intended for tax deduction used to pay the taxes when rolling over the funds from traditional to Roth?
Also, is that how the backdoor IRA must be done?: contribute to traditional ira, DO NOT take the tax deduction, then roll over to Roth IRA?
Generally speaking, yes - ie.
1. Contribute to the traditional IRA with post-tax money.
2. Immediately convert that to your Roth IRA.
3. At the end of the year, DON'T claim a tax deduction on the money you put into the IRA.
4. Note that you need to be aware of the pro rata rule - which basically says that the money in your IRA gets converted propotionally pre- and post-tax. So if you had (say) 94k pre-tax in your IRA, contributed 6k post-tax, and then converted 6k, you wouldn't be able to do it fully tax-free: you'd have to pay taxes on ~5.7k (94%), and not pay taxes on 0.3k (6%).
5. Also, the pro rata rule is judged at the end of the year: so you'll need to keep your IRA zeroed out (once you do the Conversion) until January 1st.
6. That rule above is the reason backdoor Roths are a bit more complex - you need to ensure that you don't have any non-taxable money in the account before you do the conversion.
7. However, you can do just a straight Roth IRA conversion any time you want - you'll have to pay the taxes on it, but it's a decent way to clean out your Traditional IRA if you don't have too much money in there.
8. If you want to clear out your traditional IRA without paying for a full Roth conversion, you can do a reverse-rollover, which is basically taking all of your IRA funds and putting them into your current employer's 401k. This is fine if you HAVE a 401k, and if it has decent options in it. If you don't have a 401k, or if the options are bad (ie, no timed index funds, high fees, etc.), it might be a better idea just to leave your IRA alone.
@@kevinschultz6091 and when converting, can you only convert the maximum that's allowed in the Roth IRA for that year?
However, let's say you have 10k in your IRA, untaxed. You add 6k in, post-tax. In this scenario, you can do a Roth conversion on the full 16k; you'll just have to pay the conversion tax on the 10k bit.
The whole idea of a "pure backdoor Roth" is just a few different rules about
1. contributions (if you're above the contribution limit, you can still contribute 6k a year, post-tax) and
2. conversions (the pro rata rule says you have to convert pre- and post- tax money proportionally) which
3. come together to make the backdoor Roth (if you dump 6k post-tax into an empty IRA account, convert it, and keep it empty until the end of the year, you won't have to pay any additional tax.)
If you're beneath the post-tax contribution limit, and you don't have a 401k, you can still do a backdoor Roth - but you can use your full contribution amount if you want to. In that scenario, it's not even a "backdoor" Roth - it's just "doing a conversion every year on your IRA contribution."
WHY IS THERE ALWAYS TYPING IN THE BACKGROUND?!!
Unfortunately their plan(s) are impossible to implement if your in the median income range. 25% savings when your scraping by.
Depends on your expenses. If your needs are only 50%, you got the other 50% to work with.
FOO is for everyone. The 25% is a goal to strive and work towards! Incrementally add a percent every year once you’re ready for step 6. It also includes employer match so if you’re fortunate enough to have one that helps a ton. Keep your head up you got this!!
Why watch the channel, and then complain about the advice. It’s just advice.
Median income in my state is 84k. As a single man with no debt aside from my mortgage, I had no problems saving 20k a year when I had the median income. It was basically "max your your 401k" - not even that, if you get matching funds.
Now, you may have other issues, such as a larger family, more debt, or a higher-cost of living area. However, to say that it's impossible on a median income? Nah.
I do 38k to Roth every year.
8k individual Roth plus 30.5k into Roth 401k, both include catch up contributions
In addition one can convert traditional 401k to Roth 401k.
Ones growth will always outweigh contributions. Which one do you want to pay taxes on?
I don't what this is but it sounds pretty dirty ( o.o)
Everyone should try it at least once in their life. 😂
LOL 😂
I wanna do this 😂 I'm brainstorming meme acct names to win a tumblr
Comment
Roth accounts are probably KEEPING YOU POOR. Learn how to dodge the taxes you defer later, don't just give up and pay taxes on your retirement savings.
So how do you defer the taxes later?
@@lianatrevino1848 the deferring is just the pre-tax contribution.
To avoid ever paying it, you have to control your future tax bracket. Basically, the object of the game is to have to distribute as little of that account as possible after deductions. Those deductions vary from person to person, but I'm in real estate and will probably borrow against my properties to keep from taking from my tax-deferred retirement accounts.
@@lianatrevino1848 - Well, the non-questionable way would be to max out your 401k, then do Roth conversions at a later date when your tax bracket is lower....which is one of the options the Money Guy show recommends, if it matches up with your lifestyle. (Also why they recommend folks in the 32% tax bracket do regular 401k - the savings is enough that if you're doing Roth conversions at a later date, it's worth it. It's assumed you're using the 6k or so in savings to max out your backdoor Roth, or something similar, though.)