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but I don't need to break into a Roth to get money for BTD or emergencies, etc.
Few people would see that as a disadvantage, but YMMV.
but I don't need to break into a Roth to get money for BTD or emergencies, etc.
Here's my question in all of this - How did so many of the high earners here manage to put so much into Roth accounts during their earning years?
As I understand it, even for tax year 2022, Roth IRA contribution tax benefits are completely eliminated once household income reaches $144,000 as a single filer or just $214,000 as a married couple filing jointly.
And, again for tax year 2022, you can only contribute $7,000 per year, and that's only if you're over 50 years of age. Under 50, it's only $6,000 per year.
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I wonder how many people start out with plans to do big Roth conversions then cave when they see how big that tax check is going to be? I also wonder how many people have created a spreadsheet of RMDs and taxes paid per year to see how bad the RMD tax bill is really going to be. It might not be as bad as you think but the only way to know is to build a spreadsheet or use a tool like eMoney.
Here's my question in all of this - How did so many of the high earners here manage to put so much into Roth accounts during their earning years?
As I understand it, even for tax year 2022, Roth IRA contribution tax benefits are completely eliminated once household income reaches $144,000 as a single filer or just $214,000 as a married couple filing jointly.
And, again for tax year 2022, you can only contribute $7,000 per year, and that's only if you're 50 years of age or older. Under 50, it's only $6,000 per year.
I assumed the large balances were due to conversions rather than contributions. I think Roth option has only been around ~20 years. We don’t have a huge balance because i think the advantages are overblown in our case but 95% of our Roth accounts are due to conversions.
Roth conversion, mega-backdoor Roth, and great market returns. The last item helped Peter Thiel turn <$2k into $5 Billion in his Roth IRA.Here's my question in all of this - How did so many of the high earners here manage to put so much into Roth accounts during their earning years?
As I understand it, even for tax year 2022, Roth IRA contribution tax benefits are completely eliminated once household income reaches $144,000 as a single filer or just $214,000 as a married couple filing jointly.
And, again for tax year 2022, you can only contribute $7,000 per year, and that's only if you're 50 years of age or older. Under 50, it's only $6,000 per year.
Here's my question in all of this - How did so many of the high earners here manage to put so much into Roth accounts during their earning years?
If your are charitable minded, you should leave some $ in tax-deferred so you can satisfy your potential RMDs by giving QCDs to the charities of your choice.I am retired now and might start conversions from my after tax 401k to reduce RMDs @ 70 when SS kicks in and pushes us into the 22%/25% marginal tax bracket. 100% of my 401k is in a stable value fund to minimize growth. So I should be able to convert all of it by age 70. I should also be able withdraw all of my taxable money @ 0% LTCG by then. So @ age 70, all of my savings will be in Roth accounts. My heirs will love that unless they change the tax laws WRT Roth withdrawals.
Here's how we got $312k into Roth in 8 years (2014 to 2021) with an income well north of the limit:
1. Backdoor Roth: $99k contributions. $11k-$14k / year. $5k-$7k each to non-deductible tIRA and converted to Roth each year
2. Mega backdoor Roth: $94k. Approx $20k / year. My 401k allowed after tax contributions (we did not have a Roth 401k) and subsequent rollover to Roth. So I would contribute up to the max limit for deductible 401k and then keep contributing after tax dollars up to the max total limit for 401k contributions.
3. Gains: $119k. Since this was Roth and gains should never be taxed, the Roth accounts were invested 100% in Fidelity Total US Stock fund.
I am retired now and might start conversions from my after tax 401k to reduce RMDs @ 70 when SS kicks in and pushes us into the 22%/25% marginal tax bracket. 100% of my 401k is in a stable value fund to minimize growth. So I should be able to convert all of it by age 70. I should also be able withdraw all of my taxable money @ 0% LTCG by then. So @ age 70, all of my savings will be in Roth accounts. My heirs will love that unless they change the tax laws WRT Roth withdrawals.
Here's how we got $312k into Roth in 8 years (2014 to 2021) with an income well north of the limit:
1. Backdoor Roth: $99k contributions. $11k-$14k / year. $5k-$7k each to non-deductible tIRA and converted to Roth each year
2. Mega backdoor Roth: $94k. Approx $20k / year. My 401k allowed after tax contributions (we did not have a Roth 401k) and subsequent rollover to Roth. So I would contribute up to the max limit for deductible 401k and then keep contributing after tax dollars up to the max total limit for 401k contributions.
3. Gains: $119k. Since this was Roth and gains should never be taxed, the Roth accounts were invested 100% in Fidelity Total US Stock fund.
I am retired now and might start conversions from my after tax 401k to reduce RMDs @ 70 when SS kicks in and pushes us into the 22%/25% marginal tax bracket. 100% of my 401k is in a stable value fund to minimize growth. So I should be able to convert all of it by age 70. I should also be able withdraw all of my taxable money @ 0% LTCG by then. So @ age 70, all of my savings will be in Roth accounts. My heirs will love that unless they change the tax laws WRT Roth withdrawals.
Thanks for the reply but I'm still trying to understand - If you were doing Roth conversions in years your income was well north of the limit and you were paying tax on those conversions at an income level well north of the limit, what was the tax advantage of doing so?
RMDs start at age 72 now.
Also, I'm not 100% sure but I think you'd end up with more after tax dollars to spend if you had your 401k in something that you expected to grow. Yes, you'd have more dollars to convert and your tax bill would be higher, but you'd still be left with more spendable dollars at the end of the day.
If you want to be in a stable value fund for asset allocation reasons, then that would make sense. But to avoid growth just to avoid taxes is, I think, cutting off your nose to spite your face.
My 401k is the 40 part of my 60/40 AA.
Here's my question in all of this - How did so many of the high earners here manage to put so much into Roth accounts during their earning years?
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