Fortunately, I had a college economics teacher that taught me a lesson at 18. That lesson was: for every huge, frivoluos purchase you make, you need to have an investment double it's worth, this doesn't necessarily mean you should always invest when you make a purchase, it simply means living within your means. Varied sources of income is wise and especially like i said, living within your means. Whenever you're about to make a huge, dumb purchase that doesn't add value think about taxes and how you get your income. I made $272k combined net last year and paid no Federal taxes.
Right there with you. I'm retiring early, no debt. Kids are taken care of. Building my dream home on 11 acres, looking over the river valley. there are loads of ways to make a killing right now, but such high-volume near impeccable trades can only be carried out by real-time experts.
@@harrisonkyunghee Inflation is over 10% here in the UK, but as we know it's definitely way more than the Government would like to admit. My plan is to earn more passive income and ride this out, can your Investment-adviser assist?
@michaelgraham Sure, the Investment advisor that guides me is “Olivia Rene Reyes” and she's renowned and has quite a following. So it shouldn't be a hassle finding her. Just look her up.
@@harrisonkyunghee Olivia really seems to know her stuff. I found her website, read through her resume, educational background, qualifications and it was really impressive. She is a fiduciary who will act in my best interest. So, I booked a session with her
Because ROTH IRAs are tax-free, you'll be able to keep more of the money you've worked so hard to earn.I want to invest more than $300k, but I'm not sure how to go.
Holding fixed-income assets in tax-deferred retirement funds as opposed to taxable accounts has additional advantages. If you don't know how to invest in the market, get some advice from a financial counselor.
Having an investment adviser is the best way to go about the stock market right now, especially for near retirees, I've been in touch with a coach for awhile now mostly and I made over $800K within a short time
Alicia Estela Cabouli* Her honest approach gives me complete ownership and control over my position, and her rates are incredibly affordable given my ROI
I just googled her name and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
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 60 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.
*@shirleygarland4766* This aligns perfectly with my desire to organize my finances prior to retirement. Could you provide me with access to your advisor?
I'm guided by "Camille Alicia Garcia" an experienced coach with extensive financial market knowledge. While you can consider other options, her strategy has yielded positive results for me. She offers valuable insights, including entry and exit points for the securities I concentrate on.
Thank you for the information. I conducted my own research and your advisor appears to be highly skilled and knowledgeable. I've sent her an email and arranged a phone call. Her expertise is impressive, and I'm eagerly anticipating our conversation.
The utilization of after-tax money and tax-free growth makes opening a Roth IRA very advantageous. Through a careful guidance of my FA, I did not pay taxes on my withdrawals of $2.86 million when I retired.
I don't regret the numerous financial mistakes I've made in the past since I've learnt from them. But the biggest one was planning my finances without consulting with a licensed financial counsel.
Indeed, I did make use of a financial counselor. As I get closer to retirement, their advice has been really helpful. I thought compound interest on index funds wouldn't be sufficient because I started late. It's amusing how I've done better than colleagues who have more years of investment experience. I've profited more than $886k tax free.
The decision on when to pick an Adviser is a very personal one. I take guidance from ‘Natalie Lynn Fisk‘ to meet my growth goals and avoid mistakes, she's well-qualified and her page can be easily found on the net.
It's recommended to save at least 15% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 15% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of compound interest and potentially grow your retirement savings over time.
Margaret. has the appearance of being a great authority in her profession. I looked her up online and found her website, which I reviewed and went through to learn more about her credentials, academic background, and employment. She has a fiduciary duty to protect my best interests. I sent her an email outlining my objectives and also booked a session with her; thanks for sharing.
The stock market is a good place to keep your money to avoid taxes while growing your money and even beating inflation. I don't know why people are not taking advantage of the opportunity. I have netted $200k+ this year from being in the market, tax-free.
I bet you were using a hedge fund or a financial advisor. People who do can profit a lot from the market. I rake in a lot monthly from the market too, without much work. Expert fund management is an underrated hack for making money.
You're right. I was actually using a financial advisor. I had been investing himself for a while, but I didn't make much profit until I switched. My life changed in a matter of months, literally.
I'm personally guided by *Sharon Louise Count,* an experienced coach with extensive financial market knowledge. While you can consider other options, her strategy has yielded positive results for me.
Starting early is the best way of getting ahead to build wealth, investing remains a priority. The stock market has plenty of opportunities to earn a decent payouts, with the right skills and proper understanding of how the market works.
Ever since I lost my job with the ministry, I have been surviving through my investment with her, am so glad I invested when I did. I’m earring $25k weekly with her
I am a client with KKOS, Please answer this Question, Invest in what you know (yep) I Can invest my solo self directed 401k Roth into a start up (yep) but "Not" an S Corp (yep) but... is there any cap on my ROI if I invest in a qualified business or startup? Example If I invest 100k into a qualitied LLC or startup and if it takes off and I can double my money in 12 months to 200k...is that ok? Is their No Cap on ROI once Roth money is invested? I have not heard any videos on investing in startups or in an current operating LLC with regard to gains (ROI) Good work guys, love the vidoes!
I don’t know the answer to your question but why would that be any different than buying 100k if a stock that doubled in a day? There’s no issue with that. And Peter Thiel has something like 4 billion in his Roth IRA so certainly he had many instances of this occur.
My understanding, unless they changed the rules last year was, 401ks need to be funded by 12/31 of the year in question. Trad/Roth IRAs need to be funded by the tax filing deadline if the subsequent year, usually 4/15. And SEP IRAs can be funded by the tax filing deadline + extensions … 9/15 for S-Corp or Partnership…10/15 for personal or C-Corp.
Employer contribution on solo 401k can be made up until filing deadline+extensions. Emoloyer contribution lines are blurred when non S-corp single member LLC filing with pass through income/ no payroll.
This is my fifth year after retirement. I’ve been following the 4% rule thing, but this isn’t really how hard I expected things to be. I still have about $460k outside funds in my IRA to invest in stocks. Pls how do I take advantage of the market turnaround?
A lot of folks downplay the role of advisors until being burnt by their own emotions. I needed a good boost to help my business stay afloat, hence I researched for license advisors and came across someone of due diligence, helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far.
I started out with an FA named Nicole Desiree Simon Her honest approach gives me complete ownership and control over my position, and her rates are incredibly affordable given my ROI.
I got frustrated and somewhat confused half-way through with all the joking around for 5 minutes without moving forward with the concept. Great information! difficult presentation.
Here is the problem. If you are an employee working for other, which is a very large percentage of people, the extra money you can put on your 401k and convert it to IRA cannot be self directed IRA. You'll buy the same useless mutual funds and although it isn't as bad, it is worse than the alternative - a regular non-retirement margin account
Hi Mark. I am a client and did a fairly large IRA conversion last year and got an extension on my taxes after assuring I had the maximum taken out. The conversion was from an IRA that was previously funded by an employer matched 401 IRA that was rolled over after I retired. It seems looking at my old W2's with the block 13 checked and a lot of numbers in the 12A-B-C clocks filled in, I may be able to safe some tax money on the conversion? Should I contact my assigned attorney at your fim, Mark, for advice or someone st Mats company. I set up a self directed Roth at Mat's with those proceeds. My tax guy doesn't get it. Help, please, lol!
When you see “you can withdraw contributions whenever you want tax-free,” isn’t that limited to $10k or you can withdraw any amount as long as it’s your contributions?
The additional $40,500 comes from after tax contributions to a 401k. You need to confirm with the administrator of the plan that in service withdrawals of those contributions are allowed. You only pay taxes on the gains of those contributions when performing a rollover to a Roth IRA.
@@BarbellFinancial you could also have in plan conversions, they are functionally the same, except the money stays in the 401k just gets recharacterized as a Roth instead of after-tax and then the earnings is tax free.
Note that if you are planning an early retirement (before 59.5 y.o.) , you do NOT want all your saving in ROTH. For early retirement you can take fixed early withdrawals from traditional (rule 72t) before 59.5 but you can’t do that from a ROTH.
@@jaredmarquis6680 yes you can withdraw the principal, but I suspect that in many cases the principal wouldn’t allow for early retirement (I’m assuming the investment growth makes up the majority of savings). Having a diverse portfolio of buckets (Roth, non-Roth, and non-retirement) to withdraw from does have some tax flexibility. One scenario where the principal might used effectively in early retirement is if your about 5 or so years out and use the ROTH conversion ladder approach to early retirement.
The rolling over of old IRA into a 401k needs more of an explanation, I'm sure the rule your talking about rolling an old ira into 401k does not change the rule. Min.6:22
Why can’t I just put $61,000 into my solo 401k after-tax account and directly roll it over into my Roth IRA? In other words, do I have to do the $20,500 employee-contribution into my solo Roth 401k account? Do I have to max out my employee-contribution (20,500) before I can make my after-tax contribution?
You can, but you don't want to. Why? Employee contributions directly to Roth can be withdrawn immediately without penalty (even before 59.5), so long as you have had any Roth for 5 tax years. The remaining $40,500 that you contribute to the After-tax bucket is technically a conversion when you move it to Roth, even though no tax is due. That starts a separate 5-year timer on the $40,500 before it can be withdrawn, even if you're over 59.5.
At the 10:05 mark, what do you mean by "20,500 of straight Roth"? Are you referring to $20.500 of traditional 401K contributions? or do you actually mean we should elect to do $20,500 of Roth (after tax) 401K?
If you make a deductible contribution to your IRA, then the Roth conversion is taxable. They wash each other out, so why do the paperwork for both the deduction and the conversion tax? Plus, there are income levels where even a deductible contribution isn't possible, so one solution fits all cases.
It looks great. When I first read about millionaire Roth IRAs I was like that’s awesome, but it’s not really cause let’s say you get lucky in an investment or do well you still will get hit with estate tax at a certain level when ya die. It’s why zuckerberg moved his shares into a grat. But it’d been even better to move em into a GST with your generation transfer tax exemption so you and your kids will Avoid estate taxes which truly are unconstitutional if you think about it. Estate taxes are direct taxes. The 16th amendment changed the constitution so income taxes are fine. But it didn’t change all direct taxes. The constitution says direct taxes should be apportioned among the states. It’s absurd it’s been like a hundred years and there’s still nothing done about the unconstitutionality of that. It’s great for lawyers and accountants and politicians but it’s still illegal cause they never changed the constitution. They just say it’s legal and sadly no one has contested it so there’d be an amendment or force congress to change the law.
I didn't realize for a while that this was the total from a 3rd party employer's Roth plus your own business' Roth. You can't get to the Roth maximum with just the latter while paying a reasonable salary unless you have a 25% profit-sharing plan in place to top up your Roth, income and payroll taxes constrain your after-tax contribution too much. You could instead pay yourself a really huge salary to get the after-tax amount large enough, but I would argue that the cost in income and payroll tax makes that foolish.
So if you're under 50 and your income is too high: 1/ you will not be able to do IRA or Roth IRA. That means forget about the 6K for IRA, correct? 2/ Therefore, your total contributions can add up to 61K, not 67K, right? 3/ After contributing to roth 401k and converse after-tax traditional 401k, can you then converse the total to Roth IRA, moving the money out of your company's plans? And if you are qualify for an IRA (your income is not too high), you can just go to the bank, etc. to open an IRA/Roth IRA and put in the money from your pocket, no need for this contribution to come directly from your W-2 (or to be shown in a box like in case if box 13 for the after tax contributions)?
No to all 3. Re-watch the video... if you have too much income, you make a non-deductible contribution to traditional IRA and then convert it to Roth with no tax event. The difference between $61k & $67k is the over-50 401k catch-up. You contribute to Roth. Your employer matching goes into pre-tax, which you can choose to convert to Roth. Your employer will typically not let you take this money out of their plan until you terminate employment. You can also contribute to After-tax, which is often allowed to be rolled over (e.g., once per year) while still employed to an outside Roth account. Go to the bank and open two IRAs per person - a traditional IRA, and a Roth IRA. You deposit into the first one from your personal bank account, then later convert to Roth by ordering money moved to the second one.
If you are thinking about a Roth conversion in a 401k, then just deposit all of your contributions into Roth IRA now. The tax brackets are at historical lows. You can’t convert a traditional IRA to a Roth till your older than 59 1/2. If you do you will pay taxes on the converted amount plus 10% penalty. Depending on the amount converted and age you may have to pay a higher Medicare premium. Taxes will most likely be higher in the future due to all the money we are spending on the war and pandemic. In figuring out the Roth conversion calculation, if you have after tax and pre tax IRA (non Roth) they are calculated differently in the conversion process. So many rules to Roth conversions that if not done right you could lose more money in penalties than if you had just put money in the Roth in the first place. A Roth in a 401k or 403b is not limited to $6,000. Open a Roth account outside of work and fund it to start the clock ticking down to 5 years (the time to be vested). Roth’s outside of 401k or 403b are limited both in contribution limit and how much you make at you job (can you invest in a Roth outside of work). If you ever stop working at your job you then have a safe place to rollover your work Roth into your personal Roth. When you reach 59 1/2 you can then pull out money or let it stay invested in your personal Roth. Traditional IRA in 401k or 403b accounts are subjected to RMD with drawls at current 72 and they want to go to 75. Those are mandatory withdrawals from traditional IRA. If you don’t do it or forget then you will be penalized for the amount you should have taken out. Plus the older you get past the RMD age the more you pay. Roth IRA has no RMD. I hope this helps.
@@bwcimprint6985 Several corrections to your opening comments. Many people can't contribute directly to a Roth IRA, and nobody can do it at $61k+/yr, which is why this 401k technique is used. And you can absolutely convert traditional 401k or IRA to their Roth versions at any time without the 10% penalty - there is no requirement to be over 59-1/2. Roth IRA and Roth 401k are two separate beasts, with similar rules / benefits but some nuanced differences.
@@amyhoang9140 Yes, if your income is not too high then you can just open a Roth IRA at the bank and deposit a personal check. If you make a high income, you need to do the 2-step "backdoor" method of depositing into traditional IRA and then converting to the Roth IRA. If you want to get more than $6-7k/yr into your Roth, then you will also need to do the 401k method - that can be used to add another $61-67k. Generally, people will start with the 401k method because employers will match some of your contributions, and that's free money.
Where does SEPIRA fall in all this? Convert to Traditional Roth IRA? And then $27k into my solo Roth 401k. Then do all funds following this go through the sep to solo Roth 401k channel?
Great stuff Mark and Mat. I've been doing this for a while. My question is this; I have a SDIRA that I use to play around with Crypto. Is there a way to move or convert my 401k ROTH monies into my SDIRA so that I have more to invest?
I was told I could only do that if I left the job. I’m still working and contributing to my company 401k, so as I understand it I cannot rollover that 401k. If there is a way, please share it. Thanks.
Yes, sortof. I've done it for years. First, the thing to know is this... money you rollover into a Roth IRA becomes stuck as Roth IRA. And SD-IRA has been a more popular target for politicians to restrict vs. 401k. You might consider how you can do this with a Roth Solo 401k. Now, to your question... employer plans typically restrict a) your contributions, and b) employer matching, and c) gains on both. What does that leave? Contributions to the After-tax bucket (which is neither pre-tax nor Roth; it's a hybrid). These contributions and gains are often unrestricted from being rolled over once per year, directly into a Roth IRA or another Roth 401k. Bingo. (This is the main vehicle for doing the Mega Backdoor Roth 401k that this video discusses.) So, you may not be able to do this with money you already have in your 401k, because it probably isn't in After-tax. But you can start contributing heavily to that bucket and have money that can be rolled out of your 401k without quitting your job - this gets you a lot more than $7k/year into a Roth SD-IRA or Roth Solo 401k where you can do creative investing.
If your company’s 401k plan allows in service distributions then you can do it. If not, then you can’t move it out until you leave that job. Just ask the administrator of the plan for help with your question.
when you convert the employer match into the Roth, you have to pay tax. Which for many of us married healthcare providers, would be 50% tax. Would it worth it anymore?
I’m pretty sure that’s what he just did. Max Roth IRA, max 401k to the match only, then contribute the 401k yearly max to the after tax 401k. This only works if your employer allows in service distributions which many do not, otherwise you can’t convert until after you leave your job and that will get messy.
I have always wanted to invest in Bitcoin but I'm very inexperienced,I even watched some videos yet still difficult to... understand I'm so much in need of an expert..
What about what I retain you and talk to Darren, I miss a message because I'm moving, literally driving and the. You reach out over 3 times and never get a response? Is that normal?
Reading about people grabbing multi-figures monthly as income in investments even in this crazy days in the market,any pointers on how to make substantial progress in earnings?would be appreciated 😇
Can you add that to the permission validation ledger Interdiction Trust acceptable use policy April 2024 Schedule A to Z forgery proof legal document security Network?
For people who work for big brother have access to a 401k and 457k and don’t have any matching. Could you explain a little what advice you have here. I’m also almost positive they will not allow any money to leave these accounts until your retired and or might even have age limits. I do max my personal Roth IRA yearly
There is much more to this process than they are discussing so be aware of what your company allows or doesn't allow. Your question falls under the "it depends" category. It really is up to your company and what they allow in your plan. First, your employer has to allow you to do "in service distributions." If they don't you can't rollover anything anyway. Second, if they offer you the option of ROTH 401k, you can't rollover those Roth 401K contributions you make into your Roth IRA until you are age 59.5 or if you leave the company. Also, if you get matching ( you said you don't) but if you do, you can't rollover company matching contributions because for one, those are always considered tax deferred comp so even if you are contributing to your Roth 401k, your company matching are being contributed to your Trad 401k where they will sit until they are vested and can be rolled out to a Trad IRA where you can convert them (and pay taxes on that conversion) to your Roth IRA. If your company does allow you to the option to contribute after tax money, you can roll over just that amount, but only up to the amount of times your company allows "in service distributions." Again it depends on your plan rules and each plan is different. They may allow 1 time per year or 1 time per quarter. So if this is possible, its best to wait until you have maxed out all those contributions before you do your Mega Back door. Lastly, if you are a HCE (Highly Compensated Employee) for 2022 that is you make over $305k, your ability to contribute to any deferred comp plans are eliminated once you reach that income level. DYOR its NOT this cut and dry and there are many moving parts this and its really boils down to your companies Savings Benefit Plans rules. Hope this helped a little...
@@rsjones1163 good response ! I think my plan told me years ago they wouldn’t do a “in service distribution” but maybe that was for a private Roth IRA type and not their own will have to look into again thanks ! Will piece things together
Can someone place settlement money from a personal injury case into a back door Roth IRA? Or does the deposit have to come from earned income on which income tax has been paid?
Would any part of the settlement have been for lost wages (or anything else reported on a Form W-2)? If so, that part (reported on Form W-2) could be put into a retirement plan. I am not aware of any way to put tax-free personal injury damage money into tax-advantaged retirement accounts.
Been down this path... your contributions cannot exceed your earned income, and there's no way to assign the claim to an entity that your Roth owns. If you setup an LLC + Solo 401k, you might have more flexibility because you control the accounts, but the rules still apply. (e.g., contributions don't have to be made via paycheck deductions like they do with most corporate 401k plans)
@@hornbaker Yeah. It seems to me that if a contribution were less than the earned income, then it might be fine. It would be as if the income was invested and the untaxed settlement was used for living expenses.
I have a question. In 2019 I left my W2 job and rolled my 401K into an IRA LLC and purchased a SFR rental property. How would I go about converting the rental property to a ROTH? Thanks
at minute 10:55 for any portion that employer matches the 401k roth. Would you convert the employer matched amount from transitional $$ to Roth IRA if your tax bracket is 47% (state + federal)
I was told that my ROTH inside my plan (401K) is not transferable to another ROTH and even the contribution is not accessible until 59 1/2 What am I missing? EDIT: Checked with TR Price and the plan does not allow "In Service Distribution", what other options do I have?
I think if you change jobs you can transfer the 401k to the new job's account (not sure about this), so make sure the new job allows in-service distributions
@@michaelrudolph7003 Correct. I don't have access to it to move into any other ROTH options or other trading accounts. I think that's just how a company elects to set up the ROTH.
As much as I like this, the one flaw that exists: I get money into my 401k Roth side component and that includes employer matching. However, My 401k plan administrating rules do not allow me to roll JUST ROTH contributions into my ROTH..been on the phone numerous times.. ..I would love to find a way to get more per year into my roth IRA.
@@eric3434 My employer. Each employer can structure the administration differently..at least that's what I have been told. Now I can say this, I have rolled out a butt load of money 3 years ago into an rollover ira and at that time, I had asked the same thing; They told me exactly this; Your plan administrator doesn't allow us to 'cherry pick'. So when I rolled out Say $500k (Just and example) so much went into the rollover (the tax deferred stuff) and the 401k roth contributions, went into my ROTH IRA. If you know of a way to correct happy to hear. I have most of the components of the Mega Backdoor: I do the non deductible IRA, I roll it over and I contribute After tax into 401k Post meeting IRS contribution limits for deducting from my gross, and my company even matches my after tax contribution...it's almost there..just can't bypass plan rules.
@@nickstone7834 Doesn't really make sense to me. Though i only keep 100% roth funds in my 401k and ira's. I don't keep tax deferred funds (traditional 401k or traditional ira) at all. Did they say 'Pro Rata rule'? Employer 401k matching contributions are placed in 401k pre-tax accounts. I believe you have to convert an equal percentage of pre-tax 401k funds to 401k roth. Or roll an equal percentage of pre-tax 401k funds to a pre-tax IRA at the time of the conversion from 401k after-tax to 401k roth. For instance, if you have $40k in after-tax funds and $100k in 401k pre-tax funds, and you want to do an in-plan conversion of $30k in after-tax funds to 401k roth, thats 75% ratio of the after-tax funds. So to move $30k of after-tax to 401k roth when you have $100k in pre-tax 401k funds, you need to also convert 75% of the pre-tax 401k funds ($75k) to 401k roth, or roll 75% of the 401k pre-tax funds ($75k) to a pre-tax IRA. Might be wrong here. I am no expert when it comes to non-roth funds. Traditional pre-tax 401k and ira's are worthless to me and i avoid them at all costs unless the employer is matching. And if the employer is matching, i'm converting those employer matched funds to roth immediately.
@@eric3434 I am guessing if all you're money is in after tax 401k and ROTH, then you have no need to get your taxable income down. Are you self employed? For me, I need to lower my taxable income by the IRS Limits, otherwise my tax obligation would simply be insane. I certainly see the value of ROTH's vs traditional..I just can't afford to have that much taken out after taxes. as for the equal amounts you mentioned, that's never raised it's head or that topic has not been mentioned. Like I said, I had bulk of retirement close to million just before pandemic; pre and post tax bundled but tracked. I told my plan admin, roll x amount into rollover and into my Roth..they did that.. I can always call plan administrators and ask..I made it pretty clear this past year I wanted to ONLY ROLL roth money into roth ira. No go they said. not part of your plan. And for the record plan also states I can only roll so much out of the 401k. as long as I am employed
@@nickstone7834 I'd love to bring my taxable income down as much as i possibly can. But I use deductions/expenses or flat out stop generating taxable income altogether. Yes, i am self employed with a self directed solo 401k and trust fund. I use the mega backdoor 401k roth and IRA roth contributions. Roth is the only way forward with benefit. If you can gain only 8% on your funds every year for just 5 or 6 years, it outweighs the benefits of a 401k pre-tax imo. So i deal with it up front and just pay the tax. I can't benefit in receiving employer profit sharing contributions as I pay myself. But if i was receiving employer profit contributions from an employer, i would take them and just convert those funds to roth, or roll them to a pre-tax IRA and deal with it later down the road. I hear you about the burden of taxes. The insane level of taxation that we are subject to on earned income is agonizing. Its not a fair game to tax earners at these levels. I just sent a huge check to our IRS mafia myself. Than drank a bottle of hard alcohol to overcome the pain, but I ran out of alcohol a little short of achieving my goal. When you said the word 'Cherry Pick', I would bet your administrator is telling you her hands are tied because of the Pro-Rata rules. And if thats the case -> roll 100% of your 401k pre-tax to a pre-tax IRA together with an in-plan conversion of 100% of your after-tax to your roth 401k. From there you should be able to roll the roth 401k to your roth ira, or just keep it in the roth 401k. (I think) Or if they can't do that since your employers plan does not allow in-service rollovers, convert the pre-tax 401k to roth 401k and pay the tax. And an in-plan conversion of the after-tax 401k to 401k roth. If your employer has a restriction in the plan where the plan restricts you from in-service rollovers (rolling from pre-tax 401k to pre-tax ira, or from roth 401k to roth ira). Ask them if they would allow you to quit, take a vacation for a month then rehire you after your vacation. :) Or alternatively if they will modify the plan to support in-service rollovers. In-service rollovers are permitted by the IRS, so this issue is only a restriction of your employers plan.
I recently discovered your channel and love it! At some point could you talk about continuing education and if there is a way to deduct this if self employed? If I have an s corp for professional services and I’m considering doing a masters in that field (not necessary to have but nice to have). Can this count as an expense or are there rules around this?
Very confused. Retired & have 401s from which I am now drawing RMDs. Have no earned income. So can i covert some of 401 to IRA then convert that to Roth? & are limits the mega roth back door limits?
I'm not clear with what the "After-Tax Employee Traditional Contribution" is versus the "ROTH 401k Employee contribution". I have a day job, my company matches a small fraction (let's say 2% up to the first 6%). I understand I am allowed to take what is now my "Traditional 401k" contributions and make them "ROTH 401k contributions" up to $20,500 and I think I can add my employers contribution to this as well. I am not clear what the "After-Tax Employee Traditional Contribution" is though. Can someone please explain?
Roth and pretax contributions are tax advantages so the IRS limits them to 20500 a year. After tax is non tax advantage money so there is no specific limit. The idea behind it is that you contribute after tax and then convert it to Roth which is a tax advantages source above your limit. Not all employees offer after tax contributions
At around 6:51, you mentioned that I need to convert old traditional IRA first before I can convert newer non-deductible IRA. So if I have a 401k rollover that's older than my non-deductible, do I need to convert all of that first and pay taxes first before I can convert the non-deductible? I went back to your earlier videos, but didn't find an answer. Thanks!
This sounds good…but they have glossed over a number of hurdles that 95% or more of ppl would not be able to get past. I have been a CFP for over 26 years and making this work is going to be impossible for most people. Once again “buffet” advice for individuals.
Mark - please clarify as I thought in this or another video you stated that anyone could contribute to a Roth IRA, however, I see. from the IRS that in order to contribute to a traditional IRA, you, and/or your spouse if you file a joint return, must have taxable compensation, such as wages, salaries, ...
These guys can’t explain rain without confusing the crap out of you. Here’s how you do it. Contribute to the IRS limits tax deferred up to $30k if you’re over 50 to a 401K. Employer match for example is $16K. Now you’re up to $46K. Contribute after tax to your employer 401K up to the IRS limit for 2023 of $73k in total contributions. So that means you’ve contributed $27k in after tax. Roll the after tax into a Roth and you’re done. The $27k is tax free when you take a distribution because you’ve already paid taxes on it.
The after tax 401k is really for those that have enough income to already max out their traditional/Roth IRA and traditional/Roth 401k. One thing not everyone know is that Roth can mean either Roth 401k and/or Roth IRA. You can contribute significantly more to a Roth 401k than a Roth IRA due to the higher 401k limit (vs IRA limit) and the ability to rollover after tax 401k contributions to either a Roth 401k/Roth IRA. Not every employer 401k plan allow you to contribute to an after tax 401k nor does the plan allow you to roll over after tax 401k contributions immediately to Roth 401k/Roth IRA. Some employer 401k plan allow after tax 401k rollover into Roth 401k or Roth IRA quarterly/yearly. If so you can rollover your after tax 401k contributions during that quarter/year (that you already paid taxes on) but your after tax 401k earnings during that time (quarter or year) will likely remain with your traditional tax deferred 401k. So in the $27k example you gave there, that is only talking about the $27k after tax 401k contributions, not the earnings. Also converting from traditional 401k and after tax 401k later to Roth 401k/Roth IRA becomes more complicated the longer you wait because you have to follow the pro rata rule, where your have to convert them to traditional IRA and Roth IRA based on the ratio of your after tax 401k to traditional tax deferred 401k in your 401k plan. Plus you have to pay taxes on the tax deferred amount and the earnings in the Roth 401k/IRA conversion. Which can be quite high especially if you are in the high income group (>24%). I agree that it is most advantageous to rollover over after tax 401k contribution immediately (if plan allows) or quarterly/yearly before it makes too much after tax 401k earnings (which will be taxed when you rollover to any Roth account or take a distribution).
If I have a roth 401k that only covers my wife and I. To make after tax employee traditional contribution are you saying we should not do any match from corporation? Does the after tax contribution employee have to come from a payroll check situation? or can I just take it as compensation? Not sure what qbI means.Thanks
Mark, so my wife and I are contributing to traditional pretax 401k , maxing out at 20.5 and 27k for myself. We are doing the 6k and 7k roth each year too. We have wanted to do the backdoor but didn't know how. We currently do not have any money 8nan traditional IRA. Can we open a IRA , put money in it. Not take deduction and convert to roth Ira that we have had for years. If so how much can we each do? Thanks
Is the Mega Backdoor Roth IRA only available, if your company does a 401K match? What are the opens of employees who's employer does not do a 401K match
No, mega backdoor Roth IRA is only available if your 401k offers AFTER TAX contributions, different from pre tax & roth contributions that are standard for most 401k plans
The matching is counted toward the total 415 (c) limit unless you can set up a separate 401 (a) plan for matching then you can contribute the total of 61k (2022) in a 401k + matching in a 401(a)
Is there a way to do this if you don't have a 401k with your employer and you don't have time for a side hustle that will earn enough money to have a solo 401k?
@@BarbellFinancial only if he and his wife are the only employees! However a third party administrator to setup a 401k for you is only 2,000 a year and that’s more than made up for in the tax savings and the employee benefit!
Buy a self directed solo 401k plan. Around $400 - $650 a year if your willing to do most of the work. (dont use Nabor's, they suck) Or a couple grand a year if you want someone to do it for you. The initial setup is a pain in the rear. But once it's setup, its easy to maintain. Pay the taxes and roth all your contributions. The law that is in place to perform mega-backdoor contributions likely won't last much longer. But it will last thru 2022. Take advantage of this opportunity. It's a huge win for self employed and S-corps.
@@eric3434 Yeah, but it sounds like they are planning to allow employers to make Roth 401k contributions. Which means you would likely achieve the same benefits of the mega back door Roth IRA without having to worry about the 5 year rule if you have a solo 401k.
To have a chance to get your question answered on a podcast, please submit it to podcast.mainstreetbusiness.com/ OR contact my team at directedira.com/appointment/ Thanks!
Also - If I have a traditional IRA, can I transfer it to my employee ROTh 401K and avoid taxes or will i need to transfer it to an employee Traditional 401K?
Why not just convert to a ROTH IRA? As long as the money in your Trad IRA was taxed, you just move it to ROTH. Then if you leave your job you convert the Roth 401k to your Roth IRA. Easy peasy.
Ok dumb question…. Why can’t you just invest in an example Ameritrade account and just let it grow vs making a 401k then take out what you need when you need? Not trying to be a smart I am truly asking. I understand that then I guess you can’t roll it into the Roth correct? But also what is wrong with doing something like that other than of course paying the awful taxes.? Thank you. Trying to learn and one day retire thanks
@@mmar161 you can certainly do that and pay more money in taxes. You don’t get any tax benefit to investing in a brokerage account at ameritrade for example. 401k contributions provide tax advantages to you to either lower your taxable income for traditional 401k contributions or let investments grow tax free for Roth 401k contributions. And if you get a company match, then that’s free money.
@@mmar161 You paid income tax on the money put into your Ameritrade account. You will be taxed on all of the profits it returns. If instead you put that after-tax money into the After-tax bucket of your 401k, you could roll it into a Roth tax-free and make the same investments. But the gains will forever be 100% tax free. If you need to spend that money in the near term, putting it all into Roth may not be attractive because there are restrictions on taking it out. (The rollover money can be withdrawn after 5 years; the profits after you're 59.5. Both can come out anytime for a 10% penalty plus taxes on gains.)
Fortunately, I had a college economics teacher that taught me a lesson at 18. That lesson was: for every huge, frivoluos purchase you make, you need to have an investment double it's worth, this doesn't necessarily mean you should always invest when you make a purchase, it simply means living within your means. Varied sources of income is wise and especially like i said, living within your means. Whenever you're about to make a huge, dumb purchase that doesn't add value think about taxes and how you get your income. I made $272k combined net last year and paid no Federal taxes.
Right there with you. I'm retiring early, no debt. Kids are taken care of. Building my dream home on 11 acres, looking over the river valley. there are loads of ways to make a killing right now, but such high-volume near impeccable trades can only be carried out by real-time experts.
@@harrisonkyunghee Inflation is over 10% here in the UK, but as we know it's definitely way more than the Government would like to admit. My plan is to earn more passive income and ride this out, can your Investment-adviser assist?
@michaelgraham Sure, the Investment advisor that guides me is “Olivia Rene Reyes” and she's renowned and has quite a following. So it shouldn't be a hassle finding her. Just look her up.
@@harrisonkyunghee Olivia really seems to know her stuff. I found her website, read through her resume, educational background, qualifications and it was really impressive. She is a fiduciary who will act in my best interest. So, I booked a session with her
My man!
Because ROTH IRAs are tax-free, you'll be able to keep more of the money you've worked so hard to earn.I want to invest more than $300k, but I'm not sure how to go.
Holding fixed-income assets in tax-deferred retirement funds as opposed to taxable accounts has additional advantages. If you don't know how to invest in the market, get some advice from a financial counselor.
Having an investment adviser is the best way to go about the stock market right now, especially for near retirees, I've been in touch with a coach for awhile now mostly and I made over $800K within a short time
I wouldn't mind consulting the advisor who guides you, I really want to grow my retirement fund since I could retire in 3 years.
Alicia Estela Cabouli* Her honest approach gives me complete ownership and control over my position, and her rates are incredibly affordable given my ROI
I just googled her name and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
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 60 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.
*@shirleygarland4766* This aligns perfectly with my desire to organize my finances prior to retirement. Could you provide me with access to your advisor?
I'm guided by "Camille Alicia Garcia" an experienced coach with extensive financial market knowledge. While you can consider other options, her strategy has yielded positive results for me. She offers valuable insights, including entry and exit points for the securities I concentrate on.
Thank you for the information. I conducted my own research and your advisor appears to be highly skilled and knowledgeable. I've sent her an email and arranged a phone call. Her expertise is impressive, and I'm eagerly anticipating our conversation.
The utilization of after-tax money and tax-free growth makes opening a Roth IRA very advantageous. Through a careful guidance of my FA, I did not pay taxes on my withdrawals of $2.86 million when I retired.
I don't regret the numerous financial mistakes I've made in the past since I've learnt from them. But the biggest one was planning my finances without consulting with a licensed financial counsel.
Indeed, I did make use of a financial counselor. As I get closer to retirement, their advice has been really helpful. I thought compound interest on index funds wouldn't be sufficient because I started late. It's amusing how I've done better than colleagues who have more years of investment experience. I've profited more than $886k tax free.
Please who is the consultant that assists you with your investment and if you don't mind, how do I get in touch with them?
The decision on when to pick an Adviser is a very personal one. I take guidance from ‘Natalie Lynn Fisk‘ to meet my growth goals and avoid mistakes, she's well-qualified and her page can be easily found on the net.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
It's recommended to save at least 15% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 15% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of compound interest and potentially grow your retirement savings over time.
Margaret. has the appearance of being a great authority in her profession. I looked her up online and found her website, which I reviewed and went through to learn more about her credentials, academic background, and employment. She has a fiduciary duty to protect my best interests. I sent her an email outlining my objectives and also booked a session with her; thanks for sharing.
Who recommended that amount?
The stock market is a good place to keep your money to avoid taxes while growing your money and even beating inflation. I don't know why people are not taking advantage of the opportunity. I have netted $200k+ this year from being in the market, tax-free.
I bet you were using a hedge fund or a financial advisor. People who do can profit a lot from the market. I rake in a lot monthly from the market too, without much work. Expert fund management is an underrated hack for making money.
You're right. I was actually using a financial advisor. I had been investing himself for a while, but I didn't make much profit until I switched. My life changed in a matter of months, literally.
This sounds great. I want to switch to using an advisor. What do you think?
I'm personally guided by *Sharon Louise Count,* an experienced coach with extensive financial market knowledge. While you can consider other options, her strategy has yielded positive results for me.
@@gregorywhemhow much should financial advisors be charging is it a monthly fee or yearly fee?
Starting early is the best way of getting ahead to build wealth, investing remains a priority. The stock market has plenty of opportunities to earn a decent payouts, with the right skills and proper understanding of how the market works.
I truly agree with you on that,
I must say crypto is the future and with the way Bitcoin is climbing so high it's really advisable for people to invest now.
Mrs Kamilla helped me recovered all I've lost trading by myself
Ever since I lost my job with the ministry, I have been surviving through my investment with her, am so glad I invested when I did. I’m earring $25k weekly with her
Investment is that tiny line that separates the rich from the poor.
It is very clear mark that you are the SUPERGEEK!
This is fantastic information! Continue to share your knowledge!
This guy is my hero
Everybody talks about the mega 401k but never the cash balance plan! My cash balance needs some love
Thank you for the info but can you do another video that articulates better and less confusing ?
I am a client with KKOS, Please answer this Question, Invest in what you know (yep) I Can invest my solo self directed 401k Roth into a start up (yep) but "Not" an S Corp (yep) but... is there any cap on my ROI if I invest in a qualified business or startup? Example If I invest 100k into a qualitied LLC or startup and if it takes off and I can double my money in 12 months to 200k...is that ok? Is their No Cap on ROI once Roth money is invested? I have not heard any videos on investing in startups or in an current operating LLC with regard to gains (ROI) Good work guys, love the vidoes!
I don’t know the answer to your question but why would that be any different than buying 100k if a stock that doubled in a day? There’s no issue with that. And Peter Thiel has something like 4 billion in his Roth IRA so certainly he had many instances of this occur.
My understanding, unless they changed the rules last year was, 401ks need to be funded by 12/31 of the year in question. Trad/Roth IRAs need to be funded by the tax filing deadline if the subsequent year, usually 4/15. And SEP IRAs can be funded by the tax filing deadline + extensions … 9/15 for S-Corp or Partnership…10/15 for personal or C-Corp.
Employer contribution on solo 401k can be made up until filing deadline+extensions. Emoloyer contribution lines are blurred when non S-corp single member LLC filing with pass through income/ no payroll.
This is amazing information!! Keep the knowledge coming!! When is the Summit?
Friday
@@trigger455 where’s the info to be a part of it?
This is my fifth year after retirement. I’ve been following the 4% rule thing, but this isn’t really how hard I expected things to be. I still have about $460k outside funds in my IRA to invest in stocks. Pls how do I take advantage of the market turnaround?
Well the bigger the risk, the bigger the reward and such impeccable decisions are better guided by professionals.
A lot of folks downplay the role of advisors until being burnt by their own emotions. I needed a good boost to help my business stay afloat, hence I researched for license advisors and came across someone of due diligence, helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far.
How do I Find this Lady?
I started out with an FA named Nicole Desiree Simon Her honest approach gives me complete ownership and control over my position, and her rates are incredibly affordable given my ROI.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
Thank you for this video. Great information.
@mark j kohler can you do a video on taxes when selling your business? Service based business.
Great as always!!!
Wow really excited about this 😍
I got frustrated and somewhat confused half-way through with all the joking around for 5 minutes without moving forward with the concept. Great information! difficult presentation.
Here is the problem. If you are an employee working for other, which is a very large percentage of people, the extra money you can put on your 401k and convert it to IRA cannot be self directed IRA. You'll buy the same useless mutual funds and although it isn't as bad, it is worse than the alternative - a regular non-retirement margin account
Excellent information!
Hi Mark.
I am a client and did a fairly large IRA conversion last year and got an extension on my taxes after assuring I had the maximum taken out. The conversion was from an IRA that was previously funded by an employer matched 401 IRA that was rolled over after I retired. It seems looking at my old W2's with the block 13 checked and a lot of numbers in the 12A-B-C clocks filled in, I may be able to safe some tax money on the conversion? Should I contact my assigned attorney at your fim, Mark, for advice or someone st Mats company. I set up a self directed Roth at Mat's with those proceeds. My tax guy doesn't get it. Help, please, lol!
Mark is the Roth king
When you see “you can withdraw contributions whenever you want tax-free,” isn’t that limited to $10k or you can withdraw any amount as long as it’s your contributions?
can only do it if your 401K plan allows for in service distributions, I wish mine allowed it. Id love to do it but without quitting my job I can't
Ask your plan provider if they can do a Roth in plan conversion and just convert within side the 401k thus not needing an in service distribution
An example would be helpful here. Not sure where the $40,500 is coming from in the cylinder. And needs some clarity on taxes at each stage
The additional $40,500 comes from after tax contributions to a 401k. You need to confirm with the administrator of the plan that in service withdrawals of those contributions are allowed. You only pay taxes on the gains of those contributions when performing a rollover to a Roth IRA.
@@BarbellFinancial you could also have in plan conversions, they are functionally the same, except the money stays in the 401k just gets recharacterized as a Roth instead of after-tax and then the earnings is tax free.
@@harrychufan yes, either approach is great if they are permissible
61000 - 20500 = ding ding ding ding
Note that if you are planning an early retirement (before 59.5 y.o.) , you do NOT want all your saving in ROTH. For early retirement you can take fixed early withdrawals from traditional (rule 72t) before 59.5 but you can’t do that from a ROTH.
But can’t you withdrawal your principal from the ROTH?
@@jaredmarquis6680 yes you can withdraw the principal, but I suspect that in many cases the principal wouldn’t allow for early retirement (I’m assuming the investment growth makes up the majority of savings). Having a diverse portfolio of buckets (Roth, non-Roth, and non-retirement) to withdraw from does have some tax flexibility.
One scenario where the principal might used effectively in early retirement is if your about 5 or so years out and use the ROTH conversion ladder approach to early retirement.
Can’t you just load up on dividend stocks and live off the taxed dividends? once that dividend income is sufficient of course.
The rolling over of old IRA into a 401k needs more of an explanation, I'm sure the rule your talking about rolling an old ira into 401k does not change the rule. Min.6:22
Why can’t I just put $61,000 into my solo 401k after-tax account and directly roll it over into my Roth IRA? In other words, do I have to do the $20,500 employee-contribution into my solo Roth 401k account? Do I have to max out my employee-contribution (20,500) before I can make my after-tax contribution?
You can, but you don't want to. Why? Employee contributions directly to Roth can be withdrawn immediately without penalty (even before 59.5), so long as you have had any Roth for 5 tax years.
The remaining $40,500 that you contribute to the After-tax bucket is technically a conversion when you move it to Roth, even though no tax is due. That starts a separate 5-year timer on the $40,500 before it can be withdrawn, even if you're over 59.5.
What we do if employee doesn’t have conversation to Roth IRA from after tax account?
At the 10:05 mark, what do you mean by "20,500 of straight Roth"? Are you referring to $20.500 of traditional 401K contributions? or do you actually mean we should elect to do $20,500 of Roth (after tax) 401K?
Why would you put a non deductible contribution into an ira in the first place???
because you are going to do a Roth conversion :-)
If you make a deductible contribution to your IRA, then the Roth conversion is taxable. They wash each other out, so why do the paperwork for both the deduction and the conversion tax? Plus, there are income levels where even a deductible contribution isn't possible, so one solution fits all cases.
It looks great. When I first read about millionaire Roth IRAs I was like that’s awesome, but it’s not really cause let’s say you get lucky in an investment or do well you still will get hit with estate tax at a certain level when ya die. It’s why zuckerberg moved his shares into a grat. But it’d been even better to move em into a GST with your generation transfer tax exemption so you and your kids will
Avoid estate taxes which truly are unconstitutional if you think about it. Estate taxes are direct taxes. The 16th amendment changed the constitution so income taxes are fine. But it didn’t change all direct taxes. The constitution says direct taxes should be apportioned among the states. It’s absurd it’s been like a hundred years and there’s still nothing done about the unconstitutionality of that. It’s great for lawyers and accountants and politicians but it’s still illegal cause they never changed the constitution. They just say it’s legal and sadly no one has contested it so there’d be an amendment or force congress to change the law.
I didn't realize for a while that this was the total from a 3rd party employer's Roth plus your own business' Roth. You can't get to the Roth maximum with just the latter while paying a reasonable salary unless you have a 25% profit-sharing plan in place to top up your Roth, income and payroll taxes constrain your after-tax contribution too much. You could instead pay yourself a really huge salary to get the after-tax amount large enough, but I would argue that the cost in income and payroll tax makes that foolish.
So if you're under 50 and your income is too high:
1/ you will not be able to do IRA or Roth IRA. That means forget about the 6K for IRA, correct?
2/ Therefore, your total contributions can add up to 61K, not 67K, right?
3/ After contributing to roth 401k and converse after-tax traditional 401k, can you then converse the total to Roth IRA, moving the money out of your company's plans?
And if you are qualify for an IRA (your income is not too high), you can just go to the bank, etc. to open an IRA/Roth IRA and put in the money from your pocket, no need for this contribution to come directly from your W-2 (or to be shown in a box like in case if box 13 for the after tax contributions)?
No to all 3. Re-watch the video... if you have too much income, you make a non-deductible contribution to traditional IRA and then convert it to Roth with no tax event. The difference between $61k & $67k is the over-50 401k catch-up.
You contribute to Roth. Your employer matching goes into pre-tax, which you can choose to convert to Roth. Your employer will typically not let you take this money out of their plan until you terminate employment. You can also contribute to After-tax, which is often allowed to be rolled over (e.g., once per year) while still employed to an outside Roth account.
Go to the bank and open two IRAs per person - a traditional IRA, and a Roth IRA. You deposit into the first one from your personal bank account, then later convert to Roth by ordering money moved to the second one.
If you are thinking about a Roth conversion in a 401k, then just deposit all of your contributions into Roth IRA now. The tax brackets are at historical lows. You can’t convert a traditional IRA to a Roth till your older than 59 1/2. If you do you will pay taxes on the converted amount plus 10% penalty. Depending on the amount converted and age you may have to pay a higher Medicare premium. Taxes will most likely be higher in the future due to all the money we are spending on the war and pandemic. In figuring out the Roth conversion calculation, if you have after tax and pre tax IRA (non Roth) they are calculated differently in the conversion process. So many rules to Roth conversions that if not done right you could lose more money in penalties than if you had just put money in the Roth in the first place. A Roth in a 401k or 403b is not limited to $6,000. Open a Roth account outside of work and fund it to start the clock ticking down to 5 years (the time to be vested). Roth’s outside of 401k or 403b are limited both in contribution limit and how much you make at you job (can you invest in a Roth outside of work). If you ever stop working at your job you then have a safe place to rollover your work Roth into your personal Roth. When you reach 59 1/2 you can then pull out money or let it stay invested in your personal Roth. Traditional IRA in 401k or 403b accounts are subjected to RMD with drawls at current 72 and they want to go to 75. Those are mandatory withdrawals from traditional IRA. If you don’t do it or forget then you will be penalized for the amount you should have taken out. Plus the older you get past the RMD age the more you pay. Roth IRA has no RMD. I hope this helps.
@@bwcimprint6985 Several corrections to your opening comments. Many people can't contribute directly to a Roth IRA, and nobody can do it at $61k+/yr, which is why this 401k technique is used. And you can absolutely convert traditional 401k or IRA to their Roth versions at any time without the 10% penalty - there is no requirement to be over 59-1/2. Roth IRA and Roth 401k are two separate beasts, with similar rules / benefits but some nuanced differences.
@@hornbaker thank you. Can I just go to the bank, open a roth IRA and deposit money from my personal bank account (without a traditinal IRA)?
@@amyhoang9140 Yes, if your income is not too high then you can just open a Roth IRA at the bank and deposit a personal check. If you make a high income, you need to do the 2-step "backdoor" method of depositing into traditional IRA and then converting to the Roth IRA.
If you want to get more than $6-7k/yr into your Roth, then you will also need to do the 401k method - that can be used to add another $61-67k. Generally, people will start with the 401k method because employers will match some of your contributions, and that's free money.
Great info, thank you.
@1:30...Correction: 5yrs - 59.5, whichever is LATER.
I don’t have a 401k so this doesn’t apply? I’m 58 and retired from the Air Force with a Roth IRA
Nope, not since you’re not working. I’m unaware even if you were working if the TSP has the same strategy.
Did I hear correct that you can convert 401k employer contributions to a ROTH while still an active employee with that company?
Where does SEPIRA fall in all this? Convert to Traditional Roth IRA? And then $27k into my solo Roth 401k. Then do all funds following this go through the sep to solo Roth 401k channel?
Great stuff Mark and Mat. I've been doing this for a while. My question is this; I have a SDIRA that I use to play around with Crypto. Is there a way to move or convert my 401k ROTH monies into my SDIRA so that I have more to invest?
if the sdira is roth, rollover your 401k roth to your sdira roth.
I was told I could only do that if I left the job. I’m still working and contributing to my company 401k, so as I understand it I cannot rollover that 401k. If there is a way, please share it. Thanks.
@@anthonyputorek7095 Not that i know of. Its an artificial restriction in your employers plan.
Yes, sortof. I've done it for years.
First, the thing to know is this... money you rollover into a Roth IRA becomes stuck as Roth IRA. And SD-IRA has been a more popular target for politicians to restrict vs. 401k. You might consider how you can do this with a Roth Solo 401k.
Now, to your question... employer plans typically restrict a) your contributions, and b) employer matching, and c) gains on both. What does that leave? Contributions to the After-tax bucket (which is neither pre-tax nor Roth; it's a hybrid). These contributions and gains are often unrestricted from being rolled over once per year, directly into a Roth IRA or another Roth 401k. Bingo. (This is the main vehicle for doing the Mega Backdoor Roth 401k that this video discusses.)
So, you may not be able to do this with money you already have in your 401k, because it probably isn't in After-tax. But you can start contributing heavily to that bucket and have money that can be rolled out of your 401k without quitting your job - this gets you a lot more than $7k/year into a Roth SD-IRA or Roth Solo 401k where you can do creative investing.
If your company’s 401k plan allows in service distributions then you can do it. If not, then you can’t move it out until you leave that job. Just ask the administrator of the plan for help with your question.
when you convert the employer match into the Roth, you have to pay tax. Which for many of us married healthcare providers, would be 50% tax. Would it worth it anymore?
To get your question answered, please submit it to podcast.mainstreetbusiness.com/ - thank you!
Hey guys. Thanks. Was wondering if I could talk to someone about my 457(b) and how all that works. Who should I reach out to? Thanks!
What if I am already retired and have no earned income? Can I still do this conversion?
Mark can you do a video on Mega Backdoor Roth for people with a six-figure day job?
I’m pretty sure that’s what he just did. Max Roth IRA, max 401k to the match only, then contribute the 401k yearly max to the after tax 401k. This only works if your employer allows in service distributions which many do not, otherwise you can’t convert until after you leave your job and that will get messy.
@@michaelrudolph7003 and since that applies to most people like me, my question is: exactly HOW messy and is it worth doing in that case
so what do you if the MAGI is >210K?
The best strategy to use in trading crypto is to trade with professional who understands the market quite well,that way maximum profit is guaranted
Yes that's true
Bitcoin is really profitable at this stage.
I have always wanted to invest in Bitcoin but I'm very inexperienced,I even watched some videos yet still difficult to... understand I'm so much in need of an expert..
Send mg's to her right away 👇👇💬.
꧁༒☬෴十𝟏𝟐𝟒𝟖𝟐𝟎𝟔𝟖𝟎𝟐𝟒෴☬༒꧂෴☬༒꧂
This back door Roth IRA has to be converted from the company sponsored 401K, right? How we do it if my company doesn’t sponsor this conversion?
What about what I retain you and talk to Darren, I miss a message because I'm moving, literally driving and the. You reach out over 3 times and never get a response? Is that normal?
I can show screen shots of me trying to contact my lawyers with no response
what about … it’s a taxable event to convert 401k to roth?
looking at a 25% balance drop
It’s worth it in the end depending on how long your time horizon is
LOVE THE MEGA ROTH 401K!!!!! You are right about lot's of uninformed professionals.
Reading about people grabbing multi-figures monthly as income in investments even in this crazy days in the market,any pointers on how to make substantial progress in earnings?would be appreciated 😇
You have to have an idea on what you wanna invest in carefully before going in.
Well Eliana reputation already speaks for her last month i invested over $100,000 with her and I've already made over $250,000 profit..
Elianabk is the name.
@@bigog4559 This lady right here,I tradr with her she’s inventive and the P.O.T are no jokes, I won’t look awestricken u made mention of her,
Using a good Coach like Mrs Eliana Brooklyn to buy and day trade takes away the complexity and makes you incredibly successful.
Can you add that to the permission validation ledger Interdiction Trust acceptable use policy April 2024 Schedule A to Z forgery proof legal document security Network?
Does it work the same way with a 457 account?
My question as well...
They need to find someone who can present this info. Painful to watch them trying to explain it.
Mega MEGA Backdoor: Defined Benefit Retirement Plan convert to Traditional IRA convert to Roth IRA: Add another $245,000.
Who has the extra cash to do this with?
Successful business owners
For people who work for big brother have access to a 401k and 457k and don’t have any matching. Could you explain a little what advice you have here. I’m also almost positive they will not allow any money to leave these accounts until your retired and or might even have age limits.
I do max my personal Roth IRA yearly
There is much more to this process than they are discussing so be aware of what your company allows or doesn't allow. Your question falls under the "it depends" category. It really is up to your company and what they allow in your plan.
First, your employer has to allow you to do "in service distributions." If they don't you can't rollover anything anyway. Second, if they offer you the option of ROTH 401k, you can't rollover those Roth 401K contributions you make into your Roth IRA until you are age 59.5 or if you leave the company.
Also, if you get matching ( you said you don't) but if you do, you can't rollover company matching contributions because for one, those are always considered tax deferred comp so even if you are contributing to your Roth 401k, your company matching are being contributed to your Trad 401k where they will sit until they are vested and can be rolled out to a Trad IRA where you can convert them (and pay taxes on that conversion) to your Roth IRA.
If your company does allow you to the option to contribute after tax money, you can roll over just that amount, but only up to the amount of times your company allows "in service distributions." Again it depends on your plan rules and each plan is different. They may allow 1 time per year or 1 time per quarter. So if this is possible, its best to wait until you have maxed out all those contributions before you do your Mega Back door.
Lastly, if you are a HCE (Highly Compensated Employee) for 2022 that is you make over $305k, your ability to contribute to any deferred comp plans are eliminated once you reach that income level.
DYOR its NOT this cut and dry and there are many moving parts this and its really boils down to your companies Savings Benefit Plans rules. Hope this helped a little...
@@rsjones1163 good response ! I think my plan told me years ago they wouldn’t do a “in service distribution” but maybe that was for a private Roth IRA type and not their own will have to look into again thanks ! Will piece things together
Can someone place settlement money from a personal injury case into a back door Roth IRA? Or does the deposit have to come from earned income on which income tax has been paid?
Would any part of the settlement have been for lost wages (or anything else reported on a Form W-2)? If so, that part (reported on Form W-2) could be put into a retirement plan. I am not aware of any way to put tax-free personal injury damage money into tax-advantaged retirement accounts.
Been down this path... your contributions cannot exceed your earned income, and there's no way to assign the claim to an entity that your Roth owns. If you setup an LLC + Solo 401k, you might have more flexibility because you control the accounts, but the rules still apply. (e.g., contributions don't have to be made via paycheck deductions like they do with most corporate 401k plans)
@@hornbaker Yeah. It seems to me that if a contribution were less than the earned income, then it might be fine. It would be as if the income was invested and the untaxed settlement was used for living expenses.
I have a question. In 2019 I left my W2 job and rolled my 401K into an IRA LLC and purchased a SFR rental property. How would I go about converting the rental property to a ROTH? Thanks
Can't
at minute 10:55 for any portion that employer matches the 401k roth. Would you convert the employer matched amount from transitional $$ to Roth IRA if your tax bracket is 47% (state + federal)
I was told that my ROTH inside my plan (401K) is not transferable to another ROTH and even the contribution is not accessible until 59 1/2 What am I missing? EDIT: Checked with TR Price and the plan does not allow "In Service Distribution", what other options do I have?
I think if you change jobs you can transfer the 401k to the new job's account (not sure about this), so make sure the new job allows in-service distributions
Hsa $7300 for a family
What’s the problem though? Your money is already Roth unless you don’t like your investment options. Sounds like you can’t touch it until you leave.
@@michaelrudolph7003 Correct. I don't have access to it to move into any other ROTH options or other trading accounts. I think that's just how a company elects to set up the ROTH.
Enjoyed the video. Thanks for sharing
As much as I like this, the one flaw that exists: I get money into my 401k Roth side component and that includes employer matching. However, My 401k plan administrating rules do not allow me to roll JUST ROTH contributions into my ROTH..been on the phone numerous times.. ..I would love to find a way to get more per year into my roth IRA.
Who setup your 401k plan?
@@eric3434 My employer. Each employer can structure the administration differently..at least that's what I have been told. Now I can say this, I have rolled out a butt load of money 3 years ago into an rollover ira and at that time, I had asked the same thing; They told me exactly this; Your plan administrator doesn't allow us to 'cherry pick'. So when I rolled out Say $500k (Just and example) so much went into the rollover (the tax deferred stuff) and the 401k roth contributions, went into my ROTH IRA.
If you know of a way to correct happy to hear. I have most of the components of the Mega Backdoor: I do the non deductible IRA, I roll it over and I contribute After tax into 401k Post meeting IRS contribution limits for deducting from my gross, and my company even matches my after tax contribution...it's almost there..just can't bypass plan rules.
@@nickstone7834 Doesn't really make sense to me. Though i only keep 100% roth funds in my 401k and ira's. I don't keep tax deferred funds (traditional 401k or traditional ira) at all.
Did they say 'Pro Rata rule'? Employer 401k matching contributions are placed in 401k pre-tax accounts. I believe you have to convert an equal percentage of pre-tax 401k funds to 401k roth. Or roll an equal percentage of pre-tax 401k funds to a pre-tax IRA at the time of the conversion from 401k after-tax to 401k roth.
For instance, if you have $40k in after-tax funds and $100k in 401k pre-tax funds, and you want to do an in-plan conversion of $30k in after-tax funds to 401k roth, thats 75% ratio of the after-tax funds. So to move $30k of after-tax to 401k roth when you have $100k in pre-tax 401k funds, you need to also convert 75% of the pre-tax 401k funds ($75k) to 401k roth, or roll 75% of the 401k pre-tax funds ($75k) to a pre-tax IRA.
Might be wrong here. I am no expert when it comes to non-roth funds. Traditional pre-tax 401k and ira's are worthless to me and i avoid them at all costs unless the employer is matching. And if the employer is matching, i'm converting those employer matched funds to roth immediately.
@@eric3434 I am guessing if all you're money is in after tax 401k and ROTH, then you have no need to get your taxable income down. Are you self employed? For me, I need to lower my taxable income by the IRS Limits, otherwise my tax obligation would simply be insane. I certainly see the value of ROTH's vs traditional..I just can't afford to have that much taken out after taxes.
as for the equal amounts you mentioned, that's never raised it's head or that topic has not been mentioned. Like I said, I had bulk of retirement close to million just before pandemic; pre and post tax bundled but tracked. I told my plan admin, roll x amount into rollover and into my Roth..they did that..
I can always call plan administrators and ask..I made it pretty clear this past year I wanted to ONLY ROLL roth money into roth ira. No go they said. not part of your plan. And for the record plan also states I can only roll so much out of the 401k. as long as I am employed
@@nickstone7834 I'd love to bring my taxable income down as much as i possibly can. But I use deductions/expenses or flat out stop generating taxable income altogether. Yes, i am self employed with a self directed solo 401k and trust fund.
I use the mega backdoor 401k roth and IRA roth contributions. Roth is the only way forward with benefit. If you can gain only 8% on your funds every year for just 5 or 6 years, it outweighs the benefits of a 401k pre-tax imo. So i deal with it up front and just pay the tax. I can't benefit in receiving employer profit sharing contributions as I pay myself. But if i was receiving employer profit contributions from an employer, i would take them and just convert those funds to roth, or roll them to a pre-tax IRA and deal with it later down the road.
I hear you about the burden of taxes. The insane level of taxation that we are subject to on earned income is agonizing. Its not a fair game to tax earners at these levels. I just sent a huge check to our IRS mafia myself. Than drank a bottle of hard alcohol to overcome the pain, but I ran out of alcohol a little short of achieving my goal.
When you said the word 'Cherry Pick', I would bet your administrator is telling you her hands are tied because of the Pro-Rata rules. And if thats the case -> roll 100% of your 401k pre-tax to a pre-tax IRA together with an in-plan conversion of 100% of your after-tax to your roth 401k. From there you should be able to roll the roth 401k to your roth ira, or just keep it in the roth 401k. (I think)
Or if they can't do that since your employers plan does not allow in-service rollovers, convert the pre-tax 401k to roth 401k and pay the tax. And an in-plan conversion of the after-tax 401k to 401k roth.
If your employer has a restriction in the plan where the plan restricts you from in-service rollovers (rolling from pre-tax 401k to pre-tax ira, or from roth 401k to roth ira). Ask them if they would allow you to quit, take a vacation for a month then rehire you after your vacation. :) Or alternatively if they will modify the plan to support in-service rollovers. In-service rollovers are permitted by the IRS, so this issue is only a restriction of your employers plan.
I recently discovered your channel and love it! At some point could you talk about continuing education and if there is a way to deduct this if self employed? If I have an s corp for professional services and I’m considering doing a masters in that field (not necessary to have but nice to have). Can this count as an expense or are there rules around this?
Very confused. Retired & have 401s from which I am now drawing RMDs. Have no earned income.
So can i covert some of 401 to IRA then convert that to Roth?
& are limits the mega roth back door limits?
I'm not clear with what the "After-Tax Employee Traditional Contribution" is versus the "ROTH 401k Employee contribution". I have a day job, my company matches a small fraction (let's say 2% up to the first 6%). I understand I am allowed to take what is now my "Traditional 401k" contributions and make them "ROTH 401k contributions" up to $20,500 and I think I can add my employers contribution to this as well. I am not clear what the "After-Tax Employee Traditional Contribution" is though. Can someone please explain?
Roth and pretax contributions are tax advantages so the IRS limits them to 20500 a year. After tax is non tax advantage money so there is no specific limit. The idea behind it is that you contribute after tax and then convert it to Roth which is a tax advantages source above your limit. Not all employees offer after tax contributions
Please can you give more detail how can I open a Roth IRA? Thank you
I’m so confused ! I would love to see elementary number and example illustrations to have a clear point!!!!
That’s what I do for my clients
At around 6:51, you mentioned that I need to convert old traditional IRA first before I can convert newer non-deductible IRA. So if I have a 401k rollover that's older than my non-deductible, do I need to convert all of that first and pay taxes first before I can convert the non-deductible? I went back to your earlier videos, but didn't find an answer. Thanks!
You need to make programme easy
This sounds good…but they have glossed over a number of hurdles that 95% or more of ppl would not be able to get past. I have been a CFP for over 26 years and making this work is going to be impossible for most people. Once again “buffet” advice for individuals.
Most friends i know die after being retired for 5 years.
What if you have an existing roth?
Mark - please clarify as I thought in this or another video you stated that anyone could contribute to a Roth IRA, however, I see. from the IRS that in order to contribute to a traditional IRA, you, and/or your spouse if you file a joint return, must have taxable compensation, such as wages, salaries, ...
Person or their spouse must have earned income (a job) to qualify for traditional IRA
Yes Larry, you or your spouse need earned income to contribute to an IRA/Roth IRA
Not every one.
These guys can’t explain rain without confusing the crap out of you. Here’s how you do it. Contribute to the IRS limits tax deferred up to $30k if you’re over 50 to a 401K. Employer match for example is $16K. Now you’re up to $46K. Contribute after tax to your employer 401K up to the IRS limit for 2023 of $73k in total contributions. So that means you’ve contributed $27k in after tax. Roll the after tax into a Roth and you’re done. The $27k is tax free when you take a distribution because you’ve already paid taxes on it.
The after tax 401k is really for those that have enough income to already max out their traditional/Roth IRA and traditional/Roth 401k. One thing not everyone know is that Roth can mean either Roth 401k and/or Roth IRA. You can contribute significantly more to a Roth 401k than a Roth IRA due to the higher 401k limit (vs IRA limit) and the ability to rollover after tax 401k contributions to either a Roth 401k/Roth IRA. Not every employer 401k plan allow you to contribute to an after tax 401k nor does the plan allow you to roll over after tax 401k contributions immediately to Roth 401k/Roth IRA. Some employer 401k plan allow after tax 401k rollover into Roth 401k or Roth IRA quarterly/yearly. If so you can rollover your after tax 401k contributions during that quarter/year (that you already paid taxes on) but your after tax 401k earnings during that time (quarter or year) will likely remain with your traditional tax deferred 401k. So in the $27k example you gave there, that is only talking about the $27k after tax 401k contributions, not the earnings. Also converting from traditional 401k and after tax 401k later to Roth 401k/Roth IRA becomes more complicated the longer you wait because you have to follow the pro rata rule, where your have to convert them to traditional IRA and Roth IRA based on the ratio of your after tax 401k to traditional tax deferred 401k in your 401k plan. Plus you have to pay taxes on the tax deferred amount and the earnings in the Roth 401k/IRA conversion. Which can be quite high especially if you are in the high income group (>24%). I agree that it is most advantageous to rollover over after tax 401k contribution immediately (if plan allows) or quarterly/yearly before it makes too much after tax 401k earnings (which will be taxed when you rollover to any Roth account or take a distribution).
I have a deductible traditional IRA; will I be able to convert that into a ROTH?
If I have a roth 401k that only covers my wife and I. To make after tax employee traditional contribution are you saying we should not do any match from corporation? Does the after tax contribution employee have to come from a payroll check situation? or can I just take it as compensation? Not sure what qbI means.Thanks
Mark, so my wife and I are contributing to traditional pretax 401k , maxing out at 20.5 and 27k for myself. We are doing the 6k and 7k roth each year too. We have wanted to do the backdoor but didn't know how. We currently do not have any money 8nan traditional IRA. Can we open a IRA , put money in it. Not take deduction and convert to roth Ira that we have had for years. If so how much can we each do? Thanks
Is the Mega Backdoor Roth IRA only available, if your company does a 401K match? What are the opens of employees who's employer does not do a 401K match
No, mega backdoor Roth IRA is only available if your 401k offers AFTER TAX contributions, different from pre tax & roth contributions that are standard for most 401k plans
Can you have a self directed Roth and also a regular Roth
2023 over 50 is 30k$ max IRA contribution.
Do I have to pay taxes on the $60,000 before putting in the roth
Can the mega include cryptos?
If you roll your after tax contributions into an IRA that allows you to invest in crypto, like iTrust, then yes!
So, both you and wife over 50 would need to be pulling in 150k+ to be able to mega back door roth? Sounds great. Thanks for sharing
Can I just put the 40.5K from my own money directly in one go? or should I put this on each paycheck?
Payroll only, but you can also live on your cash and defer 100% of your paycheck, if allowed to get the mqx in
If solo401k, can you contribute even more by matching in a Roth? Or if you’re going this way should you not offer yourself a match?
The matching is counted toward the total 415 (c) limit unless you can set up a separate 401 (a) plan for matching then you can contribute the total of 61k (2022) in a 401k + matching in a 401(a)
Does every employee 401k allow after-tax contributions tot he max of 60k?
Is there a way to do this if you don't have a 401k with your employer and you don't have time for a side hustle that will earn enough money to have a solo 401k?
Nope, you got stuck with your employer retirement plan
If it's all after tax, what's the point for those that don't have years to accumulate investment gains?
How would whether the money is pre-tax or after-tax help or hurt that position? The point is whether you want to pay taxes when you take it out not.
@@michaelrudolph7003 you pay taxes going in (after tax) so the savings are only on the gains. Good if you are 50 but minimal if you are 60.
Or if you want to get around mandatory draws later on that don’t apply to Roth IRAs.
what if you are self employed and DONT HAVE a 401k?
I encourage you to set up a solo 401k!
@@BarbellFinancial only if he and his wife are the only employees! However a third party administrator to setup a 401k for you is only 2,000 a year and that’s more than made up for in the tax savings and the employee benefit!
Buy a self directed solo 401k plan. Around $400 - $650 a year if your willing to do most of the work. (dont use Nabor's, they suck)
Or a couple grand a year if you want someone to do it for you.
The initial setup is a pain in the rear. But once it's setup, its easy to maintain.
Pay the taxes and roth all your contributions. The law that is in place to perform mega-backdoor contributions likely won't last much longer. But it will last thru 2022. Take advantage of this opportunity. It's a huge win for self employed and S-corps.
@@eric3434
Yeah, but it sounds like they are planning to allow employers to make Roth 401k contributions.
Which means you would likely achieve the same benefits of the mega back door Roth IRA without having to worry about the 5 year rule if you have a solo 401k.
what about tax on ira conversion to Roth ira
As long as you got no tax deduction from the contribution to the Trad IRA, there is no issue converting to Roth.
So how do i take the money from the traditional ira out and put it in a roth? Wouldn't i want to pay the tax on that money?
To have a chance to get your question answered on a podcast, please submit it to podcast.mainstreetbusiness.com/ OR contact my team at directedira.com/appointment/ Thanks!
Also - If I have a traditional IRA, can I transfer it to my employee ROTh 401K and avoid taxes or will i need to transfer it to an employee Traditional 401K?
Why not just convert to a ROTH IRA? As long as the money in your Trad IRA was taxed, you just move it to ROTH. Then if you leave your job you convert the Roth 401k to your Roth IRA. Easy peasy.
At what age do you have to cease contributing to your ROTH IRA?
No age limit just have to have enough earned income.
Can you do this if you're self-employed
Absolutely
If I have a day job with a 401k, and also have a side job . Can I have a solo 401k?
Yes
Yes, absolutely
Ok dumb question…. Why can’t you just invest in an example Ameritrade account and just let it grow vs making a 401k then take out what you need when you need? Not trying to be a smart I am truly asking. I understand that then I guess you can’t roll it into the Roth correct? But also what is wrong with doing something like that other than of course paying the awful taxes.? Thank you. Trying to learn and one day retire thanks
@@mmar161 you can certainly do that and pay more money in taxes. You don’t get any tax benefit to investing in a brokerage account at ameritrade for example. 401k contributions provide tax advantages to you to either lower your taxable income for traditional 401k contributions or let investments grow tax free for Roth 401k contributions. And if you get a company match, then that’s free money.
@@mmar161 You paid income tax on the money put into your Ameritrade account. You will be taxed on all of the profits it returns. If instead you put that after-tax money into the After-tax bucket of your 401k, you could roll it into a Roth tax-free and make the same investments. But the gains will forever be 100% tax free.
If you need to spend that money in the near term, putting it all into Roth may not be attractive because there are restrictions on taking it out. (The rollover money can be withdrawn after 5 years; the profits after you're 59.5. Both can come out anytime for a 10% penalty plus taxes on gains.)
Can I do this mega contribution for a 3 year old???
Depends on your situation
Having a 2 year old with a ROTH IRA cause they work in the family business