Today on Your Money, Your Wealth® podcast 328 with Joe Anderson, CFP® and Big Al Clopine, CPA: Roth 401(k) contributions and “Megatron” (er, mega backdoor) Roth contributions for highly compensated employees, and the Roth conversion strategy of filling the tax bracket. Plus, moving a pension to an investment plan, owning real estate in a self-directed IRA, paying off the mortgage vs. refinancing your house, spousal vs. survivor Social Security benefits, and rolling a whole life insurance policy to a variable annuity. Access the YMYW podcast show notes and Ask Joe & Al on air:

00:00 – Intro
01:13 – We Have $6M Retirement Savings and $475K Gross Income. Should We Contribute to Roth 401(k)? (Dan, NYC)
05:52 – Highly Compensated Employee “Megatron” Roth Contributions: Do These People Have Rocks in their Heads? (Nick, OH)
16:23 – Is Filling the Tax Bracket the Best Roth Conversion Strategy? (JR, Charlotte, NC)
27:30 – Should I Move My Pension to an Investment Plan? (Brandon, Ft Myers, FL)
36:43 – Is Rental Real Estate in a Self-Directed IRA a Good Idea? (Jim Santa Cruz, CA)
41:23 – Should We Refinance Our House? (Deborah, CA)
44:48 – Spouses Vs. Survivors Social Security Benefits (Dave, AZ)
53:33 – Should I Roll from a Whole Life Insurance Policy to a Low-Cost Variable Annuity? (Ajay)
57:13 – Limericks and Comments

Schedule a free assessment with one of our experienced financial professionals, either online, or at one of our many financial planning offices around the country:

Subscribe to our YouTube channel and stay tuned for the next episode of the Your Money, Your Wealth® TV show:

Subscribe to the YourMoney, Your Wealth® podcast:

IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, Inc. A Registered Investment Advisor.
• Pure Financial Advisors Inc. does not offer tax or legal advice. Consult with their tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

#RothConversions #MegaBackdoorRoth #RetirementPlanning…(read more)

LEARN MORE ABOUT: IRA Accounts

CONVERTING IRA TO GOLD: Gold IRA Account

CONVERTING IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

Should People in High Tax Brackets Save in Roth Retirement Accounts? – YMYW podcast 328

retirement planning can be a complex process, especially when it comes to deciding how to allocate your savings. Making sound financial decisions during your working years can significantly impact your retirement lifestyle. One question that often arises is whether people in high tax brackets should save in Roth retirement accounts. In their podcast episode 328, the team at Your Money’s Worth (YMYW) delves into this topic and provides valuable insights for individuals in such situations.

Roth retirement accounts, such as Roth IRAs and Roth 401(k)s, offer unique advantages that traditional retirement accounts don’t provide. Contributions to Roth accounts are made with after-tax dollars, meaning you have already paid taxes on the money you put in. In return, earnings and withdrawals in retirement are generally tax-free, as long as certain requirements are met.

For individuals in higher tax brackets, the conventional wisdom has often been to maximize contributions to traditional pre-tax retirement accounts to lower their taxable income. This strategy makes sense as it reduces your current tax liability and allows you to take advantage of potential tax savings in retirement when your income is expected to be lower.

However, the landscape has changed over the years, as tax rates fluctuate and individuals face uncertain tax environments. With tax rates at historic lows and the possibility of them rising in the future, the YMYW podcast team argues that prioritizing Roth contributions, even for high earners, can be a smart move.

One of the key factors to consider is the potential tax-free growth of investments in Roth accounts. By contributing to a Roth account, your money has the opportunity to grow tax-free over time. While traditional accounts may provide upfront tax savings, you will eventually have to pay taxes on both your contributions and earnings when you withdraw funds in retirement. By contrast, Roth accounts allow you to enjoy tax-free growth and tax-free withdrawals in retirement.

Additionally, there are no Required Minimum Distributions (RMDs) for Roth accounts during the owner’s lifetime, unlike traditional accounts where the government mandates minimum withdrawals after a certain age. This RMD exemption can offer additional flexibility and tax savings for high earners who may not need to tap into their retirement funds immediately.

The potential for tax diversification is another crucial aspect to consider. By having a mix of traditional and Roth retirement accounts, you create opportunities to manage your tax liability proactively. During retirement, you can strategize on which account to draw from to maximize tax efficiency. Accessing funds from different accounts can potentially help you control your taxable income, especially if you foresee fluctuating income needs throughout retirement.

However, it is important to note that Roth contributions are subject to certain income limitations. Individuals with high incomes may not be eligible to contribute directly to a Roth IRA. In such cases, you can explore backdoor Roth conversions, which involve making non-deductible contributions to a traditional IRA and then converting it to a Roth IRA.

In conclusion, the decision of whether people in high tax brackets should save in Roth retirement accounts is a nuanced one. Considering factors such as current and future tax rates, potential for tax diversification, and the ability to leverage tax-free growth and withdrawals, prioritizing Roth contributions can be a wise move. As always, it is crucial to consult with a financial advisor or tax professional who can provide personalized advice based on your unique circumstances.