The Need-to-Know Details About Roth IRAs and 401ks, Ep #62

<p>How do I feel about Roth IRAs and 401ks/403Bs? What about the Backdoor Roth IRA? They can be an important tool in your retirement planning. But how do they work? What is the best way to optimize them? Learn more in this episode of Retirement Made Easy!</p> <h2>You will want to hear this episode if you are interested in...</h2> <ul> <li>[2:27] Learn more about Roth IRAs/401ks/403Bs</li> <li>[7:51] Conversations about capping the Roth IRA</li> <li>[13:09] The basics of the Backdoor Roth IRA</li> <li>[17:24] Why I’m passionate about Roth IRAs</li> </ul> <h2>Learn more about Roth IRAs/401ks/403Bs</h2> <p>I strongly encourage people to use a Roth IRA whenever they can. A Roth IRA allows you to contribute money after taxes. This allows that money to grow tax-free, which means when you take a withdrawal taxes will not be removed. </p> <p>Some people also have access to a Roth 401k or 403B through an employer. Not all 401ks/403Bs have this feature—I wish they would. It’s certainly not the standard (but it should be). The benefit of a Roth 401k is that there is no income limit compared to a Roth IRA.</p> <p>I recommend with a Roth 401k or 403B, roll it into a Roth IRA by the age of 72. Why? They have a required minimum distribution. The Federal government makes you take money out of it every year for the rest of your life. You’ll be hit with a 50% penalty if you don’t make a withdrawal. But that is NOT required with a Roth IRA. </p> <h2>Should the government cap Roth IRA contributions?</h2> <p>If you fall under the income limits, you can contribute $6,000 each per year as long as your earned income is at least $6,000. If one spouse doesn’t have earned income, you can still contribute $6,000 per person (if under 50). If you’re over 50, you’re allowed to contribute up to $7,000 per person. </p> <p>In his article, “Lord of the Roths,” Justin Elliott shared that in 2018, the average Roth IRA was worth $39,108. In the article, Peter Thiel—the co-founder of PayPal—was highlighted. He has amassed $5 billion inside his Roth IR