Two more reasons to utilize a Roth: Medicare premiums and taxes on Social Security benefits are based off of…your taxable income! Using a Roth to bring your taxable income below certain levels will save a retiree a ton of money in Medicare premiums and Social Security taxes. 😊

I max both my roth IRA and 401k. The only downside is i dont have much left in the end of the month, my cash flow is low

Tax code changes taught me to build resilience into my portfolio. Diversification is key! My set manager helped me spread my investments across different asset classes like stocks, bonds, and real estate so that a positive tax code cha age here can help minimize the impact of aa negative tax code change there adjustments.

Thanks, that helps me further decide to take advantage of the 403b Roth I have access to - no need to do a backdoor roth anymore, or annual limits. The points you make about future tax changes and rule changes are really valid to consider.

Wow, I watch to financial youtubes all the time. This is one the best ones I've seen. You are very practical and spell things out in an easy to understand fashion. Also, your delivery is great. Great voice, great appearance... please keep it up! Mark

Hi Erin. My wife and I really enjoy your videos. We find them very informative. As I get closer to retirement I'm doing more research on my retirement account, how much should I have in order to comfortably retire, etc. Of all the videos I see about that, none of them take into account pensions. I'm a federal employee so I an annuity in addition to my retirement (TSP) and my social security. I know pensions are a rare thing but I'm hoping that you would do a video on calculating how much a pension would be worth when determining one's financial strength in addition to the retirement (TSP, 401K, etc.) account and expected social security benefits. Thanks.

I have a very good income and contributing max to 401k and putting in my wife's roth IRA. I have so much cash on side lines until I can figure this out. I am 53 and needs to to make all this cash work for me so I can retire tomorrow.

Listen to 1:45, it states “$176k to $161k”, I think it was intended to state “$147 to $161k”.

I wish I didn't wait to start my ROTH until last year but it's already taking off like crazy, I max it out as early as possible to allow compounding to take its course.

If you're only over the earnings limit by a little, add more to your 401k to make yourself eligible for the Roth IRA. It's hard to pass up the benefits of the Roth IRA each year, as you can't make retroactive contributions. I really wish you could though.

I opened my first Roth I.R.A in 2010 and I have all my 5498s. Lol. I have been mixing out my Roth for a few yrs. This year I am insane to max out my Roth 401k and Roth IRA. Yay🎉🎉

Humphrey Yang sent me here. I listened to him and I subbed. :)

Since the 2017 TRUMP Tax Cuts my Wife and I have been Back Door Rothing $50,000 a year and still staying in our 24% Tax Bracket. Tax time has been a blast :( Next year is our last year and then we are done. At 60 we will have 1/4 of our Portfolio in Roth, 1/4 in Taxable Brokage and 1/2 in the Bad Tax Deffered.

My only 'add' is that if you have an investment idea / concept which might pay 'outsized' gains, then a Roth is a perfect place to park your funds. Peter Thiel placed $2,000 of Paypal to become $5B from Paypal. It will never be taxed. Maybe you loved Apple or Tesla and were mostly certain it would triple. $10,000 would become $30,000 and no capital gains and no future tax from a traditional IRA.

Max it out while you can!! I can no longer contribute. I am 42 and should be continuing to contribute to a retirement account (IMO). My annual taxable income is under $50K, but it’s not EARNED income because I was diagnosed with a neuromuscular disease and became disabled, out of the nowhere. Was a healthy athlete growing up, healthy adult lifestyle, steady job. I am not allowed to contribute to any IRA because my income is from SSDI. My illness is disabling, but not terminal, so life expectancy is the same. MAX OUT YOUR ROTH WHILE YOU CAN!!

If you have the money up front do you suggest maxing out the Roth every January or dollar cost averaging?

Great video and really good point you made near the end about high earners. If you think your tax rate will be lower in retirement than it is now, then a Traditional IRA/401k may be better. There's an interesting experiment you can try in a spreadsheet: Compare the ending income from a Roth Vs Traditional when you have the same income to invest, you get the same appreciation over time and your tax rate is the same at the start & end dates. You end up with exactly the same $$.

You never mentioned 5 year rule.

I don't think I've asked this before but one thing I haven't seen anyone talk about is when during the year to take withdrawals. Most people talk about what you can take on a yearly basis but from a budgeting standpoint that seems like a nightmare. We're big budgeters in my home and taking a lump some once a year seems contrary to that - and, truly, anyone else that isn't rolling in it. We can put it in an account and draw on it but it would make more sense to at least do it quarterly. I wonder however if that would only increase transaction fees. Long story short, like the channel and common sense you promote.

There's one instance where I disagree with most financial content creators and you said it. The "don't use the Roth IRA as an emergency fund" line. I feel like it's totally okay to start an emergency fund in a Roth IRA IF: you can't max it out. You could put it into a safe vehicle like a money market account inside the IRA. If you need it, it's easy enough to get out in emergencies. If you don't, well guess what, you just started funding a Roth IRA. Of course if you can max out the Roth IRA, then it's a different situation, but that's how I see it anyway. Any thoughts?

Thanks for all your great info Erin off topic if I roll over a t bill say $1000 Dollars does the profit money get rolled over also or do they send that to your bank account . If that makes any sense . Thank you ..

Max out a 401k & a Roth each year if possible.

I have an older underfunded Roth. Can I contribute into that Roth now up to my limits? Do I have to wait 5 years to withdraw profits from that fund?

Excellent video! I love the Roth flexibility. Some financial planners in my area believe that collectively there is so much money in Roth accounts that Congress in the future will tax withdrawals being unable to ignore a potential revenue stream.

Roth 401k or pretax and why? Can do either.

I overcontributed so I’m seeing the tax man Thursday oops 🙊

I wish brokerage accounts taxable where Roth IRA lol

Hey Erin , very good video . I can do better editing in your videos which can help you to get more engagement in your videos . Pls lmk what do you think ?

The best feature of a roth is leaving it to your child tax-free.

Traditional is better if you need a tax write off. If I had a Roth put in less money than a Traditional to save money. Roth tax you up front like getting pick pocket and can't get the money until retirement

Roth emergency fund… Erin, your advice doesn’t hold up to the math. Why would anyone put after-tax money into a taxable account when they could put it into Roth and access the principal anytime penalty-free? It’s the best of both - until (and after) the emergency funds are needed, the gains compound tax-free forever. Roth should be the first savings account to be filled up, and taxable accounts should be the last.

I was pretty into the Roth IRA, but then I realized that my wife and I could withdraw up to almost $100k a year from a taxable brokerage account tax free, and I don't imagine we'll ever be much richer than that. So I'm not really sure what the advantage is for the Roth in that case.

Thanks for doing a great job explaining how these accounts work and their limitations.

I'm just surprised not everyone under 50 maxes out their Roth IRA... You're limited to 10k married and 7k single... It's easy to hit for almost every income range above 40-50k.

I love your videos! I am 51 and find the information you present very timely!

What's the point of having income limits if you can simply do a backdoor roth anyway?

😂😂😊

Another great video and discussion on this very important topic. I'm certain it will help many people and encourage you to continue putting out this great content. Have a great week Erin! Larry, Central Valley, Ca.

🥇🥇🥇

Don't sleep on the taxable brokerage. 0% tax up to 90k of capital gains if you are married is huge IMO. Full flexibility of when to use it and how to use it. If you die with money in it, the step up law allows your heirs to take it tax free. I'm dropping out of tax deferred accounts entirely: Roth or taxable. Deferred is dumb (for someone in my tax bracket at least).

Best video on the Roth IRA!

Does anyone know if this limit is applied to Roth 401k/403b? Also, if you have more than one Roth IRA account, does the 7k limit apply to ALL of them combined?

There are many things to like about the Roth IRA but if I had to pick one, I would say that Roth withdrawals do not cause many of the problems that Traditional withdrawals do. For example, Roth withdrawals do not count as income when it comes to the IRMAA surcharge. Roth withdrawals do not impact the taxation of Social Security benefits, either. Roth withdrawals do not count when applying for a Marketplace healthcare plan. Traditional IRA withdrawals do impact all of the above and cause even more headaches. The Roth IRA can save you from a lot of complications and nasty surprises in your retirement.

🎉

Say you just make slightly over the MAGI amount. Could you put more money into a traditional 401k to lower your MAGI which would then let you contribute the full amount again into your Roth IRA? I'm guessing yes because I think that's what the M stands for, modified right? I'm still far from reaching that amount, but hoping the future I will make that amount so I'm curious. Thanks!

Another great video. Absolutely the flexibility with Roth. Also consider it a form of "tax insurance" against SS taxability, potentially punitive RMDs, increased rates coupled w/ bracket compression, Medicare surcharges, etc. While we don't love paying 22%/24% today, it is KNOWN and tolerable.

I have a Roth 401k and can put 30k per year in… 😱

Another excellent video Erin. I agree with you completely about the benefits of a Roth IRA. Unfortunately, we could never qualify for one as our income always exceeded the limits. As for a back door conversion, the numbers just never worked for that either. Also, I have no heirs so there was no estate planning benefit to me either. I would have definitely used this tool had it been available to me.

they day my income exceeded phase out, I cried.

I made the mistake of opening a traditional IRA a few yrs ago instead of a Roth. I started investing late in life. I'm 54 and have around 34000 in a traditional. I don't know if I should convert to a Roth now

I do Roth IRA and deferred 457 and After dollars . 3 buckets

IRA distributions are taxed as income, not capital gains. I really can't see income tax increases on seniors happening any time even in the distant future. Most middle and upper income people are going to pay much lower tax rates in retirement than while working.

Compound interest is like having two bunny rabbits without cable television. 🙂 They multiply.

My captial gains taxes come out of my tax refund. I never feel it. Works for me.

We're doing an ESA, 2 HSAs, max 401k, max 403b, and should get 2 max Roth IRAs by next April. Saving some cash for a new roof and possibly another car. My job just added a 457 as well so next year after wife and I get raises and we pay our house off we may try to max 457, 403b, 401k, 2 HSAs, 2 Roth IRAs, and an ESA. Gonna be tough. We will be earning 210-215k and own our home.

I have to max it out to make up for my wife's yoga instructor!

I'm approaching the income cap for Roth IRA and am regretting those previous years that I didn't max it out 😢

As a person who is approaching retirement age I can tell you that time is very valuable. Start investing as soon as you can.

75% of my retirement funds are in Roths. Retiring early has also allowed me to continue converting from an IRA to a Roth 100% TAX FREE. Tax free is awesome IMO. I turn 59 1/2 this year where I can finally withdraw from them 100% TAX FREE. Tax free is part of my retirement plan.

8. Because you want to pay more income taxes than you have to pay. Tax brackets are a thing. Contribute traditional, convert Roth.

I love the ROTH acct... but I am hesitant to view it as a replacement for a traditional 401k. 3 Scenarios to consider. You are taking $1000 to invest for 30 years at an average 8%. Scenario 1) A Traditional IRA or normal 401k w/o match. You invest a full $1000, and after 30 years it turns into $9317. Assuming a 20% tax bracket in retirement, that leaves you with $7453.82 available for use in retirement. But lets also remember that this reduces your tax burden while working, giving you an extra ~$2-300 of usable income during your working years, which can't be discounted! Scenario 2) A 401k w/ employer match. You put in $1000, and your employer puts in an extra $300 (30% match up to a limit isn't uncommon). After 30 years at 8% growth you have $12,112.46, and assuming a similar 20% retirement tax bracket that leaves you with $9,689.97 of usable income in retirement. That is +$2200 from the $300 match! pretty sweet! And like scenario 1, you save on taxes, freeing up more cash during the messy middle of life. Scenario 3) A Roth contribution. Because taxes are coming out and to keep the numbers fair, we are going to assume a 25% effective tax bracket during your working years, meaning that of your $1,000, only $750 is actually getting invested (You may put in $1000, but then you are paying additional taxes on top which isn't an honest comparison to the 401k). Over the same 30 years, and the same 8% average investment, this leaves you with $6987.96. So you end up with a smaller overall usable income during retirement, AND you don't free up any tax money during your working years when life is generally going to be the most expensive. But thankfully retirement investing isn't an either/or situation. In a vacuum and direct comparison to a Traditional IRA or 401k, the Roth actually isn't that great in all except the highest income and super-saver situations. But most people aren't starting their retirement journey at age 16 where maxing out their Roth acct each and every year until age 67-70 is going to give them a stupidly large account and a massive income boost walking into retirement. Most people are starting their retirement savings in their 30s-40s where contributing to other retirement account types will have advantages over a traditional non-retirement brokerage account... and that is where the Roth really shines! If you have a 401k anyway either to meet your retirement savings goals, or get your employer match, then saving your Roth as an 'account of last resort' will allow you to keep it invested an extra 10 years. Being able to give it that additional time compared to a 401k with its RMDs means that it could grow that $750 to $15k+ of tax-free income. If you still like your kids at the end of your life, there are a lot less taxes and considerations when inheriting a Roth account, which again makes it ideal as an 'account of last resort'. Roth alone for most people, especially people starting their retirement plans late, likely isn't the best tool for the job. But where it really shines is in combination with other accounts to give you options and flexibility. When part of a mix of account types... oh boy! A Roth starts to look incredibly broken! Surely a must-have in your retirement mix! But just not so great if it is your only retirement account type unless you start extremely early or have an insane retirement income.