Are you ready for Roth/Backdoor Roth on Jan 1st week?


#1

Jan 1st, 2019 onwards we are eligible for new Roth or Backdoor Roth $6000 + catch up $1000. All cash must be from earned income.

No matter whether you are at 30s, 40 or 60s, as long as you see your life expands another 15-30 years, this money grows tax free !

Roth_15_years_6000

Roth_15_years_7000

Since the equities at low prices now, I think it is better to move money as early as possible and keep it invested.

Any one is ready, like me, to jump on Roth on First week of Jan 2019?


#2

If you maximize your 401k, can you still contribute to Roth IRA?


#3

Yes, I do it every year, both maximization.


#4

Do you have a good guide on how to execute a backdoor Roth?


#5

You need to move your money as after tax to traditional IRA (this is the key) and then to Roth next day.


#6

We now know that caiguycaiguy and JIL have high incomes.


#7

With a slowing housing market, Roth IRA might be a good idea. However, stock market can also be due for a bear market in the next few years.


#8

Already a bear market :face_with_hand_over_mouth:


#9

It’s a fake bear market now. Real bear may come after a few years. No recession in 2019, buy, buy and buy tomorrow


#10

Inside Roth, you can buy and sell easily depending on market without any concern to tax implications. The money can be put into aggressive growth side.

Whether housing slows or not, whether stock slows or not, Roth IRA is always a good Idea as this has very low limit allowed by IRS.


#11

@Jil I am assuming that there are no income limits for this contribution. Is that right?


#12

Backdoor Roth is cool. Which brokerage has made this easy to do online? I hate to spend too much time on this


#13

For Roth, there is income limit. If you exceed income limit, you need to use Backdoor Roth
Look here for limits

It is up to your comfort. Use fidelity or vanguard or schwab as they have commission free ETFs too.


#14

Sounds like an exciting opportunity to save $$. However, what are the risk of running into IRS complications? It may violate the intent clause “Step Transaction Doctrine” mentioned at www.kitces.com/blog/how-to-do-a-backdoor-roth-ira-contribution-while-avoiding-the-ira-aggregation-rule-and-the-step-transaction-doctrine. Has anyone had any experience with this?

I’m worried since IRS can come even after 10 years from today…


#15

I have not experienced as I use this backdoor last few years.

It won’t be 10 years away unless you are sued in court by IRS. Whatever I know, IRS normally comes back within 3 years for personal tax audits (see reference link) and 7 years for company tax audits.

Most of the audits are based on automated computer algorithmic check, esp excess deduction and abnormal income missed transactions or wash sale transactions. Rarely, manual review triggering occurs.

With this, I assume that backdoor is safe from “Step transaction Doctrine”, but we never know until we get audit notice !

Reference : IRS Audits | Internal Revenue Service

The best is to consult CPA whether it will trigger any issue later.


#16

.

:+1:

:+1:

In addition, money in IRAs is trapped there till 65.


#17

Think of this situation, if you have bought your 1998 AAPL in Roth IRA, you would not pay any cent on tax for all the dividends or capital gain you make now !

IIRC, it is 59.5 (not 65), even though many do not take the IRA (esp Roth) money unless required for expenses. The more you keep, better it grows tax free.


#18

Not possible. Don’t have Roth IRA. Bought most of them while in Singapore :sob: Worse, Singapore doesn’t have capital gain tax! Now, I am screwed. Lost a HUGE fortune to Uncle Sam by coming here. Wish I can rewind the clock… not coming here… regret. You touch on my sensitive… I bought while in Singapore using my money hard-earned in Singapore, now just because I get that greenie thingy, I am liable to a huge tax bill. Any advice how to resolve this?


#19

Well, since Jill is pandering or recommending his products, I will do that too. This forum should be to help, recommend, do good deals among posters, let the posters decide which plan the love the most.

If you are a high earner, with a big net worth, you are better putting your money into an IUL.

75%-80% of your contributions will be in your hands, while another 75%- 80% will be in the S&P 500 earning at least 7% compounding interests as Jil told us in another topic, S&P500 returns have been 7% in the last 20 years or so.

Contributions are not limited pathetically as of any of the above programs. You can open a policy reflected in 20-23 times your income. $10K a month? Easy! You get $8K in your hands and $8K in the S&P500.

That is called leverage of your money. $10K = $16K in your hands.

The insurance company, contrary to the 401Ks and so forth, invests your money, when they make a profit they will give you a return, if they lose, they lose their money, yours is protected by 0% returns.

If you had put a total of $100K into an IUL for 20 years, you could be scheduling your retirement income right now disregarding if you are 50 or 60, receiving $80K-$120K, tax free, year after year, for the rest of your life, up to age 120.

Don’t let the brokers keep 100% of your money. At the whim of the risky stock market where you lose 10%, you have to make 11% or more just to get even. To be a winner right now, you need the stock market to reach 28,000 points. Just ro recover your losses.

Don’t let these brokers punish you for having an emergency when you make a loan, or get penalized 10% for closing your account. They are charging you up to 24 fees, Google it, or go to YouTube.

There’s no retirement age limitations. You can schedule your income in 15-30+ years if you wish so.

The 5%-10% many Americans in retirement lost recently, wouldn’t happen with owning an IUL.

Why? Because when the market goes under, you get 0%, but as soon as the market recovers, even in the negative territory, the IULs are giving you returns.

Have a nice retirement age, don’t depend on age, contribution limits, minimum distributions where you are forced to withdraw your money even if you don’t need it, otherwise, you get penalized.

It’s your money, right? Why giving somebody else the control over it?


#20

You can renounce US Citizenship and not liable to pay taxes here :rofl: