⚠Correction⚠ The mandatory Roth catch up contribution for Highly Compensated Employees (HCEs) has been pushed to 2026. 🆕Our latest video takes a deeper dive on the Inherited IRA Rules🆕: ua-cam.com/video/sbTDF0Zogig/v-deo.html As always, all content on this channel is education and should not be taken as advice or recommendations.
I’ve been reading about it. It sounds like there’ll be more flexibility for catch-up contributions and some tax benefits, but it’s so much to take in. I’m worried I might miss something important.
One of the biggest problems people face is not adjusting their strategies when new rules come in. I made that mistake a few years back, and it cost me thousands in potential gains.
Agreed, I've always delegated my excesses to an advisor, since suffering major portfolio loss early 2020, amid covid outbreak. I'm now semi-retired and only work 7.5 hours a week, with barely 25% short of my $1m retirement goal after subsequent investments to date
Thanks for sharing your experience! I've been managing my portfolio myself, but it's not working out. Do you have any recommendations for a good investment advisor? I could really use some help
That’s impressive. I’m managing my accounts myself, but it feels overwhelming. I’ve got a decent nest egg, but I’m not sure if I’m optimizing my investments for retirement.
Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determines a lot of things, my parents both spent same number of years in the medical profession, my mom was investing through a financial advisor while my dad through the 401k. On retirement, my mom retired with about $5million, while my dad retired with roughly $3.8million.
You are right. I’m in my mid 50’s now, my wife and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with profits over the years, but at least I’m earning more. I’m making money even before retiring and my retirement funds has grown way more than it would have been with the 401k.
It’s unfortunate most people don’t have such information, I don’t really blame people who panic cos lack of information can be a big hurdle. I’ve been making more than $25k passively by just investing through an advisor, and I don’t have to do much work. It doesn’t matter if the economy is crashing, great CFA will always make good returns.
At 32, I'm diving into investing for the first time. I’ve started contributing to my 401K and opened a Roth IRA with automatic contributions. My main question is whether asset allocation is crucial at this stage or if I'm just overthinking as a beginner.
I completely agree-having a professional manage my investments has been invaluable. My job doesn’t allow time for in-depth stock analysis, so I entrusted an advisor with my portfolio. I’ve been fully invested since the COVID-19 outbreak, and I’m happy to say my portfolio has grown fivefold in just five years, reaching nearly $1 million.
Impressive gains! Who's guiding your investments? I’m excited to invest for my future retirement, but I'm unsure where to begin. Currently, I’m only contributing to my 401K through my employer, but the returns have been slow.
Rebecca Lynne Buie has consistently been my top recommendation. She’s widely recognized for her expertise in financial markets and has a strong track record. I highly recommend her.
Thank you for the recommendation. I was curious, so I looked up Rebecca Lynne Buie online. Her consulting page came up at the top, and I’ve scheduled a call. I've heard about advisors before, but none have looked as impressive as she does.
I just turned 47 and awfully late to investing with barely any portfolio except my 401k, I have a decent amount of cash saved up and with inflation currently soaring AGAIN, I’m getting worried about retirement, my intention is to retire at 55. How best do I maximize my savings of over $140k
Retirement is now more difficult than it was in the past. it's all about balancing your risk tolerance with your long-term goals. Maybe consider speaking to an advisor to help in diversifying your portfolio to spread out the risk.
Agreed, I've always delegated my excesses to an advisor, since suffering major portfolio loss early 2020, amid covid outbreak. I'm now semi-retired and only work 7.5 hours a week, with barely 25% short of my $1m retirement goal after subsequent investments to date.
Thanks for sharing your experience! I’ve been managing my portfolio myself, but it’s not working out. Do you have any recommendations for a good investment advisor? I could really use some help.
Teresa L. Athas a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Thank you so much for the suggestion! I really needed it. I looked her up on Google and explored her website; she has an impressive background in investments. I've sent her an email, and I hope to hear back from her soon!
Whenever I leave a company, I move it immediately to an IRA while using the new companies 401k. The thing I like about not keeping it in the 401k once you leave a company is in CONTROL. I like controlling what I can invest in, unlike the 401k where it’s ultimately picked for you.
The purpose of the rollover is technically to consolidate your retirement assets so it can grow faster in one managed account. I put about $80k in rollovers from 2 previous jobs that are managed by my Financial Advisor Abigail Ann Ryan, Now my portfolio is about $400k... it has been great returns.
Becoming a millionaire through a Roth IRA or a 401(k) involves different strategies for maximizing profits. A Roth IRA offers tax-free withdrawals in retirement, which can be advantageous if you expect to be in a higher tax bracket later in life. On the other hand, a 401(k) provides tax-deferred growth and potential employer contributions, boosting your savings. The optimal choice depends on factors like your current and future tax situation, employer match, and investment options. Consulting a financial advisor can help tailor a strategy that aligns with your financial goals and circumstances.
Prioritizing effective personal finance management holds greater significance than the sheer amount saved, irrespective of income source. Consulting a certified financial advisor can offer tailored strategies to optimize financial results by reducing expenses and enhancing income, regardless of whether it's earned through employment or investments.
I wholeheartedly concur. At 62 years old and newly retired, my external retirement funds total around One million two hundred fifty thousand dollars.. With no debt and minimal retirement fund allocation relative to my portfolio's value over the last three years, I recognize the importance of a financial advisor. Neglecting them isn't an option; however, thorough research is vital to find a trustworthy fiduciary advisor.
When ‘Melissa Terri Swayne is trading, there's no nonsense and no excuses. She wins the trade and you win. Take the loss, I promise she'll take one with you.
I just looked her up on the internet and found her webpage with her credentials. I wrote her a outlining my financial objectives and planned a call with her.
I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm 59 and living off my savings.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as an individual investment account or employing the services of a retirement planner/financial Advisor.
I've stuck with ‘’Julianne Iwersen Niemann” for about 9 years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
My retirement account has gone down by 13.7% in the past year due to rebalancing I did out of fear uncertainty and doubt. What are best alternatives to take in other to secure a financially free retirement and achieve ultimate peace? I don’t want to fail after years of working hard.
If you want to rebuild your portfolio by yourself, without help, I will tell you it is near impossible. Even NewRetirement and co can’t do the job of an FA with expertise, a large following/client base and experience. Vet and hire one and begin to develop a rapport.
@@OwenFlex He is very well known in the financial sector. He not only understands the intricacies of the stock market and real estate but also has insights into navigating the financial sector for potential gains.
I appreciate this. After searching his name online and reviewing his credentials, I'm quite impressed. I've contacted him as I could use all the help I can get. A call has been scheduled.
To be honest, Retirement accounts should have no tax going in and none going out. This would incentives everyone to save money for the the time they retire. The money spent to pay for goods services local taxes will be ultimately taxed when it transfers to a business etc..elderly would be in far better shape and less a burden on the taxpayer..
I hear you. That would mean a lot less tax revenue for our government that already spends more than it brings in though (this is not a political statement, the last surplus was 2001). Now, social security being taxed is something I think we can all agree isn't fair... Thanks for your comment, Bart!
Especially if the money goes to pay for Medicare premiums and healthcare - that should not be taxed. That's only fair since employer health premiums are not taxed and many employees have access to flex savings accounts. Why wouldn't we allow that for the elderly who are on a fixed income?
The rise in tax rates is why I decided to roll over my 401k to a Roth IRA. I don’t want to be 59 and paying taxes on withdrawals from my retirement account.
I completely agree. I'm in my mid-40s, getting closer to retirement, with over $2 million in non-retirement funds. I'm debt-free and hold relatively little in my retirement accounts compared to my total portfolio over the last three years. Honestly, you can't ignore the value of a good financial advisor-just make sure to do your homework and find a trustworthy fiduciary.
Thanks for the inherited IRA info. I’ll have to let my clients know. Sounds like the IRS is really cracking down on when they get their revenue from inherited accounts.
We inherited an IRA and a Roth IRA. Because of the taxation on the traditional IRA, we use those funds to supplement income while, in kind, maximizing our 401k contributions. That, for all intents and purposes, defers the taxes beyond the 10 years rule to whenever we draw from the 401k. Likewise, we draw annually from the inherited Roth to contribute the maximum to an individual Roth which removes those funds from the 10 year rule and makes them permanently tax exempt.
Thanks. I have an inherited IRA from my parents. 10 yrs now. I roll over my distributions every year minus the taxes because I don't need it, and it's a long term boost for when I do retire.
As long as you are not considered a highly compensated employee (HCE) by the employer sponsoring the 401(k), then yes you can contribute pre-tax. The IRS defines HCEs here: www.irs.gov/retirement-plans/identifying-highly-compensated-employees-in-an-initial-or-short-plan-year
That is correct, and it will increase to age 75 for those born in 1960 or later. I’ll add that if you’re still working for the company that sponsors the 401(k), RMDs are not required unless you’re a 5% or more owner of said company.
I have a crap 401k with high fees. I have a company match that covers the fees on that money for a couple of years, but any growth is subject to more fees that aren't covered. I had to throw a fit to get out of the 401k. Automatic enrollment is a horrible idea.
High fees are unfortunate. In the grand scheme of things, I think auto enrollment will leave people better off at retirement - not much different than auto-contributing to the pensions of years past. I can agree that it shouldn’t be difficult to opt out, however.
It can be very complex… depends on original account owners DOB, date of death, whether they were taking RMDs already, etc. However, if you take out 1/7th of the balance each year (assuming you want to spread taxes out evenly) it should be well above what the RMD is anyway.
The inherited IRA must be drained 10 years after inheriting the account. Your withdrawals will be much greater than the RMD. If you have 7 years left, just take today’s value, divide by 84 and have that amount sent to you monthly. Make sure to have them hold back up to 30% for taxes.
Thank you for the information! I was hoping more would've been done with the Roth IRA max contributions. I guess that's what end of next year or 2026 is for. Just subscribed, keep up the good work! :)
Thank you! Yeah, looks like IRA limits will be the same as 2024 next year. But you may be eligible for other ways to get money into a Roth. Check out this video! ua-cam.com/video/c1DnRUo-th0/v-deo.htmlsi=m3zr-mAvJ4_8sqwH
Also when I inherited an IRA in 2017, I knew about the 5 year rule (I think it was 5 at the time) but the company didnt give me the option to keep taking distributions. And just cashed me out. Luckily my income was somewhat lower and it wasnt a large amount as I would have likely cashed it out anyway as it was I think set up as an annuity with really low interest rate on it. I guess depending on what type of financial instrument the IRA is it may be worth it to cash it out anyway to put into something more aggressive. But being told I had to take it all, I was not expecting. I wonder if other people had similar experiences.
If you’ve saved enough, you don’t even need to wait until 59.5! Check out this video: Retiring Early Using The Rule of 55 ua-cam.com/video/EuVSagVKqcY/v-deo.html
@@SparkWealthAdvisors I’m getting mixed feelings on whether my company will allow me to use the rule of 55, and I did retire from them the year I turned 55. I’m planning on working with this new company this last year anyway so I’m not gonna bother with whether I can or can’t.
Two points: 1) 10 year RMD is stupid. If I done a solid job of saving and investing, why should my heirs be forced to exit the IRA? If I have a child that doesn't save like I did and I don't want them to touch the $ until they hit 59.5, I should be able to set up a trust stipulating this. It is MY money after all. 2) If you are a "high earner", why would you not want to invest your dollars post-tax in a ROTH anyway? Especially if you can afford it. My company offered a ROTH 401K 5 years ago. I couldn't make that switch fast enough.
I’m with you on #1. The 10-yr rule is basically the IRS wanting their taxes on the withdrawals quicker. Your child would be an eligible designated beneficiary and would be allowed to use the stretch provision, only requiring them RMDs over their lifetime, but at that point they can take it all if they wanted. A trust would need to use the 10 year rule, as I suspect you know. 2. High income earners typically benefit more from pre-tax contributions for the tax deduction today, and withdrawing in a lower tax bracket in the future (retirement). The rule requiring Roth now is another example of the IRS wanting the tax revenue sooner. Do you see the theme here?😅 Thanks for your comment
@@SparkWealthAdvisors I do see the theme. However, the question then is: What will taxes look like in the future? With the USA debt being where it is and the fact that spending still occurs like drunken sailors, do you think tax rates will be lower in the future? I don't. I would rather pay the taxes now while I have income vs. later where I will be on more of a fixed budget. Also, all ROTH withdrawals do not count (as you know) towards taxing SS or IRMAA.
I do think tax rates overall will go up in the future. But consider your own personal tax bracket rather than just the entire system. For example, the current 12% tax bracket may become 18 or 20% in the future (assuming this is the bracket you’ll be in in retirement), but if you’re contributing pre-tax today in say the 32% bracket, you would still come out ahead. That said, there’s more to it like you mentioned. No RMDs, no affect on other income sources, etc etc
#1: The government wants their tax money. Simple. #2: It makes no sense to do Roth as a high earner when you obviously will pay less taxes in retirement as you will be making less and only withdraw what is needed. Tax liability would be less in retirement with a traditional.
@@fictitiousnightmares As it stands, my take home will be higher in retirement with a good % coming from ROTH keeping me in a lower tax bracket. And a very high wage earner, I get the thinking. I'm in the 24% as it stands now. Will I be in a lower bracket when I retire, I certainly hope so. The ROTH to me is a no brainer. Again, my wages aren't putting me in a +30% bracket. Also I'm thinking of my heirs. More flexibility with Roth. I don't want them to have to be a mathematician to figure out tax liabilities on the RMD's associated with traditional IRA's.
Well, it does make sense to force a high earner to make a catch-up contribution to be Roth. By definition, a high earner will likely have a portion of her earnings in the 32%, 35%, or 37% tax brackets; by making the high earner do a Roth catch-up, that high earner is going to have to pay a higher percentage of tax. But that’s OK because if you’re a high earner, you can afford it, and as long as you have an investment horizon of medium term or longer, You’re likely going to outperform that marginal tax difference by the savings you receive on any capital gains tax that you won’t have to owe in the future 😅
@@CrabbyE8 - yeah, I'm maxing out my mega-backdoor Roth, and I have zero problems with it being Roth and not 401k. It's basically "the money I would have invested in a brokerage account, only better", due to the tax-free growth and withdrawal. When I hit 50 next year I'll be maximizing the backup amount as well.
For inherited IRAs, are the RMDs are only on inherited traditional IRAs since Roth themselves don't have RMD? Or are they imposing RMD on Roth when it is inherited?
RMDs apply to inherited Roth IRAs now as well. Unless you are the deceased’s spouse, then you can roll it into your own Roth IRA which is not subject to RMDs.
@@SparkWealthAdvisors So, the heir can't just wait until month 11 of year 9 to take the distribution if in a ROTH? If that is true, that is complete BS.
@@BSinNH just remember, even though you have to take an RMD every year, in most cases, you don’t have to pay any tax on that RMD because it’s a Roth RMD. You can just deposit it into your own brokerage account and be on your merry way. They just want that inherited Roth IRA to be empty by 10 years. Of course, If you put that money into a brokerage and start seeing a lot of appreciation, the IRS is hoping that when you sell some of those assets, they’ll get a little tax from you by way of capital gains
Is there a way to get this new plan reversed lol like who do I need to vote for or what petition I need to sign to change this the Traditional IRA I can understand but RMDs on a ROTH that's ridiculous smh the government doesn't want us to succeed I mean yes I can just take it out the ROTH tax free but that's 10 years of tax free growth I'll be missing out on that's worth millions versus putting it in a regular brokerage to be taxed or slowly trickling into your own ROTH and waiting for your own retirement to access it again the freedom to have tax free growth and tax free access before retirement age is epic losing it is a travesty 😢
Confused. Can people over 63 take advantage of a catch up contribution or are they limiting it to 60 - 63 year olds. So if you are 64 you cannot contribute a catch up contribution. Also you say $10k, then you say it is $11,250. What is the amount.
I agree it's confusing (nothing new with the IRS!). For ages 60-63 you have a higher catch up which is the GREATER of $10,000 OR 150% of 2024 catch-up limit ($7500). The greater of those 2 numbers would be $11,250. My understanding is after age 63 you revert back to the regular catch up of $7500 for ages 50+ (or whatever it will be increased to due to inflation each year). Hope this clears it up for you - thanks for your comment.
Sorry, I am hearing that the rules for the inherited IRAs do NOT allow the stretch option (for eligible designated beneficiaries) am I missing something or misunderstanding that section? :)
Hello! EDB’s are in fact able to use the stretch provision, here’s the IRS page (updated Aug 2024). www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
Sorry if it wasn't clear. An inherited IRA is one that the beneficiary has taken control over after the original owner has passed, and the rules in this video apply. The exception is for spouses who can move the decedent's IRA into their own, which is not considered an inherited IRA or subject to the 10-year rule etc. Hope that helps!
To confirm, Rule 5 applies to inherited IRS received from an original owner who died on or after 1/12020, correct? I have what was referred to as a beneficiary IRA that I inherited in 2005. I have been taking distributions from it. Are there any changes to this type of IRA? Is it still possible to treat it as a "stretch" IRA? Thanks for any educational guidance on this. Very nice video - super informative. Greg
Thanks for the kind words Greg! You’re correct, IRAs inherited pre-2020 are unaffected by the SECURE act. However I always recommend confirming with a CPA since I can’t see the details of your account.
I was somewhat dissapointed in the catch up contribution change as this was my first year eligible. And it coincided with paying off my house so I could just shift money right into that. To find out I only have one more year to take advantage. Being in a higher bracket I much prefer the tax savings now. Also there is a little confusion on the 145K limit. Is this pure gross. Or do other deductions count against it like my regular 401K amount of health plan premiums etc?
My understanding is that it’s your gross compensation through your employer. It’s their payroll systems that will flag you as a highly compensated employee and default you to Roth, not the IRS. At least that’s how it worked when I was at that large 401k administrator. Thanks for your comment and good question!
It’s basically the IRS wanting the tax revenue sooner. But once it’s out of the IRA, that doesn’t mean the inheritor can’t still invest what’s left after taxes in an ordinary brokerage account or their own IRAs if eligible. I wouldn’t necessarily say it’s starting from scratch.
Automatic enrollment is stupid. Obviously I want to vet the employee to make sure they’re a good fit for the company. You should get at least three months for this.
The automatic enrollment is upon eligibility. Most employers I’ve seen require anywhere from 3 months to a year of service before an employee is eligible to contribute (and thus be automatically enrolled).
Yes it does - sorry for not clarifying that. It applies to all defined contribution plans which includes 401(k), 403(b), 457(b) and 401(a). Here's an article from ADP with more info: www.adp.com/spark/articles/2024/06/secure-20-zooming-in-on-retirement-plan-catchup-contribution.aspx#:~:text=In%202025%2C%20SECURE%202.0%20increases,the%20regular%20catch%2Dup%20limit.
What if you’re currently in the inherited IRA like year 2 of the 10 letting grow will there still be a RMD? For the year starting in 2025. Or is it grand fathered?
@sparkwealthadvisors is it correct that RMDs on inherited IRAs still follow the age requirement? Meaning RMDs on inherited IRAs only apply to those 73 or older?
Hi Rachel, the age requirement only applies to your own IRAs. If you inherit an IRA you will be required to take RMDs no matter what age you are. The idea is that the IRS wants to start taxing that money rather than continuing to defer it. The only exception is if you inherit from your spouse and you transfer it to your own IRA - then you're only required to take RMDs once you are 73 (or 75 if born after 1960). Hope that helps!
Most Americans find it hard to retire comfortably amid economy crisis. Some have close to nothing going into retirement, my question is, do I pull cash from my 401k and buy a house, or spread my money in stocks for cashflow? I'd love to afford my lifestyle after retirement?
Lately, I've been contemplating retirement, uncertain whether my 401(k) and IRA will ensure a secure future. I've also invested $200K in the stock market, experiencing fluctuations without substantial gains.
Using a 401(k) or IRA is a valuable strategy for retirement planning, providing potential savings growth and tax advantages. While the stock market is promising, expert guidance is essential for effective portfolio management
Opting for an investment advisor is currently the optimal approach for navigating the stock market, particularly for those nearing retirement. I've been consulting with a coach for a while, and my portfolio has surged by 45% since Q2.
Thank you for this tip. it was easy to find your coach on the web. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé.
Yes, the IRS defines it as “not more than 10 years younger”, so older would fit that definition. You’d be eligible for the stretch provision, meaning RMDs over your life expectancy.
There are no RMD’s on a Roth IRA that you own. For non-spousal beneficiaries* who inherit aRoth IRA, As long as your benefactor had the Roth IRA for at least five years, then there will be no taxes owed on the withdrawals you make over the 10 years that the IRS gives you to empty out the account. The point is that the IRS still wants you to empty out that account in 10 years, in the hope that it ends up in a brokerage account where they can at least start taxing the beneficiary for capital gains on future earnings. Clear as mud, right?😂
@@CrabbyE8 Well it’s the crooked federal government, they need more money for programs and to send abroad to redistribute our wealth using back door deals to make money for themselves..another topic for another day…but yes I looked up the rules just now so a spouse can take the IRA and roll it tax free into their IRA but a child would have the 10 years to empty out the account, and I believe those withdrawals are tax free. It’s probably better, esp if it is a high yield dividend IRA of nothing but SCHD to take and pay the taxes on it by doing a trustee to trustee transfer from IRA to the son’s IRA and let him pay the tax on it, cause having several mil in an IRA after taxes esp if it’s something like SCHD will catch up in no time and the growth over 30 years would be staggering as well as the dividend payments.
How much longer before the Federal govt says something like "what's 1% tax on Roth withdrawals? Come on it's time for you to pay your fair share." Or "Roth withdrawals are tax free but now you just have to count them as regular income. Why should millionaires not pay tax?" It's very predictable. Just like taxes on SS. The federal govt has never had more money than it has now and the tax on an individual has never been higher. Yet this is still not enough money to balance annual Federal spending. Clearly taxing is not the problem.
The highest marginal tax rate in 1945 was 94%; it started dropping in the 60's, and by 87 (ie, Regan), it was down to 38%. Our current total tax rates look to be in the lower half (at least) of historical trends. Search on "historical USA tax rate", and you should be able to find some tables that lay out the different rates.
@@robmccance Pretty sure it's the nearly three trillion spent annually on SS/Medicare/caid/ACA against nowhere near that in corresponding tax revenue that's the problem and the rest of the world isn't even a blip on that radar.
I'm recently retired and uncertain if my 401(k) and IRA will be enough for a stable future. I've set aside $1 million to help secure my financial goals and align with my risk tolerance. Should I consider investing in stocks or buying a rental property?
The market is not necessarily a rollercoaster if you know your way around the market, there are various opportunities in the present market to accrue good profit, If you are not too savvy with the market, just buy and hold on strong companies with good earnings, or consult with advisors on Etfs and actively managed funds. I am up by 418% in 1 year under guidance.
Awesome.. Please I would love to know or get in touch with your investment advisor. I could really use such expertise in growing my portfolio now that the entire markets is uncertain
Only those well into the six figures will be able to max out that catchup. And chances are you will phase out by that income level. I dont understand this. Im near the top of the pay scale allowed before phase out. A 401k savings of $30,500 savings per year is challenging. Even tougher when i add in a std ROTH.
To clarify, the income phaseout only applies to Roth IRAs, not employer plans. I agree it takes a lot of income or low living expenses to be able to max out these plans each year.
Not necessarily. Someone being strategic might decide that it’s smarter to hit all the limits and max out their Roth, meanwhile drawing from taxable saving accounts to pay living expenses. The same amount of money is going into savings, but the technique essentially shifts after-tax money from a taxable account to a tax-free Roth.
That means lower income will pay more, wealthy will pay less. I imagine if we collapsed all the tax brackets that the average will be 25-30% income tax.
If that's the case, then it would probably be "any Roth investments after year 20XX will be taxed at Y%" ie, the Roth categories as we know them now would be frozen, and a new taxable version would be used. Or alternately, they'd cap the amount at, say, 3 million (indexed to inflation), or something. Anything after that would be taxed as regular income. And speaking as someone who would likely be over that limit, I don't have a problem with that. Retirement accounts exist to keep individuals from becoming a burden on the social safety net. Once you have a certain amount, you are no longer a burden, and thus society is not incentivized into giving you an additional reason to invest. What retirement accounts AREN'T are vehicles to avoid paying taxes on your entire portfolio - that one guy that put all his penny stocks for his company into his Roth, and now has something like 300 million in it? Good on him for figuring out a loophole, but I have ZERO problems with that dude being taxed on that. And it's been shown that people above a certain income will keep on investing, even if there's no specific incentive (such as a tax-advantaged account) to do so. So, that means that rich retirees will have SS+Roth+401k+(more) brokerage investments.
Microtargeting, baybee! Financial videos are the highest pay-per-view that UA-cam creators can make. These videos are very much not for the AVERAGE UA-cam audience, but rather "people who are interested in retirement accounts and products" - which means the actual average viewers are likely to be rolling in mid-to-high-six-figure accounts, at a minimum. Also - my dad's in his 70's, and uses UA-cam all the time. (Mainly to find how-to's on installing plumbing and car parts, honestly.)
Opting In should NEVER be automatic, for ANYTHING. If a person wants to opt in to something they should have to take an intentional action to do so. I'm not saying it should be made unnecessarily difficult, just that they should know and want to sign up for it and shouldn't be forced into something they may not know about. Deciding for other peope what's good for them and mandating they be forced to be involved without active consent is absolutely morally wrong, even if you think its beneficial. That's not how freedom works. Convince people to do it through information and discussion not mandatory enrollment.
I understand your point. The last sentence of your comment is unfortunately what rarely happens, and results in people not saving for retirement. The way I see it, at worst, someone can opt out before even contributing a dollar to the plan, at best, they are going to have automated retirement savings that they may not have ever opted-in for otherwise. What are your thoughts on pensions in this context?
They may not know about it, but they should because it's no secret. Most companies provide all of this info to people in the package they receive before onboarding. It's really not a morals issue, but there is a logistics issue in cases where you want to opt out, but they can't get it processed before the first deduction which leaves you with a peanuts retirement account to fiddle with down the road unless you want to just take the 10% hit and close it out immediately.
This is a theory versus reality thing. You are right in principle, people should not be automatically opted in. But in reality half the country is totally uninformed and does not take the proper action to support themselves in retirement. If their family doesn’t care for them, the taxpayers end up with the bill. So better to do the undesirable thing now and opt people in than deal with the fallout later. This is basically social security.
people aren’t bright enough to do it on their own. and if they don’t we all need to bail them out. not only should the opt in be automatic, it should be a mandatory REQUIREMENT to contribute.
Flat tax = raise taxes on the poor. Reminder that every Republican administration since Reagan lost jobs while Democrats are busy building this country so maybe don't listen to them on economic matters.
Boy, I’m glad I never got involved in any of that crap. 401Ks and IRAs just keep your money hostage. I retired at 55 just keeping all my money safe in the bank. I have instant access. No rules keeping me away from my money.
@@brtecson Essentially you are part of the whiner/complainer camp who blames boomers for everything. Yet no such thing for subsequent woke, entitlement generations that equally have fault? There have been only three boomer presidents: Clinton, GW Bush, and Trump. Globalization started well before boomer generation and relations/trade with China started with Nixon who was not a boomer. Most left leaning younger voters think open borders is a great thing. Thus competing for bottom rung jobs and depressing wages for low skill labor. Similarly driving up cost of low price housing. Isn’t it grand we are helping all of those hungry mouthes? Better take a closer look in the mirror.
I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm 59 and living off my savings.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as in an individual invstment account or employing the services of a retirement planner/investment advs.
I am 62, approaching retirement, with over a million in assets beyond my retirement funds, thanks in large part to my expert financial advisor's guide. His expertise has substantially boosted my portfolio's value and performance.
Becoming a millionaire through a Roth IRA or a 401(k) involves different strategies for maximizing profits. A Roth IRA offers tax-free withdrawals in retirement, which can be advantageous if you expect to be in a higher tax bracket later in life. On the other hand, a 401(k) provides tax-deferred growth and potential employer contributions, boosting your savings. The optimal choice depends on factors like your current and future tax situation, employer match, and investment options. Consulting a financial advisor can help tailor a strategy that aligns with your financial goals and circumstances.
Prioritizing effective personal finance management holds greater significance than the sheer amount saved, irrespective of income source. Consulting a certified financial advisor can offer tailored strategies to optimize financial results by reducing expenses and enhancing income, regardless of whether it's earned through employment or investments.
I wholeheartedly concur. At 40+ years old and newly retired, my external retirement funds total around One million two hundred fifty thousand dollars.. With no debt and minimal retirement fund allocation relative to my portfolio's value over the last three years, I recognize the importance of a financial advisor. Neglecting them isn't an option; however, thorough research is vital to find a trustworthy fiduciary advisor.
The rise in tax rates is why I decided to roll over my 401k to a Roth IRA. I don’t want to be 59 and paying taxes on withdrawals from my retirement account.
Pre-tax contributions can help lower income taxes during your working years, while after-tax contributions can reduce your tax burden in retirement. Both have their advantages, but it’s also smart to save outside traditional retirement plans, such as individual investment accounts or with guidance from a financial advisor.
I completely agree. I'm in my mid-40s, getting closer to retirement, with over $2 million in non-retirement funds. I'm debt-free and hold relatively little in my retirement accounts compared to my total portfolio over the last three years. Honestly, you can't ignore the value of a good financial advisor-just make sure to do your homework and find a trustworthy fiduciary.
Rebecca Lynne Buie has consistently been my top recommendation. She’s widely recognized for her expertise in financial markets and has a strong track record. I highly recommend her.
She seems to be highly educated and well-informed. I conducted an online search for her name and found her website. Thank you for sharing this information.
Hi Doug, thanks for your comment. The catch up limit for 2024 is currently $7500 for employer plans. For IRAs it is $1000, for a total of $8000 that you can contribute over age 50. I think this might be what you’re thinking of?
⚠Correction⚠ The mandatory Roth catch up contribution for Highly Compensated Employees (HCEs) has been pushed to 2026.
🆕Our latest video takes a deeper dive on the Inherited IRA Rules🆕: ua-cam.com/video/sbTDF0Zogig/v-deo.html
As always, all content on this channel is education and should not be taken as advice or recommendations.
I’ve been reading about it. It sounds like there’ll be more flexibility for catch-up contributions and some tax benefits, but it’s so much to take in. I’m worried I might miss something important.
Same here. I’ve always handled my accounts myself, but now I’m wondering if I need professional help. Mistakes with retirement accounts can be costly.
One of the biggest problems people face is not adjusting their strategies when new rules come in. I made that mistake a few years back, and it cost me thousands in potential gains.
Agreed, I've always delegated my excesses to an advisor, since suffering major portfolio loss early 2020, amid covid outbreak. I'm now semi-retired and only work 7.5 hours a week, with barely 25% short of my $1m retirement goal after subsequent investments to date
Thanks for sharing your experience! I've been managing my portfolio myself, but it's not working out. Do you have any recommendations for a good investment advisor? I could really use some help
That’s impressive. I’m managing my accounts myself, but it feels overwhelming. I’ve got a decent nest egg, but I’m not sure if I’m optimizing my investments for retirement.
Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determines a lot of things, my parents both spent same number of years in the medical profession, my mom was investing through a financial advisor while my dad through the 401k. On retirement, my mom retired with about $5million, while my dad retired with roughly $3.8million.
You are right. I’m in my mid 50’s now, my wife and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with profits over the years, but at least I’m earning more. I’m making money even before retiring and my retirement funds has grown way more than it would have been with the 401k.
It’s unfortunate most people don’t have such information, I don’t really blame people who panic cos lack of information can be a big hurdle. I’ve been making more than $25k passively by just investing through an advisor, and I don’t have to do much work. It doesn’t matter if the economy is crashing, great CFA will always make good returns.
Do you mind sharing info on the adviser who assisted you? I'm 40 now and would love to grow my stocks investment portfolio and plan my retirement..
Her name is Annette Christine Conte can't divulge much. Most likely, the internet should have her basic info, you can research if you like
Thank you for this Pointer. It was easy to find your handler, She seems very proficient and flexible. I booked a call session with her.
At 32, I'm diving into investing for the first time. I’ve started contributing to my 401K and opened a Roth IRA with automatic contributions. My main question is whether asset allocation is crucial at this stage or if I'm just overthinking as a beginner.
There are so many choices to make, and for beginners, it's often best to entrust daily investment decisions to an experienced advisor.
I completely agree-having a professional manage my investments has been invaluable. My job doesn’t allow time for in-depth stock analysis, so I entrusted an advisor with my portfolio. I’ve been fully invested since the COVID-19 outbreak, and I’m happy to say my portfolio has grown fivefold in just five years, reaching nearly $1 million.
Impressive gains! Who's guiding your investments? I’m excited to invest for my future retirement, but I'm unsure where to begin. Currently, I’m only contributing to my 401K through my employer, but the returns have been slow.
Rebecca Lynne Buie has consistently been my top recommendation. She’s widely recognized for her expertise in financial markets and has a strong track record. I highly recommend her.
Thank you for the recommendation. I was curious, so I looked up Rebecca Lynne Buie online. Her consulting page came up at the top, and I’ve scheduled a call. I've heard about advisors before, but none have looked as impressive as she does.
I just turned 47 and awfully late to investing with barely any portfolio except my 401k, I have a decent amount of cash saved up and with inflation currently soaring AGAIN, I’m getting worried about retirement, my intention is to retire at 55. How best do I maximize my savings of over $140k
Retirement is now more difficult than it was in the past. it's all about balancing your risk tolerance with your long-term goals. Maybe consider speaking to an advisor to help in diversifying your portfolio to spread out the risk.
Agreed, I've always delegated my excesses to an advisor, since suffering major portfolio loss early 2020, amid covid outbreak. I'm now semi-retired and only work 7.5 hours a week, with barely 25% short of my $1m retirement goal after subsequent investments to date.
Thanks for sharing your experience! I’ve been managing my portfolio myself, but it’s not working out. Do you have any recommendations for a good investment advisor? I could really use some help.
Teresa L. Athas a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Thank you so much for the suggestion! I really needed it. I looked her up on Google and explored her website; she has an impressive background in investments. I've sent her an email, and I hope to hear back from her soon!
Whenever I leave a company, I move it immediately to an IRA while using the new companies 401k. The thing I like about not keeping it in the 401k once you leave a company is in CONTROL. I like controlling what I can invest in, unlike the 401k where it’s ultimately picked for you.
what's the rollover for ?
The purpose of the rollover is technically to consolidate your retirement assets so it can grow faster in one managed account. I put about $80k in rollovers from 2 previous jobs that are managed by my Financial Advisor Abigail Ann Ryan, Now my portfolio is about $400k... it has been great returns.
I’m sort of a rookie out here ..if you don't mind who is your F.A ?
Do you check if the new employer allows a self directed option on their 401k?
Yes i do, it allows me to diversify my investment more extensively compared to the traditional options.
Becoming a millionaire through a Roth IRA or a 401(k) involves different strategies for maximizing profits. A Roth IRA offers tax-free withdrawals in retirement, which can be advantageous if you expect to be in a higher tax bracket later in life. On the other hand, a 401(k) provides tax-deferred growth and potential employer contributions, boosting your savings. The optimal choice depends on factors like your current and future tax situation, employer match, and investment options. Consulting a financial advisor can help tailor a strategy that aligns with your financial goals and circumstances.
Prioritizing effective personal finance management holds greater significance than the sheer amount saved, irrespective of income source. Consulting a certified financial advisor can offer tailored strategies to optimize financial results by reducing expenses and enhancing income, regardless of whether it's earned through employment or investments.
I wholeheartedly concur. At 62 years old and newly retired, my external retirement funds total around One million two hundred fifty thousand dollars.. With no debt and minimal retirement fund allocation relative to my portfolio's value over the last three years, I recognize the importance of a financial advisor. Neglecting them isn't an option; however, thorough research is vital to find a trustworthy fiduciary advisor.
How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings
When ‘Melissa Terri Swayne is trading, there's no nonsense and no excuses. She wins the trade and you win. Take the loss, I promise she'll take one with you.
I just looked her up on the internet and found her webpage with her credentials. I wrote her a outlining my financial objectives and planned a call with her.
I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm 59 and living off my savings.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as an individual investment account or employing the services of a retirement planner/financial Advisor.
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you
I've stuck with ‘’Julianne Iwersen Niemann” for about 9 years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
Found her online page by searching her full name, I wrote her an email and scheduled a call, hopefully she responds.
My retirement account has gone down by 13.7% in the past year due to rebalancing I did out of fear uncertainty and doubt. What are best alternatives to take in other to secure a financially free retirement and achieve ultimate peace? I don’t want to fail after years of working hard.
If you want to rebuild your portfolio by yourself, without help, I will tell you it is near impossible. Even NewRetirement and co can’t do the job of an FA with expertise, a large following/client base and experience. Vet and hire one and begin to develop a rapport.
You honestly should hire a private advisor, they are reliable. Look up online for a for one, That way you have an expert perspective and contributions
How can I get more info and contact him?
@@OwenFlex He is very well known in the financial sector. He not only understands the intricacies of the stock market and real estate but also has insights into navigating the financial sector for potential gains.
I appreciate this. After searching his name online and reviewing his credentials, I'm quite impressed. I've contacted him as I could use all the help I can get. A call has been scheduled.
To be honest, Retirement accounts should have no tax going in and none going out.
This would incentives everyone to save money for the the time they retire. The money spent to pay for goods services local taxes will be ultimately taxed when it transfers to a business etc..elderly would be in far better shape and less a burden on the taxpayer..
I hear you. That would mean a lot less tax revenue for our government that already spends more than it brings in though (this is not a political statement, the last surplus was 2001). Now, social security being taxed is something I think we can all agree isn't fair...
Thanks for your comment, Bart!
Especially if the money goes to pay for Medicare premiums and healthcare - that should not be taxed. That's only fair since employer health premiums are not taxed and many employees have access to flex savings accounts. Why wouldn't we allow that for the elderly who are on a fixed income?
Ok what's stopping me from abusing that
that sounds like a roth
@@foxtrotwolf6081a Roth has tax being paid on the way in.
The rise in tax rates is why I decided to roll over my 401k to a Roth IRA. I don’t want to be 59 and paying taxes on withdrawals from my retirement account.
I completely agree. I'm in my mid-40s, getting closer to retirement, with over $2 million in non-retirement funds. I'm debt-free and hold relatively little in my retirement accounts compared to my total portfolio over the last three years. Honestly, you can't ignore the value of a good financial advisor-just make sure to do your homework and find a trustworthy fiduciary.
Over 50 its 8000 in Roth for catch up.
very good , useful. Thanks
Thanks for the inherited IRA info. I’ll have to let my clients know. Sounds like the IRS is really cracking down on when they get their revenue from inherited accounts.
We inherited an IRA and a Roth IRA. Because of the taxation on the traditional IRA, we use those funds to supplement income while, in kind, maximizing our 401k contributions. That, for all intents and purposes, defers the taxes beyond the 10 years rule to whenever we draw from the 401k. Likewise, we draw annually from the inherited Roth to contribute the maximum to an individual Roth which removes those funds from the 10 year rule and makes them permanently tax exempt.
When the IRS gives you lemons, make lemonade!
Is there any tax advantage to putting money in a Roth vs just a stock dividend account?
Thanks. I have an inherited IRA from my parents. 10 yrs now. I roll over my distributions every year minus the taxes because I don't need it, and it's a long term boost for when I do retire.
You’re welcome! And yes, just because you have to withdraw it doesn’t mean you can’t keep the net amount invested in another account. 👍🏼
"Earning" is the key word. If I have income that is not earned, then I can still put catch up contributions in pre tax
As long as you are not considered a highly compensated employee (HCE) by the employer sponsoring the 401(k), then yes you can contribute pre-tax. The IRS defines HCEs here:
www.irs.gov/retirement-plans/identifying-highly-compensated-employees-in-an-initial-or-short-plan-year
Great video thanks so much for all the info. To clarify RMD is for 73 and older for a 401k I believe. Correct me if I'm wrong.
That is correct, and it will increase to age 75 for those born in 1960 or later. I’ll add that if you’re still working for the company that sponsors the 401(k), RMDs are not required unless you’re a 5% or more owner of said company.
There's going to be a tipping point where they keep trading real benefits for "you can contribute more."
Cmon, pay your fair share!
I have a crap 401k with high fees. I have a company match that covers the fees on that money for a couple of years, but any growth is subject to more fees that aren't covered. I had to throw a fit to get out of the 401k. Automatic enrollment is a horrible idea.
High fees are unfortunate. In the grand scheme of things, I think auto enrollment will leave people better off at retirement - not much different than auto-contributing to the pensions of years past. I can agree that it shouldn’t be difficult to opt out, however.
We're facing the issue with the RMD's on an inherited IRA. We have a 7 year withdrawal schedule just don't know what the RMD amount will be.
It can be very complex… depends on original account owners DOB, date of death, whether they were taking RMDs already, etc.
However, if you take out 1/7th of the balance each year (assuming you want to spread taxes out evenly) it should be well above what the RMD is anyway.
Where does one find this RMD calculator
The inherited IRA must be drained 10 years after inheriting the account. Your withdrawals will be much greater than the RMD. If you have 7 years left, just take today’s value, divide by 84 and have that amount sent to you monthly. Make sure to have them hold back up to 30% for taxes.
Fidelity has one @@smileyblair3321
Thank you for the information! I was hoping more would've been done with the Roth IRA max contributions. I guess that's what end of next year or 2026 is for. Just subscribed, keep up the good work! :)
Thank you! Yeah, looks like IRA limits will be the same as 2024 next year. But you may be eligible for other ways to get money into a Roth. Check out this video! ua-cam.com/video/c1DnRUo-th0/v-deo.htmlsi=m3zr-mAvJ4_8sqwH
Also when I inherited an IRA in 2017, I knew about the 5 year rule (I think it was 5 at the time) but the company didnt give me the option to keep taking distributions. And just cashed me out. Luckily my income was somewhat lower and it wasnt a large amount as I would have likely cashed it out anyway as it was I think set up as an annuity with really low interest rate on it. I guess depending on what type of financial instrument the IRA is it may be worth it to cash it out anyway to put into something more aggressive. But being told I had to take it all, I was not expecting. I wonder if other people had similar experiences.
Catch up nothing. The second I turn 59.5 I am taking!
If you’ve saved enough, you don’t even need to wait until 59.5! Check out this video:
Retiring Early Using The Rule of 55
ua-cam.com/video/EuVSagVKqcY/v-deo.html
@EM-sk1xvHave fun paying that 10% penalty 😢
I’ve maxed out mine since age 50 😊
@@SparkWealthAdvisors I’m getting mixed feelings on whether my company will allow me to use the rule of 55, and I did retire from them the year I turned 55. I’m planning on working with this new company this last year anyway so I’m not gonna bother with whether I can or can’t.
@@dantheman6607 Yeah I maxed from 50-55 too. That was one sad thing about going into semi-retirement.
Good channel
Thanks so much!
Two points:
1) 10 year RMD is stupid. If I done a solid job of saving and investing, why should my heirs be forced to exit the IRA? If I have a child that doesn't save like I did and I don't want them to touch the $ until they hit 59.5, I should be able to set up a trust stipulating this. It is MY money after all.
2) If you are a "high earner", why would you not want to invest your dollars post-tax in a ROTH anyway? Especially if you can afford it. My company offered a ROTH 401K 5 years ago. I couldn't make that switch fast enough.
I’m with you on #1. The 10-yr rule is basically the IRS wanting their taxes on the withdrawals quicker. Your child would be an eligible designated beneficiary and would be allowed to use the stretch provision, only requiring them RMDs over their lifetime, but at that point they can take it all if they wanted. A trust would need to use the 10 year rule, as I suspect you know.
2. High income earners typically benefit more from pre-tax contributions for the tax deduction today, and withdrawing in a lower tax bracket in the future (retirement). The rule requiring Roth now is another example of the IRS wanting the tax revenue sooner. Do you see the theme here?😅
Thanks for your comment
@@SparkWealthAdvisors I do see the theme. However, the question then is: What will taxes look like in the future? With the USA debt being where it is and the fact that spending still occurs like drunken sailors, do you think tax rates will be lower in the future? I don't. I would rather pay the taxes now while I have income vs. later where I will be on more of a fixed budget. Also, all ROTH withdrawals do not count (as you know) towards taxing SS or IRMAA.
I do think tax rates overall will go up in the future. But consider your own personal tax bracket rather than just the entire system. For example, the current 12% tax bracket may become 18 or 20% in the future (assuming this is the bracket you’ll be in in retirement), but if you’re contributing pre-tax today in say the 32% bracket, you would still come out ahead.
That said, there’s more to it like you mentioned. No RMDs, no affect on other income sources, etc etc
#1: The government wants their tax money. Simple.
#2: It makes no sense to do Roth as a high earner when you obviously will pay less taxes in retirement as you will be making less and only withdraw what is needed. Tax liability would be less in retirement with a traditional.
@@fictitiousnightmares As it stands, my take home will be higher in retirement with a good % coming from ROTH keeping me in a lower tax bracket. And a very high wage earner, I get the thinking. I'm in the 24% as it stands now. Will I be in a lower bracket when I retire, I certainly hope so. The ROTH to me is a no brainer. Again, my wages aren't putting me in a +30% bracket. Also I'm thinking of my heirs. More flexibility with Roth. I don't want them to have to be a mathematician to figure out tax liabilities on the RMD's associated with traditional IRA's.
Wow, 25% penalty on missed RMD is highway robbery! Also doesn't make sense to force "high earner" catch up to be a Roth.
Thank you for the video!
It was 50% up until 2023! Thanks for tuning in.
Umm, you realize it is currently 50%, right? They want their tax money. This is a great change.
Well, it does make sense to force a high earner to make a catch-up contribution to be Roth. By definition, a high earner will likely have a portion of her earnings in the 32%, 35%, or 37% tax brackets; by making the high earner do a Roth catch-up, that high earner is going to have to pay a higher percentage of tax. But that’s OK because if you’re a high earner, you can afford it, and as long as you have an investment horizon of medium term or longer, You’re likely going to outperform that marginal tax difference by the savings you receive on any capital gains tax that you won’t have to owe in the future 😅
@@CrabbyE8 - yeah, I'm maxing out my mega-backdoor Roth, and I have zero problems with it being Roth and not 401k. It's basically "the money I would have invested in a brokerage account, only better", due to the tax-free growth and withdrawal. When I hit 50 next year I'll be maximizing the backup amount as well.
All great changes.
For inherited IRAs, are the RMDs are only on inherited traditional IRAs since Roth themselves don't have RMD? Or are they imposing RMD on Roth when it is inherited?
RMDs apply to inherited Roth IRAs now as well. Unless you are the deceased’s spouse, then you can roll it into your own Roth IRA which is not subject to RMDs.
@@SparkWealthAdvisors So, the heir can't just wait until month 11 of year 9 to take the distribution if in a ROTH? If that is true, that is complete BS.
@@BSinNH just remember, even though you have to take an RMD every year, in most cases, you don’t have to pay any tax on that RMD because it’s a Roth RMD. You can just deposit it into your own brokerage account and be on your merry way. They just want that inherited Roth IRA to be empty by 10 years.
Of course, If you put that money into a brokerage and start seeing a lot of appreciation, the IRS is hoping that when you sell some of those assets, they’ll get a little tax from you by way of capital gains
Is there a way to get this new plan reversed lol like who do I need to vote for or what petition I need to sign to change this the Traditional IRA I can understand but RMDs on a ROTH that's ridiculous smh the government doesn't want us to succeed I mean yes I can just take it out the ROTH tax free but that's 10 years of tax free growth I'll be missing out on that's worth millions versus putting it in a regular brokerage to be taxed or slowly trickling into your own ROTH and waiting for your own retirement to access it again the freedom to have tax free growth and tax free access before retirement age is epic losing it is a travesty 😢
Has the IRS published yet how the annual RMDs will be calculated for inherited IRAs under the 10-year rule?
I don’t believe they have yet, based on this page: www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
Confused. Can people over 63 take advantage of a catch up contribution or are they limiting it to 60 - 63 year olds. So if you are 64 you cannot contribute a catch up contribution. Also you say $10k, then you say it is $11,250. What is the amount.
I agree it's confusing (nothing new with the IRS!). For ages 60-63 you have a higher catch up which is the GREATER of $10,000 OR 150% of 2024 catch-up limit ($7500). The greater of those 2 numbers would be $11,250.
My understanding is after age 63 you revert back to the regular catch up of $7500 for ages 50+ (or whatever it will be increased to due to inflation each year). Hope this clears it up for you - thanks for your comment.
Sorry, I am hearing that the rules for the inherited IRAs do NOT allow the stretch option (for eligible designated beneficiaries) am I missing something or misunderstanding that section? :)
Hello! EDB’s are in fact able to use the stretch provision, here’s the IRS page (updated Aug 2024).
www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
You need to clarify some of these rules. Are these inherited IRAs left in the deceased name or moved to their name and the rules apply?
Sorry if it wasn't clear. An inherited IRA is one that the beneficiary has taken control over after the original owner has passed, and the rules in this video apply. The exception is for spouses who can move the decedent's IRA into their own, which is not considered an inherited IRA or subject to the 10-year rule etc. Hope that helps!
To confirm, Rule 5 applies to inherited IRS received from an original owner who died on or after 1/12020, correct?
I have what was referred to as a beneficiary IRA that I inherited in 2005. I have been taking distributions from it. Are there any changes to this type of IRA? Is it still possible to treat it as a "stretch" IRA?
Thanks for any educational guidance on this. Very nice video - super informative. Greg
Thanks for the kind words Greg! You’re correct, IRAs inherited pre-2020 are unaffected by the SECURE act. However I always recommend confirming with a CPA since I can’t see the details of your account.
I was somewhat dissapointed in the catch up contribution change as this was my first year eligible. And it coincided with paying off my house so I could just shift money right into that. To find out I only have one more year to take advantage. Being in a higher bracket I much prefer the tax savings now. Also there is a little confusion on the 145K limit. Is this pure gross. Or do other deductions count against it like my regular 401K amount of health plan premiums etc?
My understanding is that it’s your gross compensation through your employer. It’s their payroll systems that will flag you as a highly compensated employee and default you to Roth, not the IRS. At least that’s how it worked when I was at that large 401k administrator. Thanks for your comment and good question!
That inherited rule is a shame. Wouldn’t it be great to let the inheritor just take on the Ira and grow forever? Why make everyone start from scratch?
It’s basically the IRS wanting the tax revenue sooner. But once it’s out of the IRA, that doesn’t mean the inheritor can’t still invest what’s left after taxes in an ordinary brokerage account or their own IRAs if eligible. I wouldn’t necessarily say it’s starting from scratch.
@@SparkWealthAdvisors or the revenue at all. True, as long as the distributions are reinvested it’s definitely not from scratch.
Automatic enrollment is stupid. Obviously I want to vet the employee to make sure they’re a good fit for the company. You should get at least three months for this.
The automatic enrollment is upon eligibility. Most employers I’ve seen require anywhere from 3 months to a year of service before an employee is eligible to contribute (and thus be automatically enrolled).
Automatic enrollment is 30 years late! When I was younger, I wish I could have that. Now I’m so much behind.
Does the new catch up provision apply to 403s or 457s as well?
Yes it does - sorry for not clarifying that. It applies to all defined contribution plans which includes 401(k), 403(b), 457(b) and 401(a). Here's an article from ADP with more info: www.adp.com/spark/articles/2024/06/secure-20-zooming-in-on-retirement-plan-catchup-contribution.aspx#:~:text=In%202025%2C%20SECURE%202.0%20increases,the%20regular%20catch%2Dup%20limit.
What if you’re currently in the inherited IRA like year 2 of the 10 letting grow will there still be a RMD? For the year starting in 2025. Or is it grand fathered?
RMDs have not been required for years 2020-2024. Starting next year you will have to start taking them thru year 10.
@sparkwealthadvisors is it correct that RMDs on inherited IRAs still follow the age requirement? Meaning RMDs on inherited IRAs only apply to those 73 or older?
Hi Rachel, the age requirement only applies to your own IRAs. If you inherit an IRA you will be required to take RMDs no matter what age you are. The idea is that the IRS wants to start taxing that money rather than continuing to defer it. The only exception is if you inherit from your spouse and you transfer it to your own IRA - then you're only required to take RMDs once you are 73 (or 75 if born after 1960). Hope that helps!
@@SparkWealthAdvisors thank you for clarifying. How is the RMD calculated so that beneficiaries can avoid the penalty?
Most Americans find it hard to retire comfortably amid economy crisis. Some have close to nothing going into retirement, my question is, do I pull cash from my 401k and buy a house, or spread my money in stocks for cashflow? I'd love to afford my lifestyle after retirement?
Lately, I've been contemplating retirement, uncertain whether my 401(k) and IRA will ensure a secure future. I've also invested $200K in the stock market, experiencing fluctuations without substantial gains.
Using a 401(k) or IRA is a valuable strategy for retirement planning, providing potential savings growth and tax advantages. While the stock market is promising, expert guidance is essential for effective portfolio management
Opting for an investment advisor is currently the optimal approach for navigating the stock market, particularly for those nearing retirement. I've been consulting with a coach for a while, and my portfolio has surged by 45% since Q2.
Thank you for this tip. it was easy to find your coach on the web. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé.
For an inherited IRA, if you are older than the deceased are you considered an eligible designated beneficiary? And if so, are there RMD?
Yes, the IRS defines it as “not more than 10 years younger”, so older would fit that definition.
You’d be eligible for the stretch provision, meaning RMDs over your life expectancy.
@@SparkWealthAdvisors thank you!
What if it is a Roth IRA? I didn’t think there were RMD’s with a Roth IRA..
There are no RMD’s on a Roth IRA that you own.
For non-spousal beneficiaries* who inherit aRoth IRA, As long as your benefactor had the Roth IRA for at least five years, then there will be no taxes owed on the withdrawals you make over the 10 years that the IRS gives you to empty out the account. The point is that the IRS still wants you to empty out that account in 10 years, in the hope that it ends up in a brokerage account where they can at least start taxing the beneficiary for capital gains on future earnings.
Clear as mud, right?😂
@@CrabbyE8 Well it’s the crooked federal government, they need more money for programs and to send abroad to redistribute our wealth using back door deals to make money for themselves..another topic for another day…but yes I looked up the rules just now so a spouse can take the IRA and roll it tax free into their IRA but a child would have the 10 years to empty out the account, and I believe those withdrawals are tax free. It’s probably better, esp if it is a high yield dividend IRA of nothing but SCHD to take and pay the taxes on it by doing a trustee to trustee transfer from IRA to the son’s IRA and let him pay the tax on it, cause having several mil in an IRA after taxes esp if it’s something like SCHD will catch up in no time and the growth over 30 years would be staggering as well as the dividend payments.
Only on inherited Roth IRAs have RMDs. And if you inherit as a spouse, you can transfer it to your own which is not subject to RMDs.
I got 20 years to go.
The earlier you start planning, the better!
Do Inherited ROTH IRA's also have the annual RMD requirement, or just deplete the account within 10 years?
Unfortunately they do have RMDs starting in 2025!
@@SparkWealthAdvisors That is for inherited ROTH - but will there also be RMD for your own ROTH next year?
@@elibennett6168 No, for your own Roth IRA for which you contributed your own income, there is no RMD.
It sounds no change to me 😆 but, Thank you anyway for the information. Good to know 👍
No worries!
How much longer before the Federal govt says something like "what's 1% tax on Roth withdrawals? Come on it's time for you to pay your fair share."
Or
"Roth withdrawals are tax free but now you just have to count them as regular income. Why should millionaires not pay tax?"
It's very predictable. Just like taxes on SS.
The federal govt has never had more money than it has now and the tax on an individual has never been higher. Yet this is still not enough money to balance annual Federal spending. Clearly taxing is not the problem.
The highest marginal tax rate in 1945 was 94%; it started dropping in the 60's, and by 87 (ie, Regan), it was down to 38%. Our current total tax rates look to be in the lower half (at least) of historical trends.
Search on "historical USA tax rate", and you should be able to find some tables that lay out the different rates.
Funding the rest of the world is the problem.
@@robmccance Pretty sure it's the nearly three trillion spent annually on SS/Medicare/caid/ACA against nowhere near that in corresponding tax revenue that's the problem and the rest of the world isn't even a blip on that radar.
Having to put your 401k catch-up contribution into the Roth option does not start until 2026.
Correct, nice catch. I pinned a comment with the correction.
Oops, I just saw that you had already made that correction. Thank you.
What about age 65???
At 65 you’d revert back to the ordinary catch up limit which is $7,500. Not sure why the rule isn’t just 60+ though🤷🏻♂️
Roth IRA goes up 500 every year
Not every year, it’s indexed for inflation. It has been a while since the limit didn’t increase from one year to the next though.
All these rules are absurdly complicated.
I’m with you. It could be much more simple.
I thought you couldn’t do Roth over a certain income? Now you have to?
Roth IRA has income limit, Roth 401(k) does not.
What alrocky said 😃
I'm recently retired and uncertain if my 401(k) and IRA will be enough for a stable future. I've set aside $1 million to help secure my financial goals and align with my risk tolerance. Should I consider investing in stocks or buying a rental property?
Invest in real estate, gold , ETfs and high-yield savings account.
The market is not necessarily a rollercoaster if you know your way around the market, there are various opportunities in the present market to accrue good profit, If you are not too savvy with the market, just buy and hold on strong companies with good earnings, or consult with advisors on Etfs and actively managed funds. I am up by 418% in 1 year under guidance.
Awesome.. Please I would love to know or get in touch with your investment advisor. I could really use such expertise in growing my portfolio now that the entire markets is uncertain
guy seems to know what he's talking about so far...
hmmm... interesting
Thanks Goody!
If UA-cam is a personal goal, you should invest in orthodontia/braces. It makes a difference.
WOW 😂 Thanks for the advice!
Only those well into the six figures will be able to max out that catchup. And chances are you will phase out by that income level. I dont understand this. Im near the top of the pay scale allowed before phase out. A 401k savings of $30,500 savings per year is challenging. Even tougher when i add in a std ROTH.
To clarify, the income phaseout only applies to Roth IRAs, not employer plans. I agree it takes a lot of income or low living expenses to be able to max out these plans each year.
Not necessarily. Someone being strategic might decide that it’s smarter to hit all the limits and max out their Roth, meanwhile drawing from taxable saving accounts to pay living expenses. The same amount of money is going into savings, but the technique essentially shifts after-tax money from a taxable account to a tax-free Roth.
We should fire everyone at the IRS and go to a flat tax with no deductions. Your tax form becomes a post card.
That would certainly be a more simple system!
Steve Forbes
The many people who work for the IRS don't make the rules, laws, etc. Everyone can't pay a flat tax with no deductions. Your statement is mute.
@@gingersnaps997 moot not mute
That means lower income will pay more, wealthy will pay less. I imagine if we collapsed all the tax brackets that the average will be 25-30% income tax.
Has anyone figured out how ROTH Ira withdraw will be taxed in the future by our broke govt?
I can bet it will happen (in some form) sooner or later…
If that's the case, then it would probably be "any Roth investments after year 20XX will be taxed at Y%" ie, the Roth categories as we know them now would be frozen, and a new taxable version would be used.
Or alternately, they'd cap the amount at, say, 3 million (indexed to inflation), or something. Anything after that would be taxed as regular income.
And speaking as someone who would likely be over that limit, I don't have a problem with that. Retirement accounts exist to keep individuals from becoming a burden on the social safety net. Once you have a certain amount, you are no longer a burden, and thus society is not incentivized into giving you an additional reason to invest.
What retirement accounts AREN'T are vehicles to avoid paying taxes on your entire portfolio - that one guy that put all his penny stocks for his company into his Roth, and now has something like 300 million in it? Good on him for figuring out a loophole, but I have ZERO problems with that dude being taxed on that.
And it's been shown that people above a certain income will keep on investing, even if there's no specific incentive (such as a tax-advantaged account) to do so. So, that means that rich retirees will have SS+Roth+401k+(more) brokerage investments.
Im 3 minutes in and we’re making content that so far is targeted for well above the youtube consumption age. XD
Not sure what you mean by UA-cam consumption age? My content is watched mostly by the 55-64 age group according to analytics. 😃
Microtargeting, baybee! Financial videos are the highest pay-per-view that UA-cam creators can make. These videos are very much not for the AVERAGE UA-cam audience, but rather "people who are interested in retirement accounts and products" - which means the actual average viewers are likely to be rolling in mid-to-high-six-figure accounts, at a minimum.
Also - my dad's in his 70's, and uses UA-cam all the time. (Mainly to find how-to's on installing plumbing and car parts, honestly.)
Opting In should NEVER be automatic, for ANYTHING. If a person wants to opt in to something they should have to take an intentional action to do so. I'm not saying it should be made unnecessarily difficult, just that they should know and want to sign up for it and shouldn't be forced into something they may not know about. Deciding for other peope what's good for them and mandating they be forced to be involved without active consent is absolutely morally wrong, even if you think its beneficial. That's not how freedom works. Convince people to do it through information and discussion not mandatory enrollment.
I understand your point. The last sentence of your comment is unfortunately what rarely happens, and results in people not saving for retirement. The way I see it, at worst, someone can opt out before even contributing a dollar to the plan, at best, they are going to have automated retirement savings that they may not have ever opted-in for otherwise. What are your thoughts on pensions in this context?
They may not know about it, but they should because it's no secret. Most companies provide all of this info to people in the package they receive before onboarding. It's really not a morals issue, but there is a logistics issue in cases where you want to opt out, but they can't get it processed before the first deduction which leaves you with a peanuts retirement account to fiddle with down the road unless you want to just take the 10% hit and close it out immediately.
This is a theory versus reality thing. You are right in principle, people should not be automatically opted in. But in reality half the country is totally uninformed and does not take the proper action to support themselves in retirement. If their family doesn’t care for them, the taxpayers end up with the bill. So better to do the undesirable thing now and opt people in than deal with the fallout later. This is basically social security.
people aren’t bright enough to do it on their own. and if they don’t we all need to bail them out. not only should the opt in be automatic, it should be a mandatory REQUIREMENT to contribute.
People are lazy, even if well-intentioned. Opting out is crazy easy to do.
Flat tax = raise taxes on the poor. Reminder that every Republican administration since Reagan lost jobs while Democrats are busy building this country so maybe don't listen to them on economic matters.
Holy broad political statement there.
Boy, I’m glad I never got involved in any of that crap. 401Ks and IRAs just keep your money hostage. I retired at 55 just keeping all my money safe in the bank. I have instant access. No rules keeping me away from my money.
Automatic 401k enrollment is completely unethical.
It's time for a general strike to force employers to pay pensions again.
Do you live in fantasy land?
😂😂😂😂😂
if anything, i'd rather have a defined 401k/ira contribution than company pension. boomers already killed the pensions
@@brtecson Essentially you are part of the whiner/complainer camp who blames boomers for everything. Yet no such thing for subsequent woke, entitlement generations that equally have fault? There have been only three boomer presidents: Clinton, GW Bush, and Trump. Globalization started well before boomer generation and relations/trade with China started with Nixon who was not a boomer.
Most left leaning younger voters think open borders is a great thing. Thus competing for bottom rung jobs and depressing wages for low skill labor. Similarly driving up cost of low price housing. Isn’t it grand we are helping all of those hungry mouthes? Better take a closer look in the mirror.
I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm 59 and living off my savings.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as in an individual invstment account or employing the services of a retirement planner/investment advs.
I have thought about this, but haven't figured out how to get consultation, I don't live in a big city.
I am 62, approaching retirement, with over a million in assets beyond my retirement funds, thanks in large part to my expert financial advisor's guide. His expertise has substantially boosted my portfolio's value and performance.
@@georgeearling905do you mind sharing his contact Info?
Becoming a millionaire through a Roth IRA or a 401(k) involves different strategies for maximizing profits. A Roth IRA offers tax-free withdrawals in retirement, which can be advantageous if you expect to be in a higher tax bracket later in life. On the other hand, a 401(k) provides tax-deferred growth and potential employer contributions, boosting your savings. The optimal choice depends on factors like your current and future tax situation, employer match, and investment options. Consulting a financial advisor can help tailor a strategy that aligns with your financial goals and circumstances.
Prioritizing effective personal finance management holds greater significance than the sheer amount saved, irrespective of income source. Consulting a certified financial advisor can offer tailored strategies to optimize financial results by reducing expenses and enhancing income, regardless of whether it's earned through employment or investments.
I wholeheartedly concur. At 40+ years old and newly retired, my external retirement funds total around One million two hundred fifty thousand dollars.. With no debt and minimal retirement fund allocation relative to my portfolio's value over the last three years, I recognize the importance of a financial advisor. Neglecting them isn't an option; however, thorough research is vital to find a trustworthy fiduciary advisor.
This aligns perfectly with my desire to organize my finances prior to retirement. Could you provide me with access to your advisor?
Rebecca Nassar Dunne is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
The rise in tax rates is why I decided to roll over my 401k to a Roth IRA. I don’t want to be 59 and paying taxes on withdrawals from my retirement account.
Pre-tax contributions can help lower income taxes during your working years, while after-tax contributions can reduce your tax burden in retirement. Both have their advantages, but it’s also smart to save outside traditional retirement plans, such as individual investment accounts or with guidance from a financial advisor.
I completely agree. I'm in my mid-40s, getting closer to retirement, with over $2 million in non-retirement funds. I'm debt-free and hold relatively little in my retirement accounts compared to my total portfolio over the last three years. Honestly, you can't ignore the value of a good financial advisor-just make sure to do your homework and find a trustworthy fiduciary.
This is the direction I want to take with my finances as I prepare for retirement. Can you recommend the advisor who helped you get ahead?
Rebecca Lynne Buie has consistently been my top recommendation. She’s widely recognized for her expertise in financial markets and has a strong track record. I highly recommend her.
She seems to be highly educated and well-informed. I conducted an online search for her name and found her website. Thank you for sharing this information.
Over 50 its 8000 in Roth for catch up.
I think 8k is the prediction; aren’t limits announced in late October/early November?
@@mfranquemont1884 its already 8k now. 2023 was 7500. 2024 is 8k.
Over 50 its 8000 in Roth for catch up.
Over 50 its 8000 in Roth for catch up.
Hi Doug, thanks for your comment. The catch up limit for 2024 is currently $7500 for employer plans.
For IRAs it is $1000, for a total of $8000 that you can contribute over age 50. I think this might be what you’re thinking of?
@@SparkWealthAdvisors employee plans! I thought you meant just a Roth or traditional ira at brokerage because its 8k in 2024.