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Old 01-14-2021, 07:42 AM   #201  
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Go and check out MPI by suncor financial. Download the free book and look at the section of ira vs roth. You end up paying the same taxes and the account values are the same after the taxes.

1 dollar roth grows to 10 at retirement you take 10 tax free

1.3 dollar ira grow to 13 and you take out 13 and pay the same 30 % taxes cause lets face it we all are gonna not be down much in brackets now. You still have 10 dollars.
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Old 01-14-2021, 07:42 AM   #202  
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Go and check out MPI by suncor financial. Download the free book and look at the section of ira vs roth. You end up paying the same taxes and the account values are the same after the taxes.

1 dollar roth grows to 10 at retirement you take 10 tax free

1.3 dollar ira grow to 13 and you take out 13 and pay the same 30 % taxes cause lets face it we all are gonna not be down much in brackets now. You still have 10 dollars.
That is all true but it also reduces your RMDs down the road
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Old 01-14-2021, 10:05 AM   #203  
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Go and check out MPI by suncor financial. Download the free book and look at the section of ira vs roth. You end up paying the same taxes and the account values are the same after the taxes.

1 dollar roth grows to 10 at retirement you take 10 tax free

1.3 dollar ira grow to 13 and you take out 13 and pay the same 30 % taxes cause lets face it we all are gonna not be down much in brackets now. You still have 10 dollars.
The math is correct, but the equation it solves is not relevant to high income earners. The calculator ignores the upper constraints on contributions limposed by the IRS, nor does it consider the negative consequences of RMDs.

-You can't contribute 1.3 times the Roth amount into a Traditional account, they both have the same upper limit. This gives the Roth account 30% more capacity for retirement savings. You can't carry 1.3 gallons of water in a 1 gallon bucket.

-RMDs force distributions, that could be left to grow in the case of a Roth account. While not easily quantifiable it is easy to assess good/bad in a binary fashion. There is no downside of eliminating RMDs, only upside in greater compounding and income flexibility.

Having a mix of Roth and Traditional accounts may be the best option. It provides flexibility of withdrawing taxable and non-taxable funds, serves as a hedge against future tax policy and provides some protection from RMDs

Last edited by Gunfighter; 01-14-2021 at 10:29 AM.
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Old 01-14-2021, 11:37 AM   #204  
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Having a mix of Roth and Traditional accounts may be the best option.
If you think out guessing the market is tough, try predicting tax policy 20 years from now.

"Proposal #3 - “Harmonize” the RMD Rules for Roth IRAs with the RMD Rules for Other Retirement Accounts
The proposal
– In order to further “simplify” the RMD rules, the administration seeks to impose required minimum distributions for Roth IRAs in the same way they are imposed for other retirement accounts. In other words, this proposal would require you to take distributions from your Roth IRA once you turn age 70 ½ in the same way you would for your traditional IRA and other retirement accounts. If, however, you are already age 70 ½ at the end of this year (2015), you would be exempt from the changes that would be created by this proposal."

Wednesday, February 04, 2015--By Jeffrey Levine, IRA Technical Expert
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Old 01-14-2021, 12:00 PM   #205  
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If you think out guessing the market is tough, try predicting tax policy 20 years from now.
Amen to that. Even within the retirement years from 65-grave, there will be a few pendulum swings on tax policy. Having a mix of traditional and Roth could allow you to play the swings in tax policy. They have already Nerfed the Inherited Roth IRA., so RMDs are next. Forcing the RMD takes away one of the Roth advantages, but until contribution limits are changed between accounts, the Roth is still a bigger bucket.

You are better off aligning yourself with the government and central banks rather than trying to outsmart them. Using conservative leverage on income producing real estate is the safest course to a secure retirement.
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Old 01-14-2021, 01:03 PM   #206  
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The math is correct, but the equation it solves is not relevant to high income earners. The calculator ignores the upper constraints on contributions limposed by the IRS, nor does it consider the negative consequences of RMDs.
So since you can only contribute 26000 into either 401 as an over 50 year old would it be better to contribute $16380 of your dollars and $9620 taxes not paid (37% of 26000), then put $7000 into a backdoor Roth?
You've now invested
$16,380 of your money, $9620 tax break at the 37% bracket, $7000 into the Roth and paid $2590 in taxes on that Roth backdoor. for a grand total of 25970 out of pocket for $33000 growing tax deferred or not taxed in the end?

I've gone back and forth on rolling over a traditional IRA that has both pre and post tax dollars in it into a Roth IRA. Should have done it in April when the market was down 30%, with the TaxCuts and jobs acts brackets of 2020.
Is it to late?

Last edited by herewego; 01-14-2021 at 01:41 PM.
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Old 01-15-2021, 05:23 PM   #207  
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So since you can only contribute 26000 into either 401 as an over 50 year old would it be better to contribute $16380 of your dollars and $9620 taxes not paid (37% of 26000), then put $7000 into a backdoor Roth?
You've now invested
$16,380 of your money, $9620 tax break at the 37% bracket, $7000 into the Roth and paid $2590 in taxes on that Roth backdoor. for a grand total of 25970 out of pocket for $33000 growing tax deferred or not taxed in the end?

I've gone back and forth on rolling over a traditional IRA that has both pre and post tax dollars in it into a Roth IRA. Should have done it in April when the market was down 30%, with the TaxCuts and jobs acts brackets of 2020.
Is it to late?
We are programmed by the education system to think there is only one right answer, when in reality most life choices have varying degrees of good. By saving 26K you are 98% right to begin with.

Here are thoughts on the remaining 2%...

If you only have 26k to work with, it really comes down to what you expect for a marginal tax rate in retirement compared to your current rate. Without the upper limit constraint it really boils down to tax rate arbitrage. If you have 41k to put toward retirement, it may be prudent to stuff 26k into Roth and pay 15k of income tax in the process. Another variable worth consideration is what you would do with funds outside of Fidelity. It may be better to fill up with pretax dollars and invest the tax savings in real estate, vs prepay tax via Roth. The back door Roth has rollover considerations based on other IRA accounts you have. DYODD. It takes way more detail that you can share on APC.

*My opinions are skewed towards the Roth because I’m at the upper limit. I like the flexibility of moving money out of Fidelity via the mega back door. The long game includes a Self Directed Roth IRA that owns limited positions in apartment syndications.
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Old 01-16-2021, 12:13 PM   #208  
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https://www.kiplinger.com/retirement...-when-they?amp
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Old 01-17-2021, 04:46 AM   #209  
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Amen to that. Even within the retirement years from 65-grave, there will be a few pendulum swings on tax policy. Having a mix of traditional and Roth could allow you to play the swings in tax policy. They have already Nerfed the Inherited Roth IRA., so RMDs are next. Forcing the RMD takes away one of the Roth advantages, but until contribution limits are changed between accounts, the Roth is still a bigger bucket.

You are better off aligning yourself with the government and central banks rather than trying to outsmart them. Using conservative leverage on income producing real estate is the safest course to a secure retirement.
If you don’t ever plan on taking distributions on the money why are you saving it?
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Old 01-17-2021, 07:51 AM   #210  
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If you don’t ever plan on taking distributions on the money why are you saving it?
TVM for the kids is probably the most common answer. Some people aren't wired to spend every $$ they get. The extra money has to go somewhere, so why not leave an inherited Roth IRA?
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