How do you maximize the value you’re getting out of your 401(k), IRA or 457(b) plan from a tax standpoint today – and in the future? In today’s episode of the Retire With Purpose podcast, we discuss three misconceptions of tax-advantaged retirement accounts, as well as how a Roth can act similarly to a non-dividend paying stock. Join us as we explore:

* The difference between traditional Traditional and Roth contributions.
* How a Roth can be utilized within a traditional 401(k).
* Why you need to pay attention to RMD requirements for traditional retirement accounts.
* The tax impact of Roth contributions versus traditional account contributions.

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ABOUT CASEY WEADE:

Casey Weade is the CEO and Founder of Howard Bailey Financial. He graduated from Stetson University with a Bachelor’s degree in Finance, and is a CERTIFIED FINANCIAL PLANNER™ (CFP®), Retirement Income Certified Professional® (RICP®), Chartered Life Underwriter® (CLU®), as well as a certified Chartered Financial Consultant® (ChFC®). In addition, Casey is an Investment Advisor Representative (IAR), is licensed in life, accident, and health insurance; and, is also Long-Term Care Certified. When he isn’t helping others find financial freedom, Casey enjoys spending time with his wife and three children, as well as hunting, fishing and golfing.

ABOUT MARSHAL JOHNSON:

Marshal Johnson is the Vice President of Howard Bailey Financial. He graduated from Indiana University with a Bachelor’s degree in Business Administration and is a CERTIFIED FINANCIAL PLANNER™ (CFP®). Additionally, Marshal holds his Series 65 securities license, and is life, accident and health insurance licensed. When he isn’t developing purpose-based retirement strategies, Marshal enjoys spending time with his son, coaching baseball and playing the guitar.

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Our Retire With Purpose™ Framework starts with establishing your unique financial philosophy — the true meaning and purpose for your money in retirement. Through continued education, one-on-one meetings, and a comprehensive team planning approach, we have helped retirees across the country secure their financial futures.

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DISCLOSURE:
Investment Advisory Services may be offered through Howard Bailey Securities, LLC, a registered investment adviser. Working with Howard Bailey Securities, LLC, cannot guarantee investment success or that specific financial goals will be achieved. Job Optional was a #1 Amazon best seller in retirement planning on 7/2/19, and a Wall Street Journal eBook Best Seller on 8/9/19. For more information on professional designations, visit www.finra.org/investors/professional-designations….(read more)

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When it comes to retirement planning, there are two main types of 401(k)/IRA accounts: traditional and Roth. Each has its advantages and disadvantages, and both should be considered to determine which is the best fit for an individual’s financial needs. However, there are a number of myths surrounding these accounts that can be misleading and even detrimental to long-term financial planning. In this article, we will address some common myths about traditional and Roth 401(k)/IRA accounts.

Myth #1: Roth accounts are always better than traditional accounts.

While Roth accounts do offer some unique benefits, they may not be the best choice for everyone. One of the main advantages of Roth accounts is that they allow for tax-free withdrawals in retirement, which can be particularly helpful for those in a higher tax bracket. However, Roth accounts do require after-tax contributions, which may not be feasible for some people, especially those who need to lower their taxable income in the short term.

On the other hand, traditional accounts allow for pre-tax contributions, which can decrease an individual’s taxable income in the present while postponing taxes on withdrawals until retirement. This can be helpful for those who expect to be in a lower tax bracket in retirement than they are currently. Additionally, some employers may offer matching contributions for traditional accounts, which can add an additional benefit to this type of account.

Myth #2: It is always better to contribute the maximum amount to a retirement account.

While contributing the maximum amount to a retirement account may seem like the most logical option, it may not always be the best financial decision for every individual. It is important to consider an individual’s overall financial situation, including debt, emergency savings, and other expenses, before committing to maxing out a retirement account.

Additionally, some employers may offer a match on a certain percentage of an employee’s contribution, such as 50% up to a certain dollar amount. In these cases, it may be more beneficial to contribute enough to receive the full contribution match rather than going over the maximum contribution limit.

Myth #3: Social Security will be enough to cover all expenses in retirement.

Many people may believe that their Social Security benefits will be enough to cover all expenses in retirement. However, this may not always be the case. Social Security benefits are designed to replace only a portion of an individual’s pre-retirement income. This means that retirees may have to rely on other sources of income, such as retirement accounts, to cover additional expenses.

It is important for individuals to calculate their estimated Social Security benefits and factor in other sources of income in order to determine how much they will need to save for retirement. This will ensure that they have enough money to cover all expenses and maintain a comfortable standard of living.

In conclusion, there are many myths surrounding traditional and Roth 401(k)/IRA accounts. It is important for individuals to understand the benefits and drawbacks of each type of account and make an informed decision based on their unique financial situation. By avoiding these common myths, individuals can make smart decisions that will help ensure their financial security in retirement.