Latest news with #RothIRA
Los Angeles Times
35 minutes ago
- Business
- Los Angeles Times
10 sources of emergency cash, ranked from best to worst
If unanticipated expenses exceed your emergency fund, here's a look at where to go next. Emergency funds should be held outside of tax-sheltered wrappers and include highly liquid investments like bank savings accounts, money market accounts, and so on. Next, look at other taxable holdings: investments in brokerage accounts, outside the confines of tax-sheltered vehicles. When identifying possible securities that you could sell to raise funds, focus on liquidity, tax consequences, and any commissions you'll owe. It's never great to tap your retirement assets unless you absolutely need to, but the Roth IRA offers more flexibility and has fewer strings attached than other tax-sheltered retirement vehicles. Specifically, you can withdraw any Roth IRA contributions at any time, without incurring penalties or tax—but you'll have fewer retirement funds working for you. Cash values that have built up in your whole life insurance or variable universal life insurance policy can be another decent source of emergency cash. You can withdraw money outright and have it deducted from your policy's face value. Another possibility is to borrow from the cash value of your life insurance. You'll owe interest on the loan, and these rates can be reasonable but aren't always low. A 401(k) loan is better than a hardship withdrawal because the interest you pay will get paid back into your account. On the downside, borrowing from your 401(k) plan short shrifts your retirement savings. Not only will you have less money working for you in the market, but having to pay the loan back with interest also means you're less likely to be able to make new contributions. If you must take out a loan, a home equity line of credit is one of the better options. Interest rates on HELOCs are usually reasonable relative to other forms of credit, particularly if you maintain a good credit rating, have a fair amount of equity in your home, and aren't taking out a huge loan. But if you're not a perfect borrower, you could be asked to pay a high interest rate or be denied the line of credit altogether. Unlike a 401(k) loan, which requires that you pay the money back, funds you take out of a 401(k) via a hardship withdrawal cannot be paid back. Moreover, you'll owe taxes on any untaxed dollars you pull out of the account. You'll also owe an additional 10% penalty unless you're age 59.5 or older or your situation meets one of several exceptions. A reverse mortgage allows older homeowners to receive a pool of assets that represents equity in their homes. The homeowners don't have to repay the loan as long as they're in their homes, but when they do leave, the borrowed amount, plus interest, is deducted from the home's value. Reverse mortgage rates can vary widely, so shop around and read the fine print. A margin account allows you to borrow against the value of the securities in your brokerage account. This option would be most attractive for those who have assets but don't want to sell them because that would mean unloading them at a bad time and/or incurring tax consequences. If you expect to be able to repay the money quickly, a margin loan could work. On the downside, interest rates aren't always attractive. They're also risky, because the securities in your account are your collateral. This is usually not a great idea: For most people, credit cards are the single easiest way to wreck your financial standing. Not only are rates high, but credit card companies have every incentive to keep you paying for as long as possible. Thus, minimum payments don't make a dent in your loan's principal. This article was provided to The Associated Press by Morningstar. Christine Benz is the director of personal finance and retirement planning at Morningstar.
Yahoo
a day ago
- Business
- Yahoo
38-Year-Old Asks Suze Orman Where To Move His Roth 401(k) — She Says Avoid This One Option
Knowing what to do with a 401(k) after leaving a job can feel overwhelming — especially for younger workers planning long-term. That's why a listener named Robert reached out to Suze Orman's "Women & Money" podcast for guidance on what to do with his Roth 401(k) if he ever leaves his company. Robert, 38, said he's been with his employer for 12 years and doesn't plan to leave anytime soon. Still, he wondered if he ever leaves his job, should he eventually roll his money into a Roth IRA, move it into a new employer's Roth 401(k), or just leave it where it is? Here's what Orman had to say — and the one move she advised him to avoid. Don't Miss: 'Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. Maker of the $60,000 foldable home has 3 factory buildings, 600+ houses built, and big plans to solve housing — Orman didn't offer a one-size-fits-all answer but made it clear that one option was off the table. "Should you roll the money into a Roth 401(k) at a new company? No," she said. Instead, she encouraged Robert to either leave the money in his current Roth 401(k) or roll it into a Roth IRA, depending on what he feels most comfortable with at the time. Her reasoning? Over time, Robert could accumulate a large balance in his 401(k), possibly a million dollars or more. Liquidating and transferring that amount later might feel daunting, especially if he's unfamiliar with investment options in the new plan. Trending: Maximize saving for your retirement and cut down on taxes: . If Robert leaves his job, he'll typically have four options: cash out, leave the money in his old plan, roll it into a Roth IRA, or roll it into a new employer's Roth 401(k). Orman ruled out that last option, so let's look closer at the two she suggested. Leaving the Money in Your Roth 401(k) If the current 401(k) plan offers low-cost investment options and solid performance, leaving the funds where they are could make sense. In her blog, Orman mentions that larger companies often negotiate lower fees — sometimes under 0.20% in expense ratios — which can help preserve returns over time. The downside? You'll have to manage multiple accounts if you switch employers later. That can make retirement planning more complex down the road. Rolling Into a Roth IRA The other path Orman supports is rolling the funds into a Roth IRA. This option can give you greater control over your investments and simplify your portfolio if you're managing several old accounts. But beware: as a Pew Research study highlights, some IRA versions of the same funds found in a 401(k) can carry higher fees, which can cost investors thousands over time if not carefully managed. To keep costs low, Orman recommends using discount brokerages and investing in low-cost index funds or rolling over your 401(k) can streamline your retirement accounts, there are some pitfalls to avoid: Indirect Rollovers: These involve receiving a check and reinvesting the money yourself within 60 days. If you miss the deadline, you may face taxes and penalties. Higher Fees: Not all IRAs are created equal. Make sure to research expense ratios and investment options before making a move. Losing Employer-Only Investment Options: Some 401(k) plans include investment choices you won't find in an IRA or new employer's plan. For Robert — and anyone considering what to do with their Roth 401(k) — the best choice depends on comfort level, investment familiarity, and fees. Orman's guidance is clear: Avoid rolling it into a new employer's plan. Instead, evaluate whether to keep it where it is or roll it into a low-cost Roth IRA that gives you more control and flexibility. As always, it pays to compare your options carefully before making a decision. Read Next:Deloitte's fastest-growing software company partners with Amazon, Walmart & Target – Image: Shutterstock UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets. Get the latest stock analysis from Benzinga? APPLE (AAPL): Free Stock Analysis Report TESLA (TSLA): Free Stock Analysis Report This article 38-Year-Old Asks Suze Orman Where To Move His Roth 401(k) — She Says Avoid This One Option originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
Building a Roth IRA Million: A Step-by-Step Guide Starting with $500 Monthly
Setting up a Roth IRA is easy. Make your monthly Roth IRA contributions automatic, and reinvest any dividends received. Importantly, stay the course and don't withdraw any money early. The $23,760 Social Security bonus most retirees completely overlook › Can you become a millionaire retiree? The answer is a resounding "yes" for many Americans. And the Roth IRA provides a great vehicle for making it happen. If you want to build a Roth IRA million-dollar portfolio, the process is relatively simple. Here's a step-by-step guide starting with $500 monthly. First, it's important to understand why a Roth IRA is a great tool for retirement savings. These accounts allow your money to grow tax-free. While you'll pay taxes on contributions, you won't pay any taxes on withdrawals later. There is an income threshold you must meet to set up a Roth IRA, though. The following table shows if you're eligible: Filing Type Modified Adjusted Gross Income Eligible for a Roth IRA? Single OR Married filing separately (if you didn't live with your spouse at any point during the year) OR Head of household <$150,000 Yes >=$150,000 but <$165,000 Yes (with reduced contributions) >=$165,000 No Married filing jointly OR Surviving spouses <$236,000 Yes >=$236,000 but <$246,000 Yes (with reduced contributions) >=$246,000 No Married filing separately (if you lived with your spouse at any time during the year) <$10,000 Yes (with reduced contributions) >=$10,000 No Data source: IRS. Table created by author. The next step is to set up your Roth IRA. Several online brokers make it easy to open a Roth IRA, including Charles Schwab, E*Trade, Fidelity, and Vanguard. You'll need to have several pieces of information to complete the process. Common requirements include your Social Security number, birth date, driver's license (or other government ID), mailing address, email address, and beneficiary information (name, address, and Social Security number). You could set up your Roth IRA and try to remember to contribute $500 each month. A better approach, though, is to automate your monthly contributions. The main things you'll need to set up an automatic monthly contribution are your bank account number and routing number. Once your automatic contribution is established, you'll be on the right track to get to that magic $1 million. One critical step is to select how to invest the money in your Roth IRA. Key considerations with this step include how long you have until your plan to retire and your risk tolerance. Stocks offer tremendous long-term growth prospects. Exchange-traded funds (ETFs), especially index ETFs, provide a convenient way to invest in a basket of stocks. Many individual stocks and ETFs pay dividends. Instead of letting the cash from those dividend payments accumulate, you can elect to reinvest any dividends. This approach allows you to immediately plow dividend payments into the investment alternatives you've specified. Over time, reinvested dividends can significantly boost your overall return. For example, the S&P 500 (SNPINDEX: ^GSPC) has increased by roughly 358% over the last two decades without dividends reinvested. However, the index's total return with dividends reinvested during this period is around 608%. A monthly contribution of $500 could help you build a $1 million retirement portfolio if you make an average annual return of 7% and can invest for nearly 37 years. For individuals who begin saving early in their careers, this is an attainable goal. However, if you start saving for retirement later, you'll need to contribute more. Currently, you can only contribute $7,000 per year if you're under age 50. But if you're age 50 or older, you can make $1,000 per year catch-up contributions, which brings your total annual maximum contribution amount to $8,000. Your best bet for becoming a millionaire retiree is to contribute as much as possible to your Roth IRA. The final step is an especially important one: Stay the course. Keep contributing to your Roth IRA each month. Don't make early withdrawals. And don't panic when the stock market declines. If you want to build a $1 million Roth IRA, time is on your side. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Building a Roth IRA Million: A Step-by-Step Guide Starting with $500 Monthly was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
a day ago
- Business
- Yahoo
300 Financial Group Highlights Roth IRA Conversions as Key Strategy for Tax-Efficient Retirement Planning
Firm Led by President Deana Jackson Offers Guidance on Timing, Tax Implications, and Legacy Benefits LOS ANGELES, May 30, 2025 /PRNewswire/ -- As Americans look for smarter ways to manage taxes in retirement, 300 Financial Group is helping clients capitalize on Roth IRA conversions—a strategic move that can lead to long-term tax advantages and greater control over retirement income. "Roth conversions continue to be one of the most underutilized strategies in comprehensive retirement planning," said Deana Jackson, President of 300 Financial Group. "We work closely with clients to determine when and how to implement these conversions in a way that aligns with their income goals, tax situation, and legacy objectives." A Roth IRA conversion allows individuals to shift funds from a traditional IRA or 401(k) into a Roth IRA by paying taxes on the converted amount upfront. Once inside a Roth, the funds grow tax-free, and qualified withdrawals are also tax-free—making it an appealing option for those anticipating higher tax rates in the future. 300 Financial Group offers personalized Roth conversion strategies that consider key factors such as: Tax Bracket Management – Ensuring clients don't inadvertently move into a higher tax bracket. Market Timing – Taking advantage of market downturns to convert assets at lower valuations. Elimination of RMDs – Helping clients avoid forced distributions that could increase taxable income. Legacy Planning – Using Roth IRAs to pass on assets to heirs tax-free. "Our team goes beyond the basics," Jackson added. "We integrate Roth conversion planning into a broader financial framework so our clients can retire with more confidence and flexibility." 300 Financial Group encourages pre-retirees and high-income earners to evaluate Roth conversion opportunities before year-end, especially considering potential tax code changes. For more information or to schedule a personalized Roth conversion consultation, visit or call (661) 476-5711. About 300 Financial Group300 Financial Group is a comprehensive financial planning firm dedicated to helping individuals and families achieve long-term financial security. Led by Deana Jackson, the firm specializes in retirement income planning, tax-efficient investment strategies, and legacy preservation. Media Contact: Sal Velazquez (661) 476-5711 396000@ View original content to download multimedia: SOURCE 300 Financial Group Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 days ago
- Business
- Yahoo
Understanding the backdoor Roth IRA—How it works and why you should consider it
Retirement planning can feel like solving a jigsaw puzzle, especially for high-income households. If you're earning too much to qualify for a Roth IRA directly, you might assume that the Roth IRA's powerful tax advantages are out of reach. Think again. The Backdoor Roth IRA is a legal and strategic way for high-earners to enjoy the benefits of a Roth IRA without income limits standing in the way. This guide from Range explores how a Backdoor Roth IRA works, why it's valuable for high-net-worth households, and the specific steps and tax implications involved. Backdoor Roth IRA Explained High-income earners can bypass Roth IRA income limits legally. Tax-free growth and withdrawals with no required minimum distributions. Contributions to a traditional IRA can be converted into Roth. A Backdoor Roth IRA isn't a special account—it's a tax strategy. It allows individuals who make too much to contribute directly to a Roth IRA to fund one indirectly. Here's how it works in simple terms: First, you contribute after-tax dollars to a traditional IRA. Then, you convert that traditional IRA to a Roth IRA, enabling you to enjoy tax-free growth and tax-free withdrawals in retirement. It's an elegant workaround for those who want to take advantage of a Roth IRA's unique perks but are above the income eligibility limits. For high-income households, the Backdoor Roth IRA is more than a loophole—it's a strategic tax planning tool that comes with significant benefits for long-term wealth building. Here's why you should consider it: 1. Tax-Free Growth Once your money is in a Roth IRA, it grows completely tax-free. Unlike traditional IRAs where you'll eventually owe taxes on investment gains, a Roth lets your wealth grow and compound without interruption from taxes. 2. Tax-Free Withdrawals When you withdraw funds from a Roth IRA in retirement, you won't pay a penny in taxes on the contribution or the earnings (as long as you meet eligibility requirements). 3. No Required Minimum Distributions (RMDs) Unlike a traditional IRA, a Roth IRA does not require you to start withdrawing funds at age 73. This flexibility allows your retirement savings to grow for as long as you like—perfect if you're planning to pass wealth on to your heirs. 4. Access for High-Income Earners Normally, individuals with a modified adjusted gross income (MAGI) above a certain threshold cannot directly contribute to a Roth IRA. For 2025, the phase-out ranges are: Single filers: $150,000–$165,000 Married filing jointly: $236,000–$246,000 With a Backdoor Roth IRA, these limits no longer apply. Here's a step-by-step breakdown of how to create a Backdoor Roth IRA. Step 1. Contribute to a Traditional IRA Start by contributing after-tax dollars to a traditional IRA. The IRS allows annual contributions of up to $7,000 (or $8,000 for those aged 50 or older in 2025). Since your contribution is made with after-tax money, it's nondeductible, meaning you won't get a tax break on the contribution. Step 2. Convert to a Roth IRA Next, convert your traditional IRA to a Roth IRA. Most financial institutions allow you to do this easily online or with a quick call to your advisor. The conversion moves your funds into the Roth account, where future earnings will grow tax-free. Step 3. Pay Taxes on Any Pre-Tax Balances If your traditional IRA contains pre-tax contributions or earnings, you'll owe income taxes during the conversion. These taxes are calculated based on the pro-rata rule, which we'll cover below. Special Note on Timing Many financial advisors suggest completing the conversion as soon as possible after the traditional IRA contribution. This minimizes any taxable earnings generated between the contribution and conversion. Pro-Tip for Tax Efficiency To minimize complexities, some high-income earners choose to maintain no other pre-tax IRA balances. Why? The pro-rata rule could make a portion of your conversion taxable. IRS Pro-Rata Rule Explained The pro-rata rule applies if you have pre-tax funds in any traditional IRA accounts. For example, if 75% of your total IRA balances are pre-tax, 75% of the conversion will be taxable. Example: Traditional IRA #1 (Pre-Tax): $18,000 Traditional IRA #2 (After-Tax): $6,000 Total IRA Balance: $24,000 Conversion Amount (IRA #2): $6,000 Taxable Portion = 75% of $6,000 = $4,500 By avoiding pre-tax IRA balances via rollovers to 401(k)s, you simplify the Backdoor Roth strategy. Here are some scenarios where a Backdoor Roth IRA may be a smart choice: You're a high-income earner: If your salary exceeds Roth contribution limits, a Backdoor Roth unlocks access to this tax-advantaged account. You anticipate higher future tax rates: Roth IRAs allow you to 'lock in' your current tax rate, potentially saving you money in retirement. You want flexibility in retirement: With no RMDs, Roth IRAs let you manage your withdrawals on your terms. While the Backdoor Roth IRA can be a powerful strategy, there are some challenges to be aware of: Tax Complexity – The pro-rata rule can make tax calculations tricky. You may benefit from consulting a tax professional to optimize the strategy. Funding Limits – You can only contribute up to $6,500 annually (or $7,500 for those 50+). Five-Year Rule – Withdrawals from converted funds may trigger penalties if made before five years have passed or before age 59½. The Backdoor Roth IRA isn't the only tool in your arsenal. Here are a few complementary strategies to optimize your retirement savings: Mega Backdoor Roth IRA – If your 401(k) plan allows for after-tax contributions, you may be eligible for a Mega Backdoor Roth strategy. Charitable Giving – Strategic donations can reduce your MAGI and improve your overall tax picture. The Backdoor Roth IRA is a game-changer for high-net-worth households seeking long-term, tax-free growth. When used thoughtfully, it opens doors to significant retirement benefits originally designed for middle-income earners. This story was produced by Range and reviewed and distributed by Stacker.
