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Its kind of annoying. You have to remember to report this as well when you file taxes or you'll get a nice letter from the irs a year later saying you owe a few grand in taxes b/c they think you withdrew 5.5k from your ira.I can't tell if it is a good thing or bad thing that I don't make enough to worry about back door Roths. Sounds all confusing and stuff and such.
I do get a raise this week though, so maybe I get lucky and a computer error adds a zero somewhere or something.
Yeah, I think we're on the same page. I just took TIger Fan's question to mean the specific annual process of (legally) skirting the Roth MAGI limitations to make a Roth contribution.
If you are making money and have even a little bit for savings, it makes a lot of sense for you to have a Roth IRA. I, too, am poor enough that I don't need to worry about the subtleties of back door Roths or conversions, but at the same time you shouldn't stick your head in the sand and assume that this stuff is beyond you. Do a little research and consider opening a Roth if you haven't already.I can't tell if it is a good thing or bad thing that I don't make enough to worry about back door Roths. Sounds all confusing and stuff and such.
I do get a raise this week though, so maybe I get lucky and a computer error adds a zero somewhere or something.
Is there even a point to that if I am contributing to a 403b and am not maxed out on it?If you are making money and have even a little bit for savings, it makes a lot of sense for you to have a Roth IRA. I, too, am poor enough that I don't need to worry about the subtleties of back door Roths or conversions, but at the same time you shouldn't stick your head in the sand and assume that this stuff is beyond you. Do a little research and consider opening a Roth if you haven't already.I can't tell if it is a good thing or bad thing that I don't make enough to worry about back door Roths. Sounds all confusing and stuff and such.
I do get a raise this week though, so maybe I get lucky and a computer error adds a zero somewhere or something.
yes, odds are any roth IRA you could set up will have better and less costly investments to you.Is there even a point to that if I am contributing to a 403b and am not maxed out on it?If you are making money and have even a little bit for savings, it makes a lot of sense for you to have a Roth IRA. I, too, am poor enough that I don't need to worry about the subtleties of back door Roths or conversions, but at the same time you shouldn't stick your head in the sand and assume that this stuff is beyond you. Do a little research and consider opening a Roth if you haven't already.I can't tell if it is a good thing or bad thing that I don't make enough to worry about back door Roths. Sounds all confusing and stuff and such.
I do get a raise this week though, so maybe I get lucky and a computer error adds a zero somewhere or something.
assume those of us who have virtually 100% of our medical paid for can skip this step?yes, odds are any roth IRA you could set up will have better and less costly investments to you.Is there even a point to that if I am contributing to a 403b and am not maxed out on it?If you are making money and have even a little bit for savings, it makes a lot of sense for you to have a Roth IRA. I, too, am poor enough that I don't need to worry about the subtleties of back door Roths or conversions, but at the same time you shouldn't stick your head in the sand and assume that this stuff is beyond you. Do a little research and consider opening a Roth if you haven't already.I can't tell if it is a good thing or bad thing that I don't make enough to worry about back door Roths. Sounds all confusing and stuff and such.
I do get a raise this week though, so maybe I get lucky and a computer error adds a zero somewhere or something.
The generally accepted order of retirement investing philosophy is:
Contribute to your 401k/403b up to the 100% employer match
Then Roth IRA until max
Then HSA if eligible until the max
Then back to the 401k/403b until the max
Then 529 if you have children and wish to contribute towards their college fund
Then Cash Management account
You can choose to invest as you see fit in your HSA or just keep it in cash, that's your choice.
HSA, if you have an eligible high deductible health insurance plan is the only triple tax protected account on the market. Tax free going in, coming out, and no tax on gains.assume those of us who have virtually 100% of our medical paid for can skip this step?yes, odds are any roth IRA you could set up will have better and less costly investments to you.Is there even a point to that if I am contributing to a 403b and am not maxed out on it?If you are making money and have even a little bit for savings, it makes a lot of sense for you to have a Roth IRA. I, too, am poor enough that I don't need to worry about the subtleties of back door Roths or conversions, but at the same time you shouldn't stick your head in the sand and assume that this stuff is beyond you. Do a little research and consider opening a Roth if you haven't already.I can't tell if it is a good thing or bad thing that I don't make enough to worry about back door Roths. Sounds all confusing and stuff and such.
I do get a raise this week though, so maybe I get lucky and a computer error adds a zero somewhere or something.
The generally accepted order of retirement investing philosophy is:
Contribute to your 401k/403b up to the 100% employer match
Then Roth IRA until max
Then HSA if eligible until the max
Then back to the 401k/403b until the max
Then 529 if you have children and wish to contribute towards their college fund
Then Cash Management account
I mean, we pay a decent copay for braces and a max of $1,000 for the family on the year, but I don't know that a HSA makes sense in our situation.
Sorry for the noob questions, but how are you eligible for an HSA? HSA's aren't tied to a job right?
Good info, but it doesn't look like we're eligible.HSA, if you have an eligible high deductible health insurance plan is the only triple tax protected account on the market. Tax free going in, coming out, and no tax on gains.assume those of us who have virtually 100% of our medical paid for can skip this step?yes, odds are any roth IRA you could set up will have better and less costly investments to you.Is there even a point to that if I am contributing to a 403b and am not maxed out on it?If you are making money and have even a little bit for savings, it makes a lot of sense for you to have a Roth IRA. I, too, am poor enough that I don't need to worry about the subtleties of back door Roths or conversions, but at the same time you shouldn't stick your head in the sand and assume that this stuff is beyond you. Do a little research and consider opening a Roth if you haven't already.I can't tell if it is a good thing or bad thing that I don't make enough to worry about back door Roths. Sounds all confusing and stuff and such.
I do get a raise this week though, so maybe I get lucky and a computer error adds a zero somewhere or something.
The generally accepted order of retirement investing philosophy is:
Contribute to your 401k/403b up to the 100% employer match
Then Roth IRA until max
Then HSA if eligible until the max
Then back to the 401k/403b until the max
Then 529 if you have children and wish to contribute towards their college fund
Then Cash Management account
I mean, we pay a decent copay for braces and a max of $1,000 for the family on the year, but I don't know that a HSA makes sense in our situation.
You need to be thinking about the future... regardless of how much you have covered now, if you build up a good amount in that account you'll have the money in there for some experimental medicines or cancer drugs that won't be covered by medicare when you are older.
Current estimates are that people spend upwards of 200K on medical care in their retired years.
I'd rather have as much of that paid for in advance now with triple tax protected money than have to take it out of my retirement nest egg later on.
I consider the HSA part of my retirement savings... although since I have a $5000 deductible, wear contacts, and have had 2 children recently, I've ended up spending a lot more of the money recently than I would have liked to... but oh well.
The HSA of course is better if you are a higher earned because the tax savings is more significant.. like if you're in the 28% tax bracket... it's like getting your health care 28% off.
If you are in a lower tax bracket, the savings are less.
If you are eligible for an HSA, it frankly is probably even a better account than the Roth IRA for saving money... it's just that the use of that money is very specific... but with high certainty something you will likely use.
My 403b has several vanguard options that are talked about a lot here, with seemingly very low fees. I am mostly in VINIX.yes, odds are any roth IRA you could set up will have better and less costly investments to you.Is there even a point to that if I am contributing to a 403b and am not maxed out on it?If you are making money and have even a little bit for savings, it makes a lot of sense for you to have a Roth IRA. I, too, am poor enough that I don't need to worry about the subtleties of back door Roths or conversions, but at the same time you shouldn't stick your head in the sand and assume that this stuff is beyond you. Do a little research and consider opening a Roth if you haven't already.I can't tell if it is a good thing or bad thing that I don't make enough to worry about back door Roths. Sounds all confusing and stuff and such.
I do get a raise this week though, so maybe I get lucky and a computer error adds a zero somewhere or something.
The generally accepted order of retirement investing philosophy is:
Contribute to your 401k/403b up to the 100% employer match
Then Roth IRA until max
Then HSA if eligible until the max
Then back to the 401k/403b until the max
Then 529 if you have children and wish to contribute towards their college fund
Then Cash Management account
You are eligible for an HSA if you and your spouse (if applicable) have high deductible health insurance policies. A quick google search on HSA's would give you a lot more info than I can fast.
Probably slightly better, but not statistically significant.My 403b has several vanguard options that are talked about a lot here, with seemingly very low fees. I am mostly in VINIX.yes, odds are any roth IRA you could set up will have better and less costly investments to you.Is there even a point to that if I am contributing to a 403b and am not maxed out on it?If you are making money and have even a little bit for savings, it makes a lot of sense for you to have a Roth IRA. I, too, am poor enough that I don't need to worry about the subtleties of back door Roths or conversions, but at the same time you shouldn't stick your head in the sand and assume that this stuff is beyond you. Do a little research and consider opening a Roth if you haven't already.I can't tell if it is a good thing or bad thing that I don't make enough to worry about back door Roths. Sounds all confusing and stuff and such.
I do get a raise this week though, so maybe I get lucky and a computer error adds a zero somewhere or something.
The generally accepted order of retirement investing philosophy is:
Contribute to your 401k/403b up to the 100% employer match
Then Roth IRA until max
Then HSA if eligible until the max
Then back to the 401k/403b until the max
Then 529 if you have children and wish to contribute towards their college fund
Then Cash Management account
Would a Rother IRA have better options than these?
It seems like "defer now, pay later" is a better option to me. What circumstances would make one better than the other?
The main things to consider are your current tax bracket, your expectations for your future tax rates, and the length of time the money will grow. Obviously future tax rates are unknown, which makes an accurate comparison difficult.
Well with my 403b I am putting more into it than if I had to pay taxes on it now, so the end number will be a lot higher than whatever it would end up being if I use a Roth.
You also need to consider all the other deductions you are currently taking which you may not (should not) have when you're retired (mortgage, likely paying higher property taxes if you downsize, etc.).
Each situation can differ but in general- I agree. I think the vast majority of people are best served with a mix of retirement from traditional and roth. The exact mix is what will differ the most among people and not so much whether you should have a mix.
Every situation is unique to your particular circumstances- there are plenty of online calculators that you can use to give you an idea (and can account for putting more into a traditional vs. a roth), but again, you're going to have to make a lot of guesses about the future.
Do you have a traditional IRA? If so, is there any money in there that is pre-tax? If so, you will have to pay tax on all of that when you convert it. You can't segregate what money in your IRA to transfer to a Roth.
There are a few more subtle benefits of the Roth that may or may not make a difference.
I favor retirement over education funds. It is great and all to have money to pay for or help pay for college but there are plenty of options for the kids to get an education (if they do) and pay for it. While, when you retire whatever you have in retirement is it. If you fall short then guess who has to pick up the slack? Your kids.
Not all employers offer Roth 401k. If they do great. Roth 401k and Roth IRA are same thing- it is just that the 401k is administered by your employer and the IRA is on you.
I'm not sure how to tell you this without coming off like a pompous jerk, but I"m going to go ahead and say it anyway:
goto the website white coat investor - look up backdoor roth IRA. he has a very specific outline.
I'll have to double check, but I don't believe you can withdraw ROTH 401K contributions penalty free like you can ROTH IRA contributions.
I'd do some searching and reading about Roth 401ks over at Bogleheads. They, if memory serves, don't like them much. Not sure why - I don't have that option so didn't delve into it.
Cost. Same as regular 401k's. With a 401k you are at the mercy of your employer. With an IRA, you are the customer and you can get the best deal possible as you wish.
This. Generally, the more options the better, At least in theory (in reality, listen to the ted talks on the subject).
Like Chad said it is dependent on a lot of variables, one isn't necessarily better than the other for most IMO, but there are circumstances where one is definitely better than the other.
Agree with Dentist and will add that if you save money for college in a 529, then the colleges will gladly take it. Gone. If the kiddo decides against going to college then I believe there is a penalty involved when getting the funds out, not sure. My guess is that it would not be pleasant for you.
If you think you can predict your tax rate at retirement, you've either got a Delorian I want to borrow, you're very close to retirement already, or you're delusional.
Also, having filled out the FAFSA every year for a few years now, there are a number of protections on funds in designated retirement accounts. So while colleges count your income and your wealth to a large extent, you can "hide" money from them in some ways still.
If you are saying personal tax rates may change over time, sure (but any drastic change is not on the horizon). But anyone over 40 can get a pretty good idea what current tax bracket they will be in when they retire IMO.
I believe you can roll your deductible IRA contributions into your 401(k) plan, if the plan allows such. That is a way to clean up the IRA to do the backdoor Roth without the tax issue.
Bracket, sure. Rate, less sure. Say you're in the 35% bracket now, and you think you'll be in the 28% or 33% bracket when you retire. You may be absolutely right, but what if those brackets are 32% and 39% 20 years from now? Then you may be paying higher taxes even though you did in fact move to a lower bracket.
