Today we are answering your questions about retirement accounts. We discuss SEP IRAs, Roth IRAs versus traditional, 403(b) versus 457(b) and more. We also answer some questions about pregnancy and healthcare and comparing safer investments. We have three guests on today from one of our recommended financial advisors, Personal Choice Financial Advisors. They will tackle a few of your questions to help you get a sense of who they are.
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00:00 Comparing Retirement Accounts
01:37 WCI CON 2023
04:57 Personal Choice Financial Advisors
08:55 403(b) vs. 457(b)
14:26 W-2 vs. 1099
19:13 Roth vs. Traditional
25:17 Backdoor Roth IRA
30:38 Roth Conversions
35:10 HSA Reimbursements
37:58 CD Rates vs. US Treasury Rates
40:34 Wrap-Up…(read more)
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19:20 To the caller:
#1: $1 to Roth costs $1 in income PLUS the cost of taxes. $1 to traditional costs $1 including the cost of tax. So if the limits are an issue or, in the case of very high net worth, there is no effective tax arbitrage, you are effectively saving more of your income with Roth.
No tax arbitrage would exist if you have so much money that in retirement you will still have significant income in the top tax bracket, or if the account saving limits are a pretty small portion of your total savings
#2: Therefore, if you have exceptionally high savings (probably greater than $500k/year) Roth is advantageous because you effectively get more money in the tax-advantaged account – the saved amount after taxes paid (Roth) represents more money than the saved amount before taxes paid (traditional)
For most merely high income people, the advantage of the tax break is huge and makes traditional the better choice in peak earning years.