#Backdoor Roth IRA

[kc22invesmentsblog]

Exploring Roth IRA Accounts: Tax-Advantaged Investing for Retirement

Written by Delvin As you plan for your retirement, it’s crucial to consider different investment options that can help you grow your savings while enjoying tax advantages. One such option is the Roth Individual Retirement Account (IRA). In this blog post, we’ll explore the features, benefits, and considerations of Roth IRA accounts, empowering you to make informed decisions about your retirement…

[facts4u2know]

Retire Rich with a Roth

2/18/24

To be rich in retirement, it does not take a large amount of money invested in a Roth IRA, but it does take a lot of time. The key is investing as early in your life as possible, to benefit from your investment compounding over time.

Over 200 years of investing history shows that over the average lifetime-long period the US stock market has had an average annual total return of about 10%, with an inflation-adjusted return of about 7%. With a 10% annual return, your investment will double about every 7 years; with a 7% annual return it will double every 10 years.

For a young person with earned income who wants to invest in a Roth IRA. Investing has never been cheaper or simpler – That person can invest as much as $7,000 this year in a broad-based equity, e.g. the S&P 500, in a Roth IRA – and then forget about it. That single $7,000 investment will have accumulated to more than $1 million in 52 years! Easy peasy. Rich enough? Perhaps not.

The million-dollar portfolio is nominal 2024 dollars, which will have only a fraction of buying power in 50 years. With an inflation-adjusted annual return of 7%, the single $7,000 investment will accumulate to only $256,000 in 50 years, which nevertheless is 32 times the single original investment. To become even richer all you must do is max out your Roth IRA each year for a few years.

For 2024, only earned incomes of less $146,000 allow a single tax-filer to fully fund a Roth IRA. If your income is too high to fund a Roth IRA you have the option of contributing to a Traditional IRA and at some time in the future converting that to a Roth IRA – this is known as a “Backdoor Roth.” In fact, high-earning individuals may be better off funding a Traditional IRA than a Roth because they will lower their tax rate but be aware that over long periods of time the tax paid when drawing down may be prohibitive. Either way, you can’t beat a Roth, which can compound tax-free until your death, when it can be inherited by your heirs.

[femmefatalevibe]

Femme Fatale Guide: How To Master Your Money & Tips On Financial Literacy

Understanding and taking control of your finances improves your quality of life in many ways. Making strides toward better financial literacy can save you a lot of stress, unnecessary fees and helps you play a more active role in taking control over this aspect of adulthood. Once you understand the game of money, saving, and investing, it becomes infinitely simpler to devise a plan to set yourself up for a more financially-free future. Here are some practical tips to keep your finances streamlined, secure, and systemized to help you gain more financial literacy and win in this area of life.

Overview:

Track Your Income & Expenses

Set Financial Goals & Realistic Limitations

Invest Higher-Quality Items To Save Later

Educate Yourself On Different Types of Banking & Investment Accounts

Establish Credit, But Know Yourself

Create An Emergency Fund

Leverage Credit Card Benefits

Understand The Power of A Roth IRA (or Backdoor Roth IRA) & HSA

Automate Whenever Possible

Get Familiar With Taxes & Write-offs

Stay Informed About Employer Benefits

Purchase Seasonally & With Discount Codes (When Available)

Protect Yourself

Read Books

Seek Expert Advice

TIPS ON MASTERING FINANCIAL LITERACY:

Track Your Income & Expenses: Always have a record of all of the money going in and out of your accounts. Use the tool on your banking account app(s) to confirm your monthly income and expenses. Tools like Mint also are great to track your spending to see where every dollar is going all in one place. Aside from personal use, for small business owners, Quickbooks is my favorite invoicing and expense-tracking option. 

Set Financial Goals & Realistic Limitations: Once you know your exact monthly income, budget your essentials, savings, investments, and fun money accordingly. Make sure necessities like rent, food, health insurance, electricity, WiFi, toiletries, etc. are accounted for before anything else. Depending on your financial situation, experts (not me – I try to educate myself as best as I can, but am no expert!) recommend trying to save and invest between 15-30% of your pre-tax income. Give yourself the liberty to spend the rest (say 15-20%) of your income, so you don’t feel deprived and stay on track with your goals.  

Invest Higher-Quality Items To Save Later: Initially purchasing a higher-quality item often cuts your overall expenses in a certain area over the long run. (Ex: Well-made clothing, shoes, furniture, kitchen appliances, coffee maker, hair dryer, etc.). If you invest upfront on an item you regularly use, there’s a lower chance that it will deteriorate, rip, break, or otherwise become unusable for the next few years. When you opt for the cheaper option, this practice might save you a few bucks in the short term, but you will probably end up having to replace it a few times over time and spend more in the long run. This tip might seem counterintuitive to some, but it truly does save you a lot of money (and frustration). However, I will place a caveat here and say that this advice comes from a place of privilege. Never purchase something you can’t afford. If you have the means, spend a bit more upfront - it is better for your future wallet, allows you to indulge in a better quality of life, and helps you let go of any scarcity mindset/financial limiting beliefs. 

Educate Yourself On The Different Types of Banking & Investment Accounts: Know the differences between and the use purpose of different accounts: Checking, Savings, CDs, 401K, Roth IRA, HSA, etc. Always opt for a high-yield savings account option to help preserve your money’s value over time with rising living costs and inflation. 

Establish Credit, But Know Yourself: Your credit score is like your adult report card. It’s essential for so many aspects of life, like renting or buying a home, insurance, cell phone plans, etc., so it’s important to start building your credit as early as you can. However, if you know you’re the type of person to overspend with a credit card, look into secured credit card options (you deposit the money that acts as a credit limit, so it’s like a debit card with credit-building benefits). 

Create An Emergency Fund: Pay yourself first. Have between 3-12 months of expenses available in a high-yield savings account at all times. If you have a family or are self-employed, aim for 6-12 months of necessary savings to stay sane. Saving this amount of money takes time. Be patient, and cut back on frivolous expenses if needed for the short term. 

Leverage Credit Card Benefits: If you have enough self-control, always use a credit card instead of a debit card – but spend in the same way you would as though the money is coming directly out of your bank account. This gives you additional flight and other purchasing perks, such as cashback and exclusive discounts. Using a credit card provides additional security, too.

Understand The Power of A Roth IRA (or Backdoor Roth IRA, depending on your income) & HSA: Compound interest is your best friend financially. Depending on your income, invest as much as you can into a Roth IRA account or set up a backdoor Roth IRA through your brokerage firm (I use Vanguard!). HSA (Health Saving Accounts) accounts offer so many benefits – they can serve as a tax write-off, lower your overall healthcare costs, and be leveraged to use as an additional retirement investment account, too (I use Fidelity). 

Automate Whenever Possible: Automate a portion of your paycheck to savings and your investments, so you never see this money. Pay yourself first before spending (on anything but necessities). 

Get Familiar With Taxes & Write-offs: This mainly applies to anyone self-employed or a small business owner (been in the game for 5 years!). However, this point can also potentially be beneficial for students who can leverage an education credit for tax purposes. Explore all of your options to see what write-offs are available in your specific situation. Understand how your income and expenses influence your tax bracket. Investing in a CPA can save you a considerable amount of money and all of your sanity if you’re not a salaried employee. Look over the standardized section C document, and speak with a professional to help maximize your write-off potential (legally and honestly, of course). My CPA is my lifeline! 

Stay Informed About Employer Benefits: Always maximize your 401K match (whatever percentage that is at your company), any wellness perks (like a gym membership or massage credit), or any meals and car services credits for late nights/work trips. 

Purchase Seasonally & With Discount Codes (When Available): Try to purchase items off-season when you can (e.g. purchase classic winter closet staples in the summer when they’re on sale). Utilize plug-ins like Honey or Cently on your browser to have discount codes for any site readily available. 

Protect Yourself: Stay on top of fraud alerts. Freeze your credit bureau accounts if necessary. 

Read Books: Educate yourself on saving, investing, budgeting, building a business, etc. See the ‘Finance’ section of my Femme Fatale Booklist for some recommendations. I also love Graham Stephan’s Youtube channel – his videos are highly useful and practical for beginners in this life arena! 

Seek Expert Advice: Use licensed professionals (CPAs, brokerage firms, your bank, etc.) as a resource, too, for your personal goals. 

This is a lot to take in, so try to implement one action item (or a few) at a time, so you can work towards your goals without getting overwhelmed. Also, for reference, I’m in the United States, so all of these tips are focused on how the system works in my country - if you know of any international equivalents, feel free to drop them in the comments to guide others.

Hope this helps xx 

[financeprincess]

advice for people just wanting to be educated in the finance field?

I would start dipping your toe in the finance sections of reputable sources (i.e. Financial Times, Wall Street Journal, Harvard business review, MarketWatch, etc.) and start researching terms and companies you don’t know. I treat myself with a Bloomberg Businessweek subscription sent to my home because I love their design team and it’s actually very informative. You can also sign up for the Morning Brew finance newsletter, it’s free and I read it every morning to get a brief overview of what’s going on. Even just being informed of current events is helpful in learning about finance because all major events effect the market and businesses. Look at stock performance charts. Learn about different types of investment accounts and different kinds of investments. There are a lot of really great courses on platforms like Coursera as well, I just took one called Private Equity & Venture Capital from Università Bocconi. Flirt with equity crowdfunding platforms (I accidentally made a lot of money on one of these as an early investor with less than $1k). If you live in the US start looking into personal and business tax deductions. Even credit card rewards can actually get you a lot, I’ve gotten free hotel rooms and free flights from money I would have spent anyway. Investments also mean more than just individual stocks: could be index funds, mutual funds, bonds, CDs, REITs, forex, precious gems & metals, real estate, even some designer goods retain and increase in value if bought strategically and handled correctly. Even just having the fundamentals of a maxed out retirement account (a Roth IRA or a backdoor Roth IRA is my personal preference) full of index funds and mutual funds that are balanced well, a fully funded emergency fund of 3-12 months personal expenses, any debt above 7% interest paid off, and sinking funds for various expenses automatically set up in a high yield savings account will have you very well off. When you have a foundation like that you have the breathing room to change careers, take time off, buy investment properties, invest in volatile but potentially profitable ventures, start businesses, and set up additional streams of income.

[no-psi-nan]

Wish Akechi was here to explain IRAs and 401ks to me 😔 girl help wtf is a mega backdoor Roth, it sounds like a fucking booby trap hsfjdlshfks

[tfpplatform]

What To Know About The Mega Backdoor Roth IRA Story

[mccareer]

Finance Friday Articles

24 Rules for 2024 2023: It Was a Good Year 2023 reading list: From 60/40 to securities lending From downturn to upswing: Strong fourth-quarter returns in stocks and bonds Investing in Middle Age New military child care benefit to kick in starting January 1 Restoring the Balance Between Savers and Borrowers Tax-Loss Harvesting Pairs and Partners The Backdoor Roth IRA When Life Is in Flux…

[that-is-just-so-typically-me]

Things That Happened This Year That I am Especially Grateful For

In no particular order:

- Fought my way through a rough senior year and graduated (Summa cum laude! Neat!)

- Went to a new continent and experienced a change in my world view I never knew possible

- Got around three different countries where the official languages weren’t English for two weeks, a lot of it by myself

- Was brave enough to date someone for a little while, ended it mutually and amicably, and learned a lot about myself from the experience

- Started my first professional job

- Learned how to perform more auto repairs like removing and installing a 12V battery and replacing audio parts.

- Had an entire summer of absolutely indescribable sex with someone who understood and complemented me sexually in a way I didn’t realize was possible

- Learned how to solder semiconductor chips

- Created a respectable bedtime routine and started sleeping somewhat regularly (if not always well, but still!)

- Reconnected with many old friends and deepened some of my friendships to the best they’ve been since well before the pandemic and felt my heart spring to life in ways I’d forgotten it could feel

- Bought and sold stock, and started a 401k, a Roth IRA, and an HYSA (all by teaching myself!!)

- Volunteered in my community for the first time in ages

- Took my first pole-dancing classes

- Began the necessary first steps for my plan to move to the PNW in the next 2-3 years!! Ahh!!

- Began a regular exercise routine and regained a lot of the strength and flexibility I lost while grinding myself into the dirt working three jobs and attending school last year

- Made massive improvements on my lifelong forward-head posture (and my back now hurts less!!)

- Read six entire books (given how bad my brain fog has been, it’s miraculous for me)

- Started making chainmail and cross-stitching while watching TV as a way to phase it from just a numbing experience and backdoor my way to more creativity and getting my brain the healing benefits of “flow” play activities in my downtime

- Actively worked on myself and saw measurable changes in so many small ways, like listening better and learning how to better let things go

- Started realizing how kind of wise and bright and capable I think I actually am after all

Less Grateful for But Feeling Proud About Nonetheless

- De-escalated a domestic violence incident at my work

- Said goodbye to my beloved animal companion who has been with me since only a few days after my ex left me

- Coped through the death of my friend and mentor

- Set hard but necessary and self-loving boundaries

- Did not self-harm with razors once

- Survived some of the most relentless and powerful body image issues of my life (still in the thick of it but not giving up yet)

- Showed up for my friends in all of my imperfections even when it was frightening to show up with all I am when I am not at 100%

Grateful to have made it this far, with all of the good and the bad and everything in-between. These things might be so small to some but I am so proud of myself and so grateful for the many things and people I know I am so wildly lucky to have in my life. 💚

[shawntsawyer]

Tax Planning Services Texas, Shawn T. Sawyer CPA

Shawn T. Sawyer offers premier Tax Planning Services in Texas, providing individuals and businesses with strategic financial guidance. With a distinguished track record in the field of taxation, Shawn's expertise and commitment to excellence set him apart.

Our Texas-based tax planning services are tailored to your unique needs, aiming to optimize your financial outlook. We stay abreast of the ever-evolving tax laws and regulations, ensuring that you receive accurate, up-to-date advice. Whether you're seeking to minimize tax liabilities, plan for future financial milestones, or navigate complex tax scenarios, Shawn T. Sawyer is your trusted partner.

Choose us for meticulous tax planning services in Texas that pave the way for financial success and peace of mind. https://shawntsawyercpa.com/tax-planning-for-retirement-the-backdoor-roth-ira/

[femmefatalevibe]

I want to FIRE! Do you have any tips for that ;)

Hi love! While I'm not committed to their FIRE movement per se, here are some of my best tips to set yourself up for financial success:

Diligently keep track of your income and expenses. Audit every week or month to give yourself an honest look at your financial activity

Create financial goals and a realistic budget to help you achieve them

Prioritize saving up a 6-month emergency fund, maxing out your Roth IRA (or backdoor Roth IRA) and HSA account (if in the U.S.)

Purchase high-quality, timeless items that are built to last; It's cheaper in the long run to maintain items vs. constantly repurchasing items if you have the option

Create multiple sources of income: A 9-5 job, investments, side hustle, digital products, etc. Find ways to monetize activities you would enjoy doing without earning a dime

Focus on building a strong network and high-value, transferable skills: Even if you plan on working as an employee forever (no shame in that – it's a great way to get a steady paycheck), always strategize your career in a way that would leave you equipped to make it on your own. You need to be in the driver's seat of your career and financial life at all times

Make food at home, take care of your health, and take advantage of preventative medical testing, screenings, and procedures. Losing your health (physical and mental) is the easiest way to ruin your life satisfaction and your finances

Hope this helps xx

[financial-pilgrimage]

Mega Backdoor Roth IRA: How to Set Up Safely

[jacoblalonso89]

Mega Backdoor Roth IRA: Is It Really Mega?

[healthyhappyfunnysexywealthy]

How to Use the 'Backdoor' Strategy to Contribute to a Roth IRA

https://www.myfederalretirement.com/ira-backdoor-strategy/

[tfpplatform]

What is a The Mega Backdoor Roth IRA and How to Use It

[moreyouread]

The power of zero

- municipal bonds

- make sure tax deferred bucket and tax free bucket has a balance

- taxes are all time low 2018-2026

- fewer standard deductions in retirement so beware

- LIRPs are life insurance that is better than paying for long term care insurance, but it takes fees

- Pay from retirement plan directly to charities and don’t have to reach standard deduction through a QCD

Next steps

Balance your 401k traditional with Roth

Municipal bonds - $5k minimum, no tax on capital gains

Set up 529 - $17k max per person per year, no tax on capital gains

[DONE] Backdoor Roth IRA - $6.5k per person per year, no tax on capital gains

Harvest $3k in capital gain tax loss, reduce income today on taxes

[SET UP FOR 2024] HSA and HFSA - $3.8k max per year, pre tax dollars / tax deferred