Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money. I retired with 5 million dollars
If you’re new to investing or have a more complex financial situation, It can be helpful to work with a financial advisor who can provide personalized guidance and help you make informed investment decisions.
On the contrary, even if you’re not skilled, it is still possible to hire one. I am a project manager and my personal port-folio of approximately $750k took a big hit in April due to the crash. I quickly got in touch with a financial-planner that devised a defensive strategy to protect and profit from my port-folio this red season. I’ve made over $150k since then
Finding financial advisors like “Sonya Lee Mitchell” who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm 59 and living off my savings.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as an individual investment account or employing the services of a retirement planner/financial Advisor.
My CFA Sophia Maurine Lanting, a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
I recently adjusted my Roth IRA to 50% in SCHD, 25% in SCHX, and 25% in SCHG. For my Roth 401k, I went with 70% in Vanguard's S&P 500 Index, 20% in the Vanguard Growth Index, and 10% in the Vanguard International Index. My goal is to grow my $350k to over $1 million within the next three years.
I agree-having an advisor manage my investments has been invaluable since my work schedule doesn't allow time for in-depth analysis. Thankfully, my portfolio has grown fivefold in just four years, reaching nearly $1 million today.
@@CarddtReddt I work with Rebecca Lynne Buie. At first, I was hesitant to let someone else handle my investments, but it turned out to be the best decision I’ve made.
Thank you for sharing! I did a quick search for Rebecca Lynne Buie online, found her consulting page, and scheduled a call. She seems to have a high level of expertise.
Increasing tax rates are the reason I rolled over my 401k to a Roth. I don’t want to be 59 paying taxes on current income on withdrawals made from my retirement account. I'm now seeking best possible areas or ways to gain wealth in today's economy.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as in an individual investment account or employing the services of a retirement planner/investment advisor.
Private investing is the best way to go about the market right now, especially for near retirees, I've been in touch with a wealth manager, netted 370K the last downturn, made it clear there's more to the markets than we average joes know.
I'm cautious about giving specific recommendations as everyone's situation varies. Consider independent financial advisors like "Sophia Maurine Lanting" I've worked with her since the pandemic and highly recommend her. You can check if she meets your criteria.
Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My Husband and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement
This is true. I'm in my mid 50's now. My wife and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with her profits over the years, but at least I earn more. I'm making money even before retiring, and my retirement fund has grown way more than it would have with just the 401(k). Haha...
Interesting. I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation..
I definitely share your sentiment about these firms. When I was starting out, I checked out a couple of freelance investors online, so you could do the same. I personally work with “Teresa L Athas”, and she's is widely recognized for her proficiency and expertise in the financial market. With a comprehensive knowledge of portfolio diversification, she is acknowledged as an authority in this field...
Investing in a Roth IRA is a smart choice because contributions grow tax-free over time, and withdrawals in retirement are tax-free. This allows you to keep more of your hard-earned money. Starting early maximizes the benefits of compounding, where your investment grows exponentially by earning interest on both the initial amount and the interest it accrues.
Effective personal finance management is more important than the amount of money saved, regardless of whether income is earned through job or investment. Individuals can seek counsel from a certified financial advisor to optimize financial outcomes, who can provide specialized advice and methods to decrease expenses and maximize income.
I completely agree; I am 60 years old, recently retired, and have approximately $650k in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, the Fin-advisor can only be neglected, not rejected. Just do your due diligence to identify a fiduciary one.
Do your due diligence and opt for one that has tactics to help your portfolio continue consistent and steady growth. “Izella Annette Anderson” is accountable for the success of my portfolio, and I believe she has the qualifications and expertise to accomplish your objectives.
My CFA ’Izella Annette Anderson’ , a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
At 32, I'm diving into investing for the first time. I’ve started contributing to my 401K and opened a Roth IRA with automatic contributions. My main question is whether asset allocation is crucial at this stage or if I'm just overthinking as a beginner.
I completely agree-having a professional manage my investments has been invaluable. My job doesn’t allow time for in-depth stock analysis, so I entrusted an advisor with my portfolio. I’ve been fully invested since the COVID-19 outbreak, and I’m happy to say my portfolio has grown fivefold in just five years, reaching nearly $1 million.
Impressive gains! Who's guiding your investments? I’m excited to invest for my future retirement, but I'm unsure where to begin. Currently, I’m only contributing to my 401K through my employer, but the returns have been slow.
Rebecca Lynne Buie has consistently been my top recommendation. She’s widely recognized for her expertise in financial markets and has a strong track record. I highly recommend her.
Thank you for the recommendation. I was curious, so I looked up Rebecca Lynne Buie online. Her consulting page came up at the top, and I’ve scheduled a call. I've heard about advisors before, but none have looked as impressive as she does.
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement, I'm 55.
the strategies are quite rigorous for the regular-Joe. As a matter of fact, they are mostly successfully carried out by pros who have had a great deal of skillset/knowledge to pull such trades off.
True. Having the right financial planner is invaluable. My portfolio is well-matched for every season of the market and recently hit 90% rise from early last year. I and my CFP are working on a 7 figure ballpark goal, though this could take till Q3 2024.
I'm cautious about giving specific recommendations since everyone's situation varies, but I've worked with Marisa Michelle Litwinsky` for years and highly recommend her. Look her up to see if she meets your criteria.
@@Markjohnson09 Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé.
Hello, I am due for retirement in two years, I'm a senior citizen but I'm curious to know best how people split their pay, how much of it goes into savings, spendings or investments, I earn around $50K per year but nothing to show for it yet.
In this current unstable markets, It is advisable to diversify while retaining 70-80% in secure investments. looking at your budget, you should consider financial advisory.
I think you're better off with majority investment in S&P500 and uprising equities cos they always outperform. Also speaking with an advisor can help with pointers. I've been in contact with one I reached through commentaries here, she has been really helpful.
"Rebecca Nassar Dunne" is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I’ve always spent less than what I made. I’ve always paid myself 1st. by using payroll deductions. If I got a raise I increased the pay roll deduction. I never went down on the deduction until I reached 59 and I started at 30. I decreased by about 50% I took more vacations that year and inflation caught up to me. I never borrowed against the funds.
A guy asked if he should take a HELOC for a home renovation. I said, "I wouldn't," and suggested saving instead. He didn't reply. Many homeowners are surprised by the idea of saving money instead of using home equity for projects like a backyard deck. I chose to save and invest in the stock market instead, which has helped me build long-term financial stability without taking on additional debt.
I believe a healthy portfolio has 3 things, at the bare minimum: Exposure to ETFs for increased diversification, Exposure to assets that generate cash flow like dividend stocks, Exposure to market-leading tech.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
people are creatures of habit and learn that it is normal to have a mortgage. When that mortgage is gone they literally feel like that void in there payments needs to get filled. It's actually abnormal to fill that void with savings, as it's something foreign to the majority of people.
So let me make sure I got this straight: 1) You can always withdraw your initial contribution so long as it wasn't from a roth conversion. Age of person and roth don't matter for that. 2) You can only withdraw your earnings once 59.5 AND if you've had a roth IRA at least 5 years, again ignoring conversions 3) If you convert to a roth, 5 year rule applies to each conversion year until you are 59.5, and this applies to both the initial contribution and earnings Did I get that right?
I recently retired at age 65 I went from a NYSDCP into a standard IRA With a Roth IRA as well. I have been converting my IRA into my Roth IRA periodically to minimize my tax burden. I have not yet reached the initial "Five Year Rule" The overall balance has been remaining fairly constant, even paying the taxes with annual conversions
Thank You!!! This was certainly the best explanation of the 5-year rule and the two parts. The second part was most important to me and frustratedly unfair and unclear to me. But you have enlightened me on the second part of the rule as it relates to conversions. Age 59.5 is the key as it relates to Roth conversations, once that mark is met all that money is usable at any time. Thank you Sir!!
@thomasridley458 - one of the things I got, was once you've been investing I nto a Roth IRA for more than five years, after 59.5 years of age, any money invested becomes distributive. However, if you've had the Roth IRA for more than five years, and you're over 59.5 years old, if you take the money right out, then it hasn't even had time to earn any interest, so there's no real benefit
I know a person that just immigrated and has the equivalent of a Roth in their home country. She has an opportunity (and is desirable) to bring their funds abroad a year after moving abroad. Her assumption was that she could move the money to a ROTH IRA and to live by drawing 4% first from her contributions and later from her gains (paying taxes only on gains) . That 5-year rule seems to sabotage her ability to feed herself. What options does she have? Also, do you have anybody in your team experienced in international finanances and tax reporting during an international move as a new retired resident? If not, cqn you recommend a competent one? I fear that most in our area aare likely more interested in making a quick buck on the fees and then leave her with a horrible burden, possibly bankruptcy and depending on welfare. Of course, she can probably sue for malpractice such an advisor that misrepresents himself/herself, but that os not a practice in her cultural makeup.
Good info, my husband is 68 has had a roth for 5 years we plan on adding small conversions. I wondered why we couldn't use it just like a tax free cash account. Dip in when needed, yes we can somewhat.
@WiseMoneyShow - Wow! There seems to be a lot of confusion around the 2nd 5 year rule - does the 5 year rule matter on a roth conversion after 59.5! It makes sense that it WOULDN'T matter and that was my logic trying to get answers from people or even googling and they were saying it still needed a 5 year waiting period for each year converted! You have been the 1st one to explain it perfectly! So thank you!
This video is excellent. I asked my advisor about the 5-year rule and didn't get an answer. This answers all my questions and clears up a confusion I had about the 5-year rule. I had no idea about the 1-year rule for the kids. That sounds awesome.
Two five year rules (well 3 if you include inheritance) and two "penalties" 1. income tax 2. 10% early withdrawal. Complicated indeed and there are many sites out there that get this wrong. This video is 100% correct. Always cross reference info on the IRS website as that is the final word on the subject.
I agree with your comments, BUT not all CPA's and Financial Advisors are thoroughly up on all the specifics of Roth accounts and Roth conversions. I have recently completed our series of Roth Conversions and have purposely not converted every last penny into our Roth accounts. What has greatly helped us was having a cash reserve for the taxes and always having an avoidance to most debt. Sure some of the recent mortgage rates have been wonderful and I can appreciate how nice it'd be to have one(if I needed one). 50+ years ago I inherited $3500 from my grandfather that was meant to be for college. I got my degree while also working and I still had that chunk of inheritance. My parents chose not to bequest money to their grandchildren, so I decided to open Roth accounts for our children and one part time working teenager. Like a teenager, college impo9rtance is not always understood, but I trust there will be a time when my heirs will appreciate my efforts!
1) You can always withdraw your initial contribution so long as it wasn't from a roth conversion. Age of person and roth don't matter for that. 2) You can only withdraw your earnings once 59.5 AND if you've had a roth IRA at least 5 years, again ignoring conversions 3) If you convert to a roth, 5 year rule applies to each conversion year until you are 59.5, and this applies to both the initial contribution and earnings Did I get that right?
@@consciouscrypto3090 1) Yes contributions are always available for withdrawal without any penalty, BUT the IRS expects you to track/report it for certain withdrawals before 59 1/2 on Form 8606 - Part 3. They want to make sure you aren't withdrawing anything that's subject to tax or penalty. 2) You are correct, but to clarify you CAN withdraw it, BUT you will be subject to tax and penalties. 3) This one gets weird. Conversions are NEVER subject to taxes (you already paid taxes upon conversion), only the 10% early withdrawal penalty applies if before 5 years (for each conversion) and before 59 1/2. This is why that penalty goes away completely after 59 1/2.
@@consciouscrypto3090No. The IRS classifies Roth money three ways. 1) Contributions. 2) Conversions. 3) Earnings. It also expects withdrawals to follow the SAME order. Therefore, both contributions and conversions can be withdrawn tax-free at any time and any age BECAUSE taxes on those funds have already been paid. Earnings, however, are subject to taxation until the IRA account has been open 5-years and until the account owner has reached age 59.5.
No Kidding! Cuts right through the crap. I wish I could find someone like him in Phoenix... Most of the people I talk to are only interested in getting my assets under their management so they can pay off that new BMW... 😞
Yes there are many little rules and have been delays in providing some of the rules as well. When a Roth account is inherited by a non-spouse, or when the non-spouse beneficiary dies and a contingent beneficiary inherits the contingent may not have their own 10 year time period, and perhaps the balance of the original beneficiary's 10 year period. Always pay to be informed!
I was aware of the second 5 year rule but not the first five year rule. And the reason is because I did a conversion many years ago. It was a small one but it was in my mind a security blanket kind of decision. That security blanket I thought I needed never came to fruition but now I have a Roth IRA because of it so when I retire I can move my Roth 401k into that IRA and I don't have to wait 5 years to touch any of that money? That's what I heard him say
I thought I was following, but the last bit of information threw me off a little: If I plan on retiring at 60 and most of my savings are in pre tax 401k…and I choose to do a Roth conversion at 61, 62, 63…using my low-income years before social security to do my conversions to minimize my taxes…the Roth conversions I do after 59.5 aren’t subjected to the 5 year rule, right? However if I did conversions all the way up to age 59…THOSE conversions would need to wait five years each? (Double checking, ha!) Thank you for the info!
With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.
For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Penalities exist if you withdraw before 59.5( i have done it )..lost the savers credit for 3 years when i took $600 out when i had a surgery,,i figure it cost me more than $600 lost savings ....2. I have a co-worker whom asked me about opening a Roth and doing conversions( he just turned 60 and his wife also)....good info
The roth was opened by accident so i converted it that same year to a traditional for tax reasons. It still has one cent in that roth so is it still considered the 5 years still even if it just has 1 cent in it and i restart adding money in it now.
Outstanding! This is the kind of common sense information I need! How come I can't find someone like you around here? I keep interviewing retirement/financial planners that don't know everything I do... 😞 I guess the only problem I have now is when and how much pre-tax IRA investments should I convert. Right now I'm told if I convert too much my taxes will be through the roof even though I'm retiring...
This was amazing. I do have Roth IRA for many years. approaching 53 within weeks, I also have a traditional IRA. I am a little confused about the transition from Traditional to Roth? Can you assist with a comment to me. than you. Super informative.
my first Roth I have had now for more then 5 years. I started a new job 1.5 years ago, and started a new 401k and 401Roth account. I am 61 now. I contributed 10k to the Roth new account and now have about 40k in it from gains. Question , do I pay a penalty if I take out these gains in my Roth that I opened a year and half ago?
Not sure if he really clarified the difference between original conversion amount vrs the gains-interest-div cap appreciation of the original amount. I understand that if you convert ira to Roth over 59.5.. you can take out the Basis.. or original conversion amount ... anytime.. no tax no penalty.
Let's be very clear. Suppose you convert 10K into Roth. Can you withdraw that 10K anytime out? Does the 5-year rule apply to that principal or just the "growth" (or gain) from it? You already pay taxes on that principal when you convert.
Think i got it - Never had a roth so even though i am 59.5 if i convert my pre-tax 457b inti a Roth, pat the taxes doing so i cant touch it for 5 years - Great info & i will look into dropping it into my Vanguard Digital Advisor instead or i could just leave it and pay the tax as i pull monthly checks
Just to be clear. After age 59.5, If I roll over money from my 401k into my roth IRA that I've had for more than 5 years, I do not have to wait 5 years to use that money, correct?
@@3piloteach conversion has a 5year rule. I read the IRS literature on it. My understanding is that the money you paid tax on is available immediately but the earnings are under the 5year rule.
Roth 401K isn’t the same as a Roth IRA? I converted my post tax contributions in my 401K to a Roth. The clock doesn’t start until I quit my job and move it to a Roth IRA? Thanks, D.
Thanks! 1. Open Roth IRA now for 5 yrs rule( holding Roth IRA does not qualify) 2. Roth conversion is taxable 3. Inherited Roth IRA- now you have 10 yrs after date of death to withdraw those Roth balance
I have a small amount of money characterized as a ROTH 401K. Does that count for the 1st 5 year rule? i want to move that money into a ROTH IRA, then start characterizing traditional 401K money into a ROTH IRA. Did both 5 year rules start "ticking" when I characterized money as a ROTH 401K?
Thank you for the great video… Answered some questions I had. But if my wife and I are making more than the allowable amount for a Roth IRA, am I still able to open up a Roth IRA for $100? Should she and I both open up to separate Roth IRA for $100 so that we can have them open for five years in order to access, the Roth in my 401(k) at retirement without waiting five years? Also, with my money in the 401(k), both traditional and Roth, do I have to convert that in order to access the money? Or can I simply withdraw from those accounts? Not understanding the pros and cons of converting either out of the 401(k) as opposed to just drawing from where it is now. I’m sure I’m missing something…
Hello, I've been intently watching retirement videos recently as I'm looking at retirement in 5 years (now 58). This is the first I'm hearing about a 5 year rule. I've been contributing for years in my 401K and started many years ago also contributing to my 401K Roth account. Are you saying I need to get a Roth IRA account set up ASAP? Also, if I do put $100 in a Roth IRA, after the 5 years, can I take the growth from my Roth 401K without penalty since it's not doing a conversion, it's just a withdraw from a Roth account?
I'm in my 50s and I'm more interested in investments that could set me up for retirement , I mean I've heard of people that netted hundreds of thousands during these crash, I listened to someone on a podcast who earned over $650K in less than a year, what's the strategy behind such returns?
Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. hence I will suggest you get yourself a financial-Advisor that can provide you with entry and exit points on best stocks to buy now or put on a watchlist.
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you. I will be retiring in two years and I might need some management on my much larger portfolio. Don't want to take any chances
GREGORY LEO CATTEL is the licensed FA I work with, I can't speak much about him you should make a search with his name, you'd find the necessary details to schedule an appointment.
When dollars are in funds/shares, that 15-20-25-35% income tax rate could challenge the Roth being a better option. Look at your tax brackets what rate you expect when retiring. You might be paying a higher rate now than in retirement. In my case traditional IRA/401k and maximizing shares purchased during my working years has more "shares/dollars" working for me. Just speaking about dollars vs the actual dollars in shares of a fund can be a missed opportunity when you have pretax dollars working for you for a longer period.
You should read about 1) IRMAA penalties-which are hidden taxes that get deducted by social security to cover Medicare costs; and 2) RMD’s (IRS mandated required minimum distributions). In many cases, Roth accounts are preferable to “regular” IRAs.
Can I withdraw @10K from a Roth 403B with no penalty if I use the funds to buy a house as a first-time home buyer and I am not 59.5 years old? I left my employer last year but have not rolled over the Roth 403B from the financial institution.
Let's say I am 60 years old and currently have $50k in a Roth IRA. I also have a regular IRA with $50k in it. If I do a Roth conversion on the $50k regular IRA and put it into my existing Roth account, do I have $100k that I can withdraw at any time?
@cometcal2 I'd say it depends when you first contributed to the Roth IRA. If it has been more than 5 years since you first contributed to the Roth IRA then YES you have $100K you can withdraw tax free/penalty free (assuming you paid the taxes on that rollover with other funds not part of the conversion dollars). if it has not been 5 years since you first contributed to the Roth IRA then the answer is NO (based on what I got out the Wise Money Show video above ). For example lets say you open and funded the Roth only 4 years ago. Lets also say you contributed $7000 per year for 4 years. Your contribution total is $28,000. If your account balance is $50,000 then you have $22,000 worth of earnings on that 28K. After you convert $50,000 from your Traditional IRA to your Roth this is what you have. $28,000 of Contributions, $22,000 worth of earnings, $50,000 from the Rollover. but you can only withdraw the $28,000 of Contributions + $50,000 Rollover dollars = $78,000 tax free and penalty free. I f you withdraw more you will be hit with the 10% early withdraw penalty. I think the 10% penalty would only be on the $$$ over 78K but I am not sure. Someone please correct me if I am wrong.
I Have a question ? My company recently switched to a new 401k company and I have $6900 in the old ROTH 401K can I roll that over to my ROTH IRA that I have at my bank?
So say I transfer $10,000 to a Roth IRA account that's already met the first 5-year rule. Will even that principal amount (not the interest) of $10K be subject to tax if I withdraw it from the Roth before it's been there for 5 years?
Basis (IRS language for cost) can be withdrawn from a Roth at ANY time with no tax due. This means any “regular” contributions made to a Roth. It also includes CONVERSION dollars added to a Roth. Both five year rules were written to prevent “loopholes” from people avoiding tax. So the only amounts subject to taxation are earnings and growth and pre-age 59.5 withdrawals that include earnings and growth.
The first 5 year is for contributions, He said do a small conversion, "even if its $100" to start the clock. This is incorrect. You need to contribute to a Roth to start the clock on the 1st 5 year rule.
He said this in the context of someone who makes too much money to contribute (start) a Roth account. This is another way to start an account. He was correct in this.
So why would anyone over 59.5 (assuming they have had a ROTH account for 5 years) EVER take a 401K withdrawal and put it into a Brokerage account instead of doing a ROTH conversion? Sounds like you should never ever do that, but people do.
I inherited a traditional IRA I took out 22k, after a month and they held 10%(federal) of the withdrawal a little over 2k..... i know i am going to have to pay more taxes on that withdrawal but does anyone know how much more?
To do a Roth conversion, do you have to have a W-2 job? Can you setup a Roth after retirement? After you retire, you no longer receive W-2 tax forms. Did I miss something?
Not to do a conversion from a 401k or IRA. Contributions are a different story. You can do conversions but cannot do contributions unless you are not working.
I have a IRA question. My wife took out a distribution from her IRA in the calendar year she was 59.5 but the day she withdrew it out on the particular year of that same calendar year she was technically 59 and not reached the 59.5 until later that same year. Does the 10% tax penalty happen for that withdraw? She messed up but hopefully since she turned 59.5 that same calendar year, the penalty doesn't apply. Thanks for the response.
Great stuff! My wife and I have been discussing this lately and it appears that we're both right. We're both retired and over 59.5 (over 70). I converted some of my IRA to a Roth two years ago, and hers last year. I said the five-year rule doesn't apply and she argued that it did. I was talking about the second rule, while she was talking about the first. She's right because we just opened the Roths. It's no problem because the Roths are the last dimes we intend to spend and the inheritance is uncomplicated (I intend to do more). Converting hers to a Roth also avoids the RMD on her IRA. Not that it really matters but hers is relatively small and mine is professionally managed, including planning. Considering inheritance, how does the five-year rule play there?
I started a ROTH IRA in 2013. I put at least $25,000 into it over the years and now it is worth about $15,800. I don't seem to know how to manage the account. All I do is lose money.
Is it advisable to make a “new” Roth account with each conversion? Or can I combine each rollover into the same account? First was done 10 years ago. I’m over 59.5. The fund in my Roth is closed to new investors so if I fund a new account, I will be unable to purchase additional shares.
Depends on careful record keeping. I have a SINGLE Roth account, and just track my 1) contributions, 2) conversions, but do not worry much about “earnings” because the default method the IRS uses in its formulas is contributions, then conversions, then earnings when distributions are taken out.
IF I (+65 yo) have to make a mandatory distribution from my 401k (non-Roth), and if I deposit the distibution to my Roth (Established >5 years ago) will I avoid taxes on the distribution?
You could rollover the non-roth to a Roth but you would need to pay taxes on the total amount of the rollover as if it is income. Then going forward there would be no required min distributions.
I don't believe you can use rmd money to convert to a Roth. I believe that money would have to be used or put into a brokerage account. After you take your rmd, if you are at the age that you must start doing that, and if you want to then do a Roth conversion, then you have to take more money out after the rmd and do the conversion of that money. Then you will pay taxes on the rmd amount and the amount you converted.
Question: I withdrew a large sum from my IRA ( after withdrawing RMD) this February . I didn’t withhold any taxes at the time, can I pay the amount of taxes owed next year when I do my taxes or do I have to pay any amount sooner. I’m 75 .
You have to pay estimated taxes on your money as a senior. So when you do a Roth conversion you have to pay estimated taxes. But the IRS wants you to pay estimated taxes on an equal basis basically for the four quarters of the year. If you use the amount you paid in taxes for the previous year and use that amount quarterly paying your estimated taxes that's called safe harbor and your large conversion won't matter, because you're under safe harbor and your pain the IRS what you paid in last year's tax returns total taxes. Then when you file your tax return and you owe more money on the conversion you just pay the money with your tax return. If you're not paying estimated taxes you'll end up getting penalized when you pay your taxes with your tax return.
If you wait to pay the taxes due when you file your tax return, the IRS will charge you an extra penalty for “underpayment” if you do not send in estimated tax payments each quarter.
Great video, thanks. Just to clarify, if I have had a Roth IRA account open for 5 years and I’m over age 59-1/2, there are no more 5 year rules for each Roth conversion? So I could do a conversion at age 61 and then take out the full amount, including any earnings growth, at age 62, tax free?
@@marylennon990 thanks for reply. Start watching at the 8:38 mark in video which is where he states the 5 year rule for each Roth conversion requirement stops once you reach age 59.5. So if you do a Roth conversion at age 59, you don’t need to wait until age 64 to withdraw earnings. You can withdraw it 6 months later when you reach the age 59.5. My understanding is that the only 5 year rule remaining after age 59.5 is that you have to have your first Roth IRA account open for at least 5 years.
I’m confused. I’ve had a Roth IRA since 2019 that hasn’t had any deposits since that first year. It’s just over 5 years ago. I have an IRA converted from a 401k from an employer, and I’m 61 now. Are you stating I can convert that into a Roth IRA now and I don’t have to wait 5 years before withdrawing those funds? I’m considering converting a “small” amount each year into a Roth to avoid taxes (I have no taxable income). Would I be able to withdraw those funds let’s say “next year?” I wouldn’t have to wait 5 years? I would suspend converting for that year of the IRA during the year of withdrawal to further avoid any taxable event. I know I’m being very specific, and I have plenty of nontaxable funds to live on otherwise. Is this a question I need to contact you on or can you answer here? I don’t do very well on the phone. I’m on the spectrum (ASD).
There is a flow chart in the IRS publication that addresses how retirement income is taxed or not taxed. The flowchart is much easier to understand than RUclips videos or the actual written paragraphs in the IRS publication itself.
Whoa very interesting. I did not know the ROTH '5 Year Rule' impacts, especially on conversions. IMO, just another reason to stick with traditional IRA, and leave the money intact and subject to compounding.
I was under the impression you had to own the Roth account you’re withdrawing from for five years. If you owned one Roth 30 years and then open one when you’re 59… I’d think at 59.5 years you could only withdraw gains from the older one.
The IRS treats multiple IRA accounts as a “single” event. Both 5-year rules magically “evaporate” provided: 1) at least ONE IRA account has been open for 5 years, and 2) the account owner is 59.5 years old (or older) when the distribution is taken out/received.
Question, I'm retiring soon as a 69 y.o. and already have a roth which has been opened for 10 years. I'm rolling over a $180,000 401k that was entirely employer funded to a self directed ira. I'm planning to open three additional roth's, as needed, and roll over the ira in equal third amounts, in three successive years into the separate roth's in order to keep the funds isolated from each other and make it simple to determine when the five year restriction has elapsed for each rollover. Does this make sense, or am I overthinking this? Once the five year rule has elapsed, I was going to move each one to my original Roth to consolidate my accounts.
@@touchofgrace3217 In the video, he said that 2nd 5 year rule does not apply if you are over 59.5. However I have heard other 'experts' say the second 5 year rule still applies over 59.5... So who knows... Even if I asked a financial expert, I would not be comfortable with the answer they gave me no matter what they said. I have heard too many people give different answers.
@@kenmore1961he is correct in this video. It clearly states on irs.gov that “You have reached age 59½” is one of the exceptions to the 2nd 5-year rule :)
@@kenmore1961 he did get a little confusing with all of the imaginary scenarios instead of just clarifying the rules themselves. One 5yr rule is about the age of the Roth Account itself. The second 5yr rule is about each individual conversion of the funds into the Roth. Neither rule is affected by the age of the retiree.
At the IRS website there is a complete explanation along with a flowchart. What it comes down to is : If you have had ANY Roth IRA open for at least five years and you are over 59 and 1/2 then all distributions are qualified and tax free.
I have an $800k portfolio from my old job and retired six years ago. Lately, it’s been doing poorly, with only 6% growth in the past three years and I feel stuck. I desperately need to revamp my investments. Any advice on what to do with my money would be greatly appreciated.
This is what people that handle their p0rtfolio themselves go through. I will advice you get yourself some fiduciary advisōr to help you make better p0rtfolio decisions.
I agree, investing with the help of an advisor set me up for life with about $1.6m currently in stock portfolio. I max out my 401k and have few properties. I worked hard as a language tutor for 32 years, and my salary was just over 80k annually. It all boils down to consistent regular investing to minimize risks and maximize growth.
I'm cautious about giving specific recommendations since this is an online forum and everyone situation is unique, but I've worked with "Melissa Elise Robinson" for years and highly recommend her. Look her up to see if she meets your criteria.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
Dealing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money.
If you’re new too investing or have a more complex financial situation, It can be helpful to work with a financial advisor who can provide personalized guidance and help you make informed investment decisions.
Thank you for sharing, I must say, She appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.
If I have $100k in cash to invest and I’m 60 years old, if I open a Roth I can only put $8k in it each year. That’s not much for growth. The rest of it would have to be invested in a taxable account where most of the money would be earned by growth and or dividends.
@ the biggest secret is a self directed Roth. It requires a LLC. Almost unlimited side hustles. U could have Bills used cars LLC or pressure washing or ticket sales. … has to be ran like a true business or you could do time for embezzlement . U could buy a car w a blown head gasket for 500$ , spend 200$ on parts , spend 6hrs repairing it. Sell the car for 2500$. Pay yourself 300$ for your labor that you would give yourself a 1099 for and pay personal income tax on. The 1500$ profit would be tax free as a conventional Roth Your business could be nearly any service that people are willing pay for. Best wishes.
There is a separate 5 year rule for each conversion but once you turn 59 and 1/2 the rule goes away. The entire purpose of the rule is to keep people from doing an end run around the rules for traditional IRAs . Once you reach 59.5 there is no more 10% penalty so no more rule.
@@everettcalhoun8197nope. On the IRS website their is a flowchart that shows how it works. If you are 59 and 1/2 and you have had ANY Roth IRA open for at least five years then all distributions are qualified and tax free. The whole purpose of the five year rule on conversions is to keep someone who is underage from converting the funds and then immediately withdrawing them with no penalty because the taxes have already been paid. I did a conversion when I retired at 61 in order to use it as an emergency fund and I have accessed it several times in the last four years. No problems with the IRS.
@@everettcalhoun8197nope. There is a flowchart on the IRS website that explains it very well. If you are over 59 and 1/2 and you’ve had ANY Roth IRA open for at least 5 years then all distributions are qualified and tax free.
Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money.
If you’re new too investing or have a more complex financial situation, It can be helpful to work with a financial advisor who can provide personalized guidance and help you make informed investment decisions.
Thank you for sharing, I must say, She appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second daughter. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks.
@@BennettElizabth Quitting may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. *MARGARET MOLLI ALVEY*, a licensed fiduciary whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help.
I’ve been saving for a long time instead of investing, and right now I only have about $516k. I'm not sure how to make it grow, considering all the inflation, into something substantial that I might use for retirement. I’m just here for ideas
This is why I entrusted a fiduciary with my investmnt decisions. Many underestimate advisors until emotions lead to losses. My advisor crafted a tailored strategy aligning with my long-term goals, guiding entry and exit points for the equities I focus on. This has grown my portfolio to over $850k. My personal best so far
To achieve a secure retirement, aiming to save at least 15% of your income in a 401(k) is advisable. Online tools can assist in calculating the best savings strategy for you, considering factors like age and income. Consistently saving this percentage can help build your retirement fund effectively, thanks to the benefits of compound interest.
With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.
For me, I believe retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My wife and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement.
For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money. I retired with 5 million dollars
If you’re new to investing or have a more complex financial situation, It can be helpful to work with a financial advisor who can provide personalized guidance and help you make informed investment decisions.
On the contrary, even if you’re not skilled, it is still possible to hire one. I am a project manager and my personal port-folio of approximately $750k took a big hit in April due to the crash. I quickly got in touch with a financial-planner that devised a defensive strategy to protect and profit from my port-folio this red season. I’ve made over $150k since then
Due to the market falls, I need advice on how to rebuild my portfolio and develop more successful tactics. Where can I find this teacher?
Finding financial advisors like “Sonya Lee Mitchell” who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I searched for her name on the internet, found her page, and reached out via email to schedule a conversation. Thank you.
I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm 59 and living off my savings.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as an individual investment account or employing the services of a retirement planner/financial Advisor.
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you
My CFA Sophia Maurine Lanting, a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Found her online page by searching her full name, I wrote her an email and scheduled a call, hopefully she responds.
I recently adjusted my Roth IRA to 50% in SCHD, 25% in SCHX, and 25% in SCHG. For my Roth 401k, I went with 70% in Vanguard's S&P 500 Index, 20% in the Vanguard Growth Index, and 10% in the Vanguard International Index. My goal is to grow my $350k to over $1 million within the next three years.
It might be worth considering a financial advisor to avoid constant adjustments. Your selections are strong, especially for a $350k portfolio.
I agree-having an advisor manage my investments has been invaluable since my work schedule doesn't allow time for in-depth analysis. Thankfully, my portfolio has grown fivefold in just four years, reaching nearly $1 million today.
That's impressive! Would you mind sharing your advisor's details? I’m in urgent need of rebalancing my portfolio.
@@CarddtReddt I work with Rebecca Lynne Buie. At first, I was hesitant to let someone else handle my investments, but it turned out to be the best decision I’ve made.
Thank you for sharing! I did a quick search for Rebecca Lynne Buie online, found her consulting page, and scheduled a call. She seems to have a high level of expertise.
Increasing tax rates are the reason I rolled over my 401k to a Roth. I don’t want to be 59 paying taxes on current income on withdrawals made from my retirement account. I'm now seeking best possible areas or ways to gain wealth in today's economy.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as in an individual investment account or employing the services of a retirement planner/investment advisor.
Private investing is the best way to go about the market right now, especially for near retirees, I've been in touch with a wealth manager, netted 370K the last downturn, made it clear there's more to the markets than we average joes know.
Who is this Adviser or investor you use? I lost over 35000 already this year, I’m in need of a planner going forward.
I'm cautious about giving specific recommendations as everyone's situation varies. Consider independent financial advisors like "Sophia Maurine Lanting" I've worked with her since the pandemic and highly recommend her. You can check if she meets your criteria.
Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My Husband and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement
This is true. I'm in my mid 50's now. My wife and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with her profits over the years, but at least I earn more. I'm making money even before retiring, and my retirement fund has grown way more than it would have with just the 401(k). Haha...
Interesting. I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation..
I definitely share your sentiment about these firms. When I was starting out, I checked out a couple of freelance investors online, so you could do the same. I personally work with “Teresa L Athas”, and she's is widely recognized for her proficiency and expertise in the financial market. With a comprehensive knowledge of portfolio diversification, she is acknowledged as an authority in this field...
Scam thread could steal your funds. Be cautious; reported to you tube.
Scam thread could steal your funds. Be cautious; reported to you tube.
Investing in a Roth IRA is a smart choice because contributions grow tax-free over time, and withdrawals in retirement are tax-free. This allows you to keep more of your hard-earned money. Starting early maximizes the benefits of compounding, where your investment grows exponentially by earning interest on both the initial amount and the interest it accrues.
Effective personal finance management is more important than the amount of money saved, regardless of whether income is earned through job or investment. Individuals can seek counsel from a certified financial advisor to optimize financial outcomes, who can provide specialized advice and methods to decrease expenses and maximize income.
I completely agree; I am 60 years old, recently retired, and have approximately $650k in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, the Fin-advisor can only be neglected, not rejected. Just do your due diligence to identify a fiduciary one.
@@mikegarvey17This is exactly how i wish to get my finances coordinated ahead or retirement. Can I get access to your advisor?
Do your due diligence and opt for one that has tactics to help your portfolio continue consistent and steady growth. “Izella Annette Anderson” is accountable for the success of my portfolio, and I believe she has the qualifications and expertise to accomplish your objectives.
My CFA ’Izella Annette Anderson’ , a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
At 32, I'm diving into investing for the first time. I’ve started contributing to my 401K and opened a Roth IRA with automatic contributions. My main question is whether asset allocation is crucial at this stage or if I'm just overthinking as a beginner.
There are so many choices to make, and for beginners, it's often best to entrust daily investment decisions to an experienced advisor.
I completely agree-having a professional manage my investments has been invaluable. My job doesn’t allow time for in-depth stock analysis, so I entrusted an advisor with my portfolio. I’ve been fully invested since the COVID-19 outbreak, and I’m happy to say my portfolio has grown fivefold in just five years, reaching nearly $1 million.
Impressive gains! Who's guiding your investments? I’m excited to invest for my future retirement, but I'm unsure where to begin. Currently, I’m only contributing to my 401K through my employer, but the returns have been slow.
Rebecca Lynne Buie has consistently been my top recommendation. She’s widely recognized for her expertise in financial markets and has a strong track record. I highly recommend her.
Thank you for the recommendation. I was curious, so I looked up Rebecca Lynne Buie online. Her consulting page came up at the top, and I’ve scheduled a call. I've heard about advisors before, but none have looked as impressive as she does.
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement, I'm 55.
the strategies are quite rigorous for the regular-Joe. As a matter of fact, they are mostly successfully carried out by pros who have had a great deal of skillset/knowledge to pull such trades off.
True. Having the right financial planner is invaluable. My portfolio is well-matched for every season of the market and recently hit 90% rise from early last year. I and my CFP are working on a 7 figure ballpark goal, though this could take till Q3 2024.
@@Markjohnson09 impressive gains! how can I get your advisor please, if you dont mind me asking? I could really use a help as of now
I'm cautious about giving specific recommendations since everyone's situation varies, but I've worked with Marisa Michelle Litwinsky` for years and highly recommend her. Look her up to see if she meets your criteria.
@@Markjohnson09 Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé.
Hello, I am due for retirement in two years, I'm a senior citizen but I'm curious to know best how people split their pay, how much of it goes into savings, spendings or investments, I earn around $50K per year but nothing to show for it yet.
In this current unstable markets, It is advisable to diversify while retaining 70-80% in secure investments. looking at your budget, you should consider financial advisory.
I think you're better off with majority investment in S&P500 and uprising equities cos they always outperform. Also speaking with an advisor can help with pointers. I've been in contact with one I reached through commentaries here, she has been really helpful.
impressive gains! how can I get your advlsor please, if you dont mind me asking? I could really use a help as of now
"Rebecca Nassar Dunne" is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I’ve always spent less than what I made. I’ve always paid myself 1st. by using payroll deductions. If I got a raise I increased the pay roll deduction. I never went down on the deduction until I reached 59 and I started at 30. I decreased by about 50% I took more vacations that year and inflation caught up to me. I never borrowed against the funds.
A guy asked if he should take a HELOC for a home renovation. I said, "I wouldn't," and suggested saving instead. He didn't reply. Many homeowners are surprised by the idea of saving money instead of using home equity for projects like a backyard deck. I chose to save and invest in the stock market instead, which has helped me build long-term financial stability without taking on additional debt.
What advice would you give to someone new to investing with around $80,000 to begin with?
I believe a healthy portfolio has 3 things, at the bare minimum: Exposure to ETFs for increased diversification, Exposure to assets that generate cash flow like dividend stocks, Exposure to market-leading tech.
Hello, I'm interested in trying this out. Who is your advisor, and how can I contact them?
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
people are creatures of habit and learn that it is normal to have a mortgage. When that mortgage is gone they literally feel like that void in there payments needs to get filled. It's actually abnormal to fill that void with savings, as it's something foreign to the majority of people.
So let me make sure I got this straight:
1) You can always withdraw your initial contribution so long as it wasn't from a roth conversion. Age of person and roth don't matter for that.
2) You can only withdraw your earnings once 59.5 AND if you've had a roth IRA at least 5 years, again ignoring conversions
3) If you convert to a roth, 5 year rule applies to each conversion year until you are 59.5, and this applies to both the initial contribution and earnings
Did I get that right?
Thank you. This really cleared up the rules. Retiring next spring at 55 and then 59.5 here we come!
I recently retired at age 65
I went from a NYSDCP into a standard IRA
With a Roth IRA as well.
I have been converting my IRA into my Roth IRA periodically to minimize my tax burden.
I have not yet reached the initial "Five Year Rule"
The overall balance has been remaining fairly constant, even paying the taxes with annual conversions
Thank You!!! This was certainly the best explanation of the 5-year rule and the two parts. The second part was most important to me and frustratedly unfair and unclear to me. But you have enlightened me on the second part of the rule as it relates to conversions. Age 59.5 is the key as it relates to Roth conversations, once that mark is met all that money is usable at any time. Thank you Sir!!
@thomasridley458 - one of the things I got, was once you've been investing I nto a Roth IRA for more than five years, after 59.5 years of age, any money invested becomes distributive.
However, if you've had the Roth IRA for more than five years, and you're over 59.5 years old, if you take the money right out, then it hasn't even had time to earn any interest, so there's no real benefit
I know a person that just immigrated and has the equivalent of a Roth in their home country. She has an opportunity (and is desirable) to bring their funds abroad a year after moving abroad.
Her assumption was that she could move the money to a ROTH IRA and to live by drawing 4% first from her contributions and later from her gains (paying taxes only on gains) .
That 5-year rule seems to sabotage her ability to feed herself.
What options does she have?
Also, do you have anybody in your team experienced in international finanances and tax reporting during an international move as a new retired resident? If not, cqn you recommend a competent one? I fear that most in our area aare likely more interested in making a quick buck on the fees and then leave her with a horrible burden, possibly bankruptcy and depending on welfare. Of course, she can probably sue for malpractice such an advisor that misrepresents himself/herself, but that os not a practice in her cultural makeup.
This video is the most clear and informative video I found on this topic. Thanks for making it.
Good info, my husband is 68 has had a roth for 5 years we plan on adding small conversions. I wondered why we couldn't use it just like a tax free cash account. Dip in when needed, yes we can somewhat.
@WiseMoneyShow - Wow! There seems to be a lot of confusion around the 2nd 5 year rule - does the 5 year rule matter on a roth conversion after 59.5! It makes sense that it WOULDN'T matter and that was my logic trying to get answers from people or even googling and they were saying it still needed a 5 year waiting period for each year converted! You have been the 1st one to explain it perfectly! So thank you!
This video is excellent. I asked my advisor about the 5-year rule and didn't get an answer. This answers all my questions and clears up a confusion I had about the 5-year rule.
I had no idea about the 1-year rule for the kids. That sounds awesome.
Two five year rules (well 3 if you include inheritance) and two "penalties" 1. income tax 2. 10% early withdrawal. Complicated indeed and there are many sites out there that get this wrong. This video is 100% correct. Always cross reference info on the IRS website as that is the final word on the subject.
I agree with your comments, BUT not all CPA's and Financial Advisors are thoroughly up on all the specifics of Roth accounts and Roth conversions. I have recently completed our series of Roth Conversions and have purposely not converted every last penny into our Roth accounts. What has greatly helped us was having a cash reserve for the taxes and always having an avoidance to most debt. Sure some of the recent mortgage rates have been wonderful and I can appreciate how nice it'd be to have one(if I needed one). 50+ years ago I inherited $3500 from my grandfather that was meant to be for college. I got my degree while also working and I still had that chunk of inheritance. My parents chose not to bequest money to their grandchildren, so I decided to open Roth accounts for our children and one part time working teenager. Like a teenager, college impo9rtance is not always understood, but I trust there will be a time when my heirs will appreciate my efforts!
1) You can always withdraw your initial contribution so long as it wasn't from a roth conversion. Age of person and roth don't matter for that.
2) You can only withdraw your earnings once 59.5 AND if you've had a roth IRA at least 5 years, again ignoring conversions
3) If you convert to a roth, 5 year rule applies to each conversion year until you are 59.5, and this applies to both the initial contribution and earnings
Did I get that right?
@@consciouscrypto3090 1) Yes contributions are always available for withdrawal without any penalty, BUT the IRS expects you to track/report it for certain withdrawals before 59 1/2 on Form 8606 - Part 3. They want to make sure you aren't withdrawing anything that's subject to tax or penalty. 2) You are correct, but to clarify you CAN withdraw it, BUT you will be subject to tax and penalties. 3) This one gets weird. Conversions are NEVER subject to taxes (you already paid taxes upon conversion), only the 10% early withdrawal penalty applies if before 5 years (for each conversion) and before 59 1/2. This is why that penalty goes away completely after 59 1/2.
Sounds correct!
@@consciouscrypto3090No. The IRS classifies Roth money three ways. 1) Contributions. 2) Conversions. 3) Earnings. It also expects withdrawals to follow the SAME order. Therefore, both contributions and conversions can be withdrawn tax-free at any time and any age BECAUSE taxes on those funds have already been paid. Earnings, however, are subject to taxation until the IRA account has been open 5-years and until the account owner has reached age 59.5.
Best explanation for Roth IRA rules I've ever seen.
No Kidding! Cuts right through the crap. I wish I could find someone like him in Phoenix... Most of the people I talk to are only interested in getting my assets under their management so they can pay off that new BMW... 😞
@@elgrancabron It's not only Phoenix.
Best roth explanation I've heard. TY
Agreed!!
We obviously could use a definitive rule from the IRS on Rule #2, but your analysis is very logical. Thanks.
Yes there are many little rules and have been delays in providing some of the rules as well. When a Roth account is inherited by a non-spouse, or when the non-spouse beneficiary dies and a contingent beneficiary inherits the contingent may not have their own 10 year time period, and perhaps the balance of the original beneficiary's 10 year period. Always pay to be informed!
There is a spreadsheet in their online retirement income instructions.
I was aware of the second 5 year rule but not the first five year rule. And the reason is because I did a conversion many years ago. It was a small one but it was in my mind a security blanket kind of decision. That security blanket I thought I needed never came to fruition but now I have a Roth IRA because of it so when I retire I can move my Roth 401k into that IRA and I don't have to wait 5 years to touch any of that money? That's what I heard him say
I thought I was following, but the last bit of information threw me off a little:
If I plan on retiring at 60 and most of my savings are in pre tax 401k…and I choose to do a Roth conversion at 61, 62, 63…using my low-income years before social security to do my conversions to minimize my taxes…the Roth conversions I do after 59.5 aren’t subjected to the 5 year rule, right?
However if I did conversions all the way up to age 59…THOSE conversions would need to wait five years each? (Double checking, ha!)
Thank you for the info!
Thank you for this great breakdown of the mysterious Roth rules, great video!!
With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.
For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings?
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
Penalities exist if you withdraw before 59.5( i have done it )..lost the savers credit for 3 years when i took $600 out when i had a surgery,,i figure it cost me more than $600 lost savings ....2. I have a co-worker whom asked me about opening a Roth and doing conversions( he just turned 60 and his wife also)....good info
I'm 60 and have a Roth IRA over 5 years, if i start a Roth 401k with my company how does the 5 year rule apply to the 401k?
The roth was opened by accident so i converted it that same year to a traditional for tax reasons. It still has one cent in that roth so is it still considered the 5 years still even if it just has 1 cent in it and i restart adding money in it now.
Good video covered all the bases on the 5 year rules.
Outstanding! This is the kind of common sense information I need! How come I can't find someone like you around here? I keep interviewing retirement/financial planners that don't know everything I do... 😞 I guess the only problem I have now is when and how much pre-tax IRA investments should I convert. Right now I'm told if I convert too much my taxes will be through the roof even though I'm retiring...
I had these straight in my head already. Glad I've been paying attention and learning. :)
What about TSP or Roth TSP? When I retired, I rolled over my TSP and Roth TSP to a Traditional and Roth IRA. Does this 5 year rule still apply?
This was amazing. I do have Roth IRA for many years. approaching 53 within weeks, I also have a traditional IRA. I am a little confused about the transition from Traditional to Roth? Can you assist with a comment to me. than you. Super informative.
my first Roth I have had now for more then 5 years. I started a new job 1.5 years ago, and started a new 401k and 401Roth account. I am 61 now. I contributed 10k to the Roth new account and now have about 40k in it from gains. Question , do I pay a penalty if I take out these gains in my Roth that I opened a year and half ago?
Not sure if he really clarified the difference between original conversion amount vrs the gains-interest-div cap appreciation of the original amount. I understand that if you convert ira to Roth over 59.5.. you can take out the Basis.. or original conversion amount ... anytime.. no tax no penalty.
If you’ve had the Roth for at least 5 years, then you can also take the gains tax free after the conversion, over age 59.5.
Let's be very clear. Suppose you convert 10K into Roth. Can you withdraw that 10K anytime out? Does the 5-year rule apply to that principal or just the "growth" (or gain) from it? You already pay taxes on that principal when you convert.
Think i got it - Never had a roth so even though i am 59.5 if i convert my pre-tax 457b inti a Roth, pat the taxes doing so i cant touch it for 5 years - Great info & i will look into dropping it into my Vanguard Digital Advisor instead or i could just leave it and pay the tax as i pull monthly checks
So if I have Roth1 held over 5 years and now I open Roth 2, Roth 2 doesn’t have to wait 5 years? I’m over 59.5.
Must needed info and clarification. Thanks.
Just to be clear. After age 59.5, If I roll over money from my 401k into my roth IRA that I've had for more than 5 years, I do not have to wait 5 years to use that money, correct?
since you're both over 59.5 and have had Roth IRA for 5+years..then you have no constraints on taking money out 8:58
I asked and want confirmation on this as well
@@3piloteach conversion has a 5year rule. I read the IRS literature on it. My understanding is that the money you paid tax on is available immediately but the earnings are under the 5year rule.
@@DunRovinRanch-1969 doesn’t apply after 59.5 tho
@@DunRovinRanch-1969instead of reading the paragraphs, look at the flow chart. It is easier to understand.
Clear at the beginning but getting confused at the end.😅
What about a roth ira rollover? Are those funds subject to a 5 year waiting rule at age 59 1/2?
Roth 401K isn’t the same as a Roth IRA? I converted my post tax contributions in my 401K to a Roth. The clock doesn’t start until I quit my job and move it to a Roth IRA? Thanks, D.
Thanks!
1. Open Roth IRA now for 5 yrs rule( holding Roth IRA does not qualify)
2. Roth conversion is taxable
3. Inherited Roth IRA- now you have 10 yrs after date of death to withdraw those Roth balance
What do you mean holding roth ira does not qualify?
I have a small amount of money characterized as a ROTH 401K. Does that count for the 1st 5 year rule? i want to move that money into a ROTH IRA, then start characterizing traditional 401K money into a ROTH IRA. Did both 5 year rules start "ticking" when I characterized money as a ROTH 401K?
You provide great information and I thank you for that. I believe, your explanation would be more impactful if you use some visual aids.
does the 5-yr rule also apply to Roth 401(k)?
Thank you for the great video… Answered some questions I had. But if my wife and I are making more than the allowable amount for a Roth IRA, am I still able to open up a Roth IRA for $100? Should she and I both open up to separate Roth IRA for $100 so that we can have them open for five years in order to access, the Roth in my 401(k) at retirement without waiting five years?
Also, with my money in the 401(k), both traditional and Roth, do I have to convert that in order to access the money? Or can I simply withdraw from those accounts? Not understanding the pros and cons of converting either out of the 401(k) as opposed to just drawing from where it is now. I’m sure I’m missing something…
Hello, I've been intently watching retirement videos recently as I'm looking at retirement in 5 years (now 58). This is the first I'm hearing about a 5 year rule. I've been contributing for years in my 401K and started many years ago also contributing to my 401K Roth account. Are you saying I need to get a Roth IRA account set up ASAP? Also, if I do put $100 in a Roth IRA, after the 5 years, can I take the growth from my Roth 401K without penalty since it's not doing a conversion, it's just a withdraw from a Roth account?
Excellent, to the point and clear. Thanks!
Super helpful. Thank you
I'm in my 50s and I'm more interested in investments that could set me up for retirement , I mean I've heard of people that netted hundreds of thousands during these crash, I listened to someone on a podcast who earned over $650K in less than a year, what's the strategy behind such returns?
Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. hence I will suggest you get yourself a financial-Advisor that can provide you with entry and exit points on best stocks to buy now or put on a watchlist.
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you. I will be retiring in two years and I might need some management on my much larger portfolio. Don't want to take any chances
GREGORY LEO CATTEL is the licensed FA I work with, I can't speak much about him you should make a search with his name, you'd find the necessary details to schedule an appointment.
I just Googled his name and his website came up right away. It looks interesting so far. I sent him an email and i hope he responds soon.
I just turn 57 and started funding a Roth IRA, that mean's I cant withdraw any of the money until I turn 62 without a penalty?
THANK YOU SO MUCH FOR THIS HELPFUL VIDEO!!!
5 year rule is best mentioned as a 5-year clock. Track the timer.
Thank you very clear presentation
When dollars are in funds/shares, that 15-20-25-35% income tax rate could challenge the Roth being a better option. Look at your tax brackets what rate you expect when retiring. You might be paying a higher rate now than in retirement. In my case traditional IRA/401k and maximizing shares purchased during my working years has more "shares/dollars" working for me. Just speaking about dollars vs the actual dollars in shares of a fund can be a missed opportunity when you have pretax dollars working for you for a longer period.
You should read about 1) IRMAA penalties-which are hidden taxes that get deducted by social security to cover Medicare costs; and 2) RMD’s (IRS mandated required minimum distributions). In many cases, Roth accounts are preferable to “regular” IRAs.
Can I withdraw @10K from a Roth 403B with no penalty if I use the funds to buy a house as a first-time home buyer and I am not 59.5 years old? I left my employer last year but have not rolled over the Roth 403B from the financial institution.
Let's say I am 60 years old and currently have $50k in a Roth IRA. I also have a regular IRA with $50k in it. If I do a Roth conversion on the $50k regular IRA and put it into my existing Roth account, do I have $100k that I can withdraw at any time?
@cometcal2
I'd say it depends when you first contributed to the Roth IRA. If it has been more than 5 years since you first contributed to the Roth IRA then YES you have $100K you can withdraw tax free/penalty free (assuming you paid the taxes on that rollover with other funds not part of the conversion dollars).
if it has not been 5 years since you first contributed to the Roth IRA then the answer is NO
(based on what I got out the Wise Money Show video above ).
For example lets say you open and funded the Roth only 4 years ago.
Lets also say you contributed $7000 per year for 4 years.
Your contribution total is $28,000.
If your account balance is $50,000 then you have $22,000 worth of earnings on that 28K.
After you convert $50,000 from your Traditional IRA to your Roth this is what you have.
$28,000 of Contributions, $22,000 worth of earnings, $50,000 from the Rollover.
but you can only withdraw the $28,000 of Contributions + $50,000 Rollover dollars = $78,000 tax free and penalty free. I
f you withdraw more you will be hit with the 10% early withdraw penalty.
I think the 10% penalty would only be on the $$$ over 78K but I am not sure.
Someone please correct me if I am wrong.
@@FrankFrankie-55 I was told by the IRS that every conversion from a 401k or IRA to a Roth had it's own 5 year rule.
@@everettcalhoun8197Partially true, partially not true.
I Have a question ? My company recently switched to a new 401k company and I have $6900 in the old ROTH 401K can I roll that over to my ROTH IRA that I have at my bank?
Roth funds can be directly transferred to a Roth UmIRA. Have your bank do the paperwork. Avoid “touching” the funds yourself.
Yes, like longgone said let the banks take care of the paperwork for the rollover.
If you have a seaskndd Roth Ira account, which is not the sccount you are drawing from, and you are over 60, are you ok to withdraw?
Very informative thank you ❤
So say I transfer $10,000 to a Roth IRA account that's already met the first 5-year rule. Will even that principal amount (not the interest) of $10K be subject to tax if I withdraw it from the Roth before it's been there for 5 years?
Basis (IRS language for cost) can be withdrawn from a Roth at ANY time with no tax due. This means any “regular” contributions made to a Roth. It also includes CONVERSION dollars added to a Roth.
Both five year rules were written to prevent “loopholes” from people avoiding tax. So the only amounts subject to taxation are earnings and growth and pre-age 59.5 withdrawals that include earnings and growth.
The first 5 year is for contributions, He said do a small conversion, "even if its $100" to start the clock. This is incorrect. You need to contribute to a Roth to start the clock on the 1st 5 year rule.
He said this in the context of someone who makes too much money to contribute (start) a Roth account. This is another way to start an account. He was correct in this.
Too many rules all designed to make things too complex to follow.
So why would anyone over 59.5 (assuming they have had a ROTH account for 5 years) EVER take a 401K withdrawal and put it into a Brokerage account instead of doing a ROTH conversion? Sounds like you should never ever do that, but people do.
RMD's can't be converted to Roth
@@stephnejele2483 I'm not talking about RMD's. I'm talking about a normal 401K distribution that is not an RMD.
@@stephnejele2483 But the years between 59.5 and RMDs? Seems like the smart thing to do, though it also sounds too good to be true.
Tax free growth is nice
Because of liquidity. You can have instant access to the cash in a brokerage acct. It can take a few days to access the cash in a Roth.
If I’m 100 % permanent and total disabled through the VA. Do I need to wait until 59 1/2?
Read IRS publications number 590-A. There are exceptions for disability, but you need to read to see if you qualify.
I plan to retire at 65. I will have my Roth IRA over 15 years by then. Is there a time limit to start withdrawing?
Not in your life time. But your beneficiaries will a time limit.
I inherited a traditional IRA I took out 22k, after a month and they held 10%(federal) of the withdrawal a little over 2k..... i know i am going to have to pay more taxes on that withdrawal but does anyone know how much more?
Your tax depends on your total taxable income. Nobody can answer your question unless they saw ALL your income.
To do a Roth conversion, do you have to have a W-2 job? Can you setup a Roth after retirement? After you retire, you no longer receive W-2 tax forms. Did I miss something?
Not to do a conversion from a 401k or IRA. Contributions are a different story. You can do conversions but cannot do contributions unless you are not working.
1) W-2 forms are NOT needed to do Roth conversions. 2) You can open a Roth IRA after retirement.
I have a IRA question. My wife took out a distribution from her IRA in the calendar year she was 59.5 but the day she withdrew it out on the particular year of that same calendar year she was technically 59 and not reached the 59.5 until later that same year. Does the 10% tax penalty happen for that withdraw? She messed up but hopefully since she turned 59.5 that same calendar year, the penalty doesn't apply. Thanks for the response.
She is subject to the 10% penalty because she took the withdrawal BEFORE she turned 59 & 1/2 years old.
Great stuff!
My wife and I have been discussing this lately and it appears that we're both right. We're both retired and over 59.5 (over 70). I converted some of my IRA to a Roth two years ago, and hers last year. I said the five-year rule doesn't apply and she argued that it did. I was talking about the second rule, while she was talking about the first. She's right because we just opened the Roths.
It's no problem because the Roths are the last dimes we intend to spend and the inheritance is uncomplicated (I intend to do more). Converting hers to a Roth also avoids the RMD on her IRA. Not that it really matters but hers is relatively small and mine is professionally managed, including planning.
Considering inheritance, how does the five-year rule play there?
Excellent tips!
I started a ROTH IRA in 2013. I put at least $25,000 into it over the years and now it is worth about $15,800. I don't seem to know how to manage the account. All I do is lose money.
OUCH!
Basic risk management tools may be in order.
Is it advisable to make a “new” Roth account with each conversion? Or can I combine each rollover into the same account? First was done 10 years ago. I’m over 59.5. The fund in my Roth is closed to new investors so if I fund a new account, I will be unable to purchase additional shares.
Depends on careful record keeping. I have a SINGLE Roth account, and just track my 1) contributions, 2) conversions, but do not worry much about “earnings” because the default method the IRS uses in its formulas is contributions, then conversions, then earnings when distributions are taken out.
IF I (+65 yo) have to make a mandatory distribution from my 401k (non-Roth), and if I deposit the distibution to my Roth (Established >5 years ago) will I avoid taxes on the distribution?
No
You could rollover the non-roth to a Roth but you would need to pay taxes on the total amount of the rollover as if it is income. Then going forward there would be no required min distributions.
I don't believe you can use rmd money to convert to a Roth. I believe that money would have to be used or put into a brokerage account. After you take your rmd, if you are at the age that you must start doing that, and if you want to then do a Roth conversion, then you have to take more money out after the rmd and do the conversion of that money. Then you will pay taxes on the rmd amount and the amount you converted.
Great explanation
Question: I withdrew a large sum from my IRA ( after withdrawing RMD) this February . I didn’t withhold any taxes at the time, can I pay the amount of taxes owed next year when I do my taxes or do I have to pay any amount sooner. I’m 75 .
I did a Roth conversion with that money.
You have to pay estimated taxes on your money as a senior. So when you do a Roth conversion you have to pay estimated taxes. But the IRS wants you to pay estimated taxes on an equal basis basically for the four quarters of the year. If you use the amount you paid in taxes for the previous year and use that amount quarterly paying your estimated taxes that's called safe harbor and your large conversion won't matter, because you're under safe harbor and your pain the IRS what you paid in last year's tax returns total taxes. Then when you file your tax return and you owe more money on the conversion you just pay the money with your tax return. If you're not paying estimated taxes you'll end up getting penalized when you pay your taxes with your tax return.
If you wait to pay the taxes due when you file your tax return, the IRS will charge you an extra penalty for “underpayment” if you do not send in estimated tax payments each quarter.
Great video, thanks. Just to clarify, if I have had a Roth IRA account open for 5 years and I’m over age 59-1/2, there are no more 5 year rules for each Roth conversion? So I could do a conversion at age 61 and then take out the full amount, including any earnings growth, at age 62, tax free?
No, he states that each conversion has its own five-year period.
@@marylennon990 thanks for reply. Start watching at the 8:38 mark in video which is where he states the 5 year rule for each Roth conversion requirement stops once you reach age 59.5. So if you do a Roth conversion at age 59, you don’t need to wait until age 64 to withdraw earnings. You can withdraw it 6 months later when you reach the age 59.5. My understanding is that the only 5 year rule remaining after age 59.5 is that you have to have your first Roth IRA account open for at least 5 years.
Dumb question, once one reaches 59.5 years of age, can one simply continue to hold thier Roth IRA and withdrawal dividends every month?
You have to have had the Roth open for 5 years before drawing the dividends out. That's the first 5 year rule
@@micheleyoungblood thanks, yeah i should definitely reach that 5 year rule, i started my roth 2 years ago when i was 28
There are no dumb questions just dumb mistakes. Just sayin'
@@everettcalhoun8197 Thanks 😊
I’m confused.
I’ve had a Roth IRA since 2019 that hasn’t had any deposits since that first year. It’s just over 5 years ago.
I have an IRA converted from a 401k from an employer, and I’m 61 now. Are you stating I can convert that into a Roth IRA now and I don’t have to wait 5 years before withdrawing those funds?
I’m considering converting a “small” amount each year into a Roth to avoid taxes (I have no taxable income). Would I be able to withdraw those funds let’s say “next year?” I wouldn’t have to wait 5 years? I would suspend converting for that year of the IRA during the year of withdrawal to further avoid any taxable event.
I know I’m being very specific, and I have plenty of nontaxable funds to live on otherwise. Is this a question I need to contact you on or can you answer here? I don’t do very well on the phone. I’m on the spectrum (ASD).
There is a flow chart in the IRS publication that addresses how retirement income is taxed or not taxed. The flowchart is much easier to understand than RUclips videos or the actual written paragraphs in the IRS publication itself.
Thanks!
Whoa very interesting. I did not know the ROTH '5 Year Rule' impacts, especially on conversions. IMO, just another reason to stick with traditional IRA, and leave the money intact and subject to compounding.
Regular IRA = perpetual tax on the HARVEST.
Roth IRA = tax on the SEED. But the perpetual HARVEST is tax-free forever.
I know which account I choose.
I was under the impression you had to own the Roth account you’re withdrawing from for five years. If you owned one Roth 30 years and then open one when you’re 59… I’d think at 59.5 years you could only withdraw gains from the older one.
That is not correct
@@teamrecon2685 You are incorrect. Each and every Roth conversion has its own 5 year rule.
The IRS treats multiple IRA accounts as a “single” event. Both 5-year rules magically “evaporate” provided: 1) at least ONE IRA account has been open for 5 years, and 2) the account owner is 59.5 years old (or older) when the distribution is taken out/received.
Question, I'm retiring soon as a 69 y.o. and already have a roth which has been opened for 10 years. I'm rolling over a $180,000 401k that was entirely employer funded to a self directed ira. I'm planning to open three additional roth's, as needed, and roll over the ira in equal third amounts, in three successive years into the separate roth's in order to keep the funds isolated from each other and make it simple to determine when the five year restriction has elapsed for each rollover. Does this make sense, or am I overthinking this? Once the five year rule has elapsed, I was going to move each one to my original Roth to consolidate my accounts.
I don’t think it matters. When you sell assets you can choose the first in, first out option
@@touchofgrace3217 In the video, he said that 2nd 5 year rule does not apply if you are over 59.5. However I have heard other 'experts' say the second 5 year rule still applies over 59.5... So who knows... Even if I asked a financial expert, I would not be comfortable with the answer they gave me no matter what they said. I have heard too many people give different answers.
@@kenmore1961he is correct in this video. It clearly states on irs.gov that “You have reached age 59½” is one of the exceptions to the 2nd 5-year rule :)
@@kenmore1961 he did get a little confusing with all of the imaginary scenarios instead of just clarifying the rules themselves.
One 5yr rule is about the age of the Roth Account itself.
The second 5yr rule is about each individual conversion of the funds into the Roth. Neither rule is affected by the age of the retiree.
At the IRS website there is a complete explanation along with a flowchart. What it comes down to is : If you have had ANY Roth IRA open for at least five years and you are over 59 and 1/2 then all distributions are qualified and tax free.
I have an $800k portfolio from my old job and retired six years ago. Lately, it’s been doing poorly, with only 6% growth in the past three years and I feel stuck. I desperately need to revamp my investments. Any advice on what to do with my money would be greatly appreciated.
This is what people that handle their p0rtfolio themselves go through. I will advice you get yourself some fiduciary advisōr to help you make better p0rtfolio decisions.
I agree, investing with the help of an advisor set me up for life with about $1.6m currently in stock portfolio. I max out my 401k and have few properties. I worked hard as a language tutor for 32 years, and my salary was just over 80k annually. It all boils down to consistent regular investing to minimize risks and maximize growth.
I'm interested in trying this out. Who is your advisor, and how can I contact them?
I'm cautious about giving specific recommendations since this is an online forum and everyone situation is unique, but I've worked with "Melissa Elise Robinson" for years and highly recommend her. Look her up to see if she meets your criteria.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
NIcely explained, and accurate
Dealing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money.
If you’re new too investing or have a more complex financial situation, It can be helpful to work with a financial advisor who can provide personalized guidance and help you make informed investment decisions.
Due to the market falls, I need advice on how to rebuild my portfolio and develop more successful tactics. Where can I find this financial planner?
Thank you for sharing, I must say, She appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.
If I have $100k in cash to invest and I’m 60 years old, if I open a Roth I can only put $8k in it each year. That’s not much for growth. The rest of it would have to be invested in a taxable account where most of the money would be earned by growth and or dividends.
There is also a one time catch up of an additional 8k since you are over age 50.
@ max contribution is $7000, for 2024-2025 if you’re over 50 you get an extra $1000 per year for a max of $8K. Not an additional $8k
@ you get a one time catch up.
@ ok thanks. I will ask my cpa, or get a different one! 😂
@ the biggest secret is a self directed Roth. It requires a LLC. Almost unlimited side hustles. U could have Bills used cars LLC or pressure washing or ticket sales. … has to be ran like a true business or you could do time for embezzlement . U could buy a car w a blown head gasket for 500$ , spend 200$ on parts , spend 6hrs repairing it. Sell the car for 2500$. Pay yourself 300$ for your labor that you would give yourself a 1099 for and pay personal income tax on. The 1500$ profit would be tax free as a conventional Roth Your business could be nearly any service that people are willing pay for. Best wishes.
I don't think there is a separate 5 yr rule for each conversion once you satisfy the first.
There is a separate 5 year rule for each conversion but once you turn 59 and 1/2 the rule goes away. The entire purpose of the rule is to keep people from doing an end run around the rules for traditional IRAs . Once you reach 59.5 there is no more 10% penalty so no more rule.
@@johnscott2746 As far as the IRS each and every conversion to a Roth has a 5 year rule regardless of age.
@@everettcalhoun8197nope. On the IRS website their is a flowchart that shows how it works. If you are 59 and 1/2 and you have had ANY Roth IRA open for at least five years then all distributions are qualified and tax free. The whole purpose of the five year rule on conversions is to keep someone who is underage from converting the funds and then immediately withdrawing them with no penalty because the taxes have already been paid. I did a conversion when I retired at 61 in order to use it as an emergency fund and I have accessed it several times in the last four years. No problems with the IRS.
@@everettcalhoun8197nope. There is a flowchart on the IRS website that explains it very well. If you are over 59 and 1/2 and you’ve had ANY Roth IRA open for at least 5 years then all distributions are qualified and tax free.
Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money.
If you’re new too investing or have a more complex financial situation, It can be helpful to work with a financial advisor who can provide personalized guidance and help you make informed investment decisions.
Due to the market falls, I need advice on how to rebuild my portfolio and develop more successful tactics. Where can I find this financial planner?
Thank you for sharing, I must say, She appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second daughter. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks.
@@BennettElizabth Quitting may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. *MARGARET MOLLI ALVEY*, a licensed fiduciary whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help.
@@EmilyEvelyn-90 Oh please I’d love that. Thanks!
@@BennettElizabth *MARGARET MOLLI ALVEY*
Lookup with her name on the webpage.
I’ve been saving for a long time instead of investing, and right now I only have about $516k. I'm not sure how to make it grow, considering all the inflation, into something substantial that I might use for retirement. I’m just here for ideas
50% stock, 20% Bitcoin, 20% high yield CD/ bonds, 10% cash/ fully liquid stable asset
At a point like this, it's best recommended you seek the services of an advisor, as this allows you make smarter investing decisions.
This is why I entrusted a fiduciary with my investmnt decisions. Many underestimate advisors until emotions lead to losses. My advisor crafted a tailored strategy aligning with my long-term goals, guiding entry and exit points for the equities I focus on. This has grown my portfolio to over $850k. My personal best so far
I could really use the expertise of this advsors
Her name is ‘Stacy Lynn Staples’. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Jesus H Christ. It took 4:12 to answer the question. The answer Yes and NO.
It really does not need to be this complex. the more I learn I see just how corrupt the IRS is.
Your shows should be 'required viewing' in schools.
Make it short
the rules for this are way too complicated to make it short
If you want it short go to irs.gov and read it for yourself.
To achieve a secure retirement, aiming to save at least 15% of your income in a 401(k) is advisable. Online tools can assist in calculating the best savings strategy for you, considering factors like age and income. Consistently saving this percentage can help build your retirement fund effectively, thanks to the benefits of compound interest.
With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.
For me, I believe retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My wife and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement.
For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
@@MarcelinaMakowski How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings?