How to get more into ROTH IRA
Dave Zoller, CFP®
00:00 – It’s not too late to boost your ROTH value
01:06 – Tax Time Bomb
01:37 – Quick refresher
03:38 – Pay more now for less tax later
04:44 – The decision to make now
05:27 – 5-Steps to decide if ROTH is right for you
07:03 – The Visual look at your timeline
07:55 – Example of a couple retiring early and implementing this strategy
10:42 – The few things we can control on
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When it comes to retirement planning, many people may feel like they are behind in saving for their future. Whether it’s due to late start, financial setbacks, or simply not being able to maximize their retirement contributions, it’s never too late to catch up. One strategy that can help boost retirement savings is the Roth IRA Max strategy.
A Roth IRA is a retirement account that allows individuals to contribute after-tax income, which can then grow tax-free and be withdrawn tax-free in retirement. This can be a powerful retirement income strategy for those who feel behind in their savings.
The Roth IRA Max strategy involves contributing the maximum amount allowed to a Roth IRA each year. In 2021 and 2022, the maximum contribution limit is $6,000 for individuals under the age of 50, and $7,000 for those 50 and over. By contributing the maximum amount, individuals can take advantage of the tax-free growth potential and create a more substantial nest egg for retirement.
For those who feel behind in their retirement savings, the Roth IRA Max strategy can be a game-changer. By consistently contributing the maximum amount each year, individuals can quickly catch up and build a significant retirement fund. Additionally, the tax-free withdrawals in retirement can provide a valuable source of income without the burden of taxes.
It’s important to note that not everyone is eligible to contribute to a Roth IRA. Individuals must meet certain income requirements to be eligible to contribute to a Roth IRA. Additionally, there are limits on who can contribute based on income. It’s important to consult with a financial advisor or tax professional to determine eligibility and the best strategy for maximizing retirement contributions.
In addition to maximizing contributions to a Roth IRA, individuals can also consider other retirement income strategies to catch up on savings. This may include maximizing contributions to employer-sponsored retirement plans, such as 401(k)s, and taking advantage of catch-up contributions for those 50 and over. Individuals can also consider working with a financial advisor to develop a comprehensive retirement savings plan that aligns with their long-term financial goals.
In conclusion, for those who feel behind in their retirement savings, the Roth IRA Max strategy can be an effective way to catch up. By contributing the maximum amount allowed each year, individuals can take advantage of the tax-free growth potential and build a more substantial nest egg for retirement. Combined with other retirement income strategies, the Roth IRA Max strategy can help individuals work towards a more secure financial future. It’s never too late to start saving for retirement, and the Roth IRA Max strategy is a powerful tool for those who want to boost their savings.
How do I reach out to get some help? I am a surgeon, at 72,have 2 pensions plus SS, still have one per diem and one locum job, and IT dinosaur.
It's funny how even when I was 35 I had it in my head that I was too old to contribute to a Roth IRA. Now that I'm 61, I'm having to pay more tax to do Roth conversions than if I had contributed to the Roth in earlier decades when I was making less. I use New Retirement, and I'm surprised their automatic Roth conversion wizard has an assumption not to start Roth conversions until retirement, but I've found I can lower lifetime taxes significantly by creating a Roth conversion plan manually in their money flows section, starting while I am still working.
Great information!
As always, appreciate the time you put in to bring us this content. Really great stuff. RE: assessing tax implications of TRAD vs ROTH 401k contributions: should one use their marginal rate or the net effective rate to compare? We are in the 22% bracket and fully fund TRAD 401k. Net rate in 2022 was 13.8% w/ 2023 shaping up the same. If we move to fund ROTH 401k for the remainder of 2023, we'd pay 22% on the ROTH dollars, but forecast our net rate would be ~15%. Which rate should be applied?
roth ladder for the WIN
great info! Thanks Dave!
Does your software account for the sunsetting of the TCJA in 2025? If so, what are your future tax rate forecasts?
Roth 401k is the biggest financial mistake I ever made! I was contributing to my 401k at work while my kids were in college. It didn't click with me until the 3rd year of the 6 years my kids were in college, that I should have been contributing to a roth instead of traditional, because with the tax credits I was getting for college expenses, my effective tax rate was extremely low! Glad it finally clicked!
i try to max out my ROTH IRA every year. Been doing it for 10 years. Unfortunately I only started it 12 years ago…in my 40s. So now I have to catch up with a 401k or just simply via brokerage
Great job
But not all money coming out of traditional is not actually taxed(the standard deduction especially before social security)
Time stamp 2:19
Lots of good stuff in here. Thanks.
Secure 2.0 is going to help out. Over a certain income level all 401k catch up contributions with be mandatory 401k Roth starting next year. Sorry if you'll be in the highest tax bracket you've ever been in or will ever be in.
Dolarize! I love made up words. I also appreciate education about Roth conversions. Thanks Dave.