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1) Google “fee-only financial adviser” or visit www.NAPFA.org (largest association of fee-only financial advisers). NOT an affiliate link
2) The first question to ask any financial adviser is, “Are you a fiduciary to me 100% of the time”. Get the answer in writing
3) Please note that some people call themselves “fee-based”. This is NOT the same as fee-only. Fee-only advisers have committed to being fiduciary to you 100% of the time.
4) Personally, I would only hire an adviser who is a fiduciary to me 100% of the time. This is not a suggestion on what you should do. Just sharing my personal preference.
⚠️ Azul’s “Scammer” Warning ➡ PLEASE READ! ⚠️
Be careful of scammers. In the comments section, I will NEVER ask you to contact me, offer any investment products, recommend a stock broker, or anything similar. Some scam bot commenters ‘ask’ for investment help, and later, other comment bots reply with “how great X idea/investment/person is” in the replies. These are scam threads. Do not fall for them.
🚨 MY VIDEOS ARE NOT FINANCIAL ADVICE (Disclaimer) 🚨
This information is only provided as an informational resource and should not be viewed as investment advice or recommendations. To get professional financial advice from a fee-only financial advisor near you, please visit www.napfa.org.
The decisions on how to invest, when to retire, and other financial planning topics are some of the most important financial decisions you will make in your life. I urge you to seek professional financial advice as you make this decision. Ideally, from a financial adviser, AND a CPA AND an attorney. Having the perspective of all three professions will help you make the right decision for you and your family.
This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and may NOT be suitable for all investors.
This information is NOT intended to, and should NOT, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, and/or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
Spoiler Alert: There are no “get rich” programs. Rather, just basic blocking & tackling and putting in time and care. Do your homework, choose wisely and (IMHO) work with experienced professionals who are fiduciary to you 100% of the time….(read more)
LEARN MORE ABOUT: IRA Accounts
TRANSFER IRA TO GOLD: Gold IRA Account
TRANSFER IRA TO SILVER: Silver IRA Account
REVEALED: Best Gold Backed IRA
The $27,000 Roth IRA Mistakes To Avoid
A Roth IRA can be a powerful tool for retirement savings, offering tax-free growth and withdrawals in retirement. However, it’s important to understand the rules and regulations surrounding this type of account in order to avoid costly mistakes. One mistake in particular could end up costing you $27,000 or more in penalties and taxes.
The mistake in question is failing to follow the rules surrounding Roth IRA contributions and withdrawals. Unlike traditional IRAs, contributions to a Roth IRA are made with after-tax dollars, meaning you won’t get a tax deduction for your contributions. However, the upside is that your withdrawals in retirement are tax-free.
One key rule to be aware of is the annual contribution limit. For 2021, the maximum contribution to a Roth IRA is $6,000 for those under age 50 and $7,000 for those 50 and older. If you contribute more than the allowed amount, you could face a 6% penalty on the excess contribution for each year it remains in the account.
Additionally, there are income limits for contributing to a Roth IRA. For 2021, individuals with a modified adjusted gross income (MAGI) of more than $140,000 and married couples filing jointly with a MAGI of more than $208,000 are not eligible to contribute to a Roth IRA. If you make contributions while exceeding these income limits, you could face penalties and taxes on the excess contributions.
Another common mistake is taking early withdrawals from a Roth IRA. While Roth IRAs offer more flexibility than traditional IRAs when it comes to withdrawals, there are still rules to follow. If you withdraw earnings from a Roth IRA before age 59 ½ and the account has been open for less than five years, you could face a 10% early withdrawal penalty, as well as owe taxes on the earnings.
To avoid these costly mistakes, it’s important to stay informed about the rules and regulations surrounding Roth IRAs. Be sure to stay within the contribution limits and income limits, and be mindful of the rules for early withdrawals. Consulting with a financial advisor or tax professional can also help ensure you’re making the most of your Roth IRA while avoiding potential penalties and taxes.
In conclusion, while a Roth IRA can be a valuable retirement savings tool, it’s crucial to understand the rules and regulations in order to avoid costly mistakes. Failing to follow the rules could result in penalties and taxes that could amount to $27,000 or more. By staying informed and seeking professional advice when needed, you can make the most of your Roth IRA and avoid these costly pitfalls.
Started a Roth IRA a bit over 2 yrs ago. The investment is different that IRA, also taken a beating too. Less than what I put in. We'll see. Longer term CDs are making more sense.
Azul my son stopped going to college. He started working. He has a nice sum in his 529. In 2024 he can withdraw from his 529 and roll the money over to a Roth IRA. He meets all the criteria to do it. The limit is 35K to roll over to the Roth IRA, yearly limits still apply. I wouldn't have had him open a Roth IRA without your suggestion, Thanks.
What is the $27k mistake?
Retired and Money , You have Money , all what You need to Retired Time ?
Hello From Finland / Helsinki.
#Retired4You
Thanks Azul, great content! Is there any chance you could give some reasons why (or why not) to have a trust in place vs a will? I know this isn't typically an advisor's job, however, I know most have experience in situations where a client did or didn't have one in place.
You didn't mention that we can't contribute more than we earn in a year. Gross?
Good points on the ROTH conversions! I would add that unlike a contribution, a conversion must be done before the end of the calendar year which it is being done and taxed on. Also if you want to make early year contributions, you are expected to pay estimated tax in the quarter that it or they (if you do multiple conversions) that they fall in. If it's done in the last quarter the the tax is not subject to be estimated. Aside from getting a penalty for withdrawals before 59 and a half, the ROTH has to be established for 5 years for it to be tax free.That 5 years is from when you first open the account, not after every contribution. However conversions do have an additional 5 year waiting period on earnings I believe. It might make sense to withdraw some money from the ROTH if you will be in a higher tax bracket due to RMD's which are based on tax deferred accounts (they could have been converted earlier if it made sense).That's another good reason to keep the ROTH account balanced.
This was excellent advice. I have both and didn’t realize I couldn’t contribute the max to both for years.
As a rule, always contribute the eligible amount to a Roth first if you are in any under 20% tax bracket. Once you get into the 20-30% brackets, it gets a lot more complicated to figure out if you should do a pretax vs Roth.
Somehow Roth accounts tend to be associated with the wealthy, but in reality they are almost always best for those of modest means.
Well done Azul. Love how simple you keep things.
Thank you for your advice! Your videos inspire me to become a volunteer financial coach to help people. So many people miss out because they do not know the basics of financial literacy.
I think if your tax rate will be LOWER after you retire then a pre-tax makes more sense and if it will be higher then the ROTH makes more sense. I have a mix of both.