Money Minutes for Doctors #63 ~ All Things IRA
In this episode, host Kristina McAteer, MD, invites Dan Forbes, CEO of Forbes Financial, to explore the intricacies of retirement planning centered around the Roth IRA. They highlight its gold standard status due to the absence of minimum distribution requirements, making it a key consideration for tax planning. Listeners learn the flexibility of investing in both Roth and traditional IRAs simultaneously, enabling yearly review of tax liabilities and strategic investment decisions. The discussion delves into maximizing retirement contributions, including the option of a backdoor Roth for high-income earners and the benefits of gifting Roth IRAs to future generations. Furthermore, recent legislative changes regarding 529 Plans and Roth IRAs are discussed, providing valuable insights into evolving retirement savings strategies. Throughout, McAteer and Forbes emphasize the personalized nature of retirement planning, urging listeners to explore diverse options tailored to their individual financial goals.
Enjoy the discussion!
About Mr. Forbes:
Dan Forbes, founder and owner of Forbes Financial Planning, embarked on his financial planning journey immediately after graduating from Brown University in 1997. With a career spanning over two decades, he became a Certified Financial Planner practitioner in 2007 and was distinguished as a Certified Financial Planning Board Ambassador in 2011. Renowned for his media presence, Dan has been the author of the Friday Financial Five since 2010, a regular contributor to the CFP blog at the Let's Make a Plan Learning Center, a guest on the nationally syndicated show Jill on Money, and a contributor to Investors Business Daily. His dedication to financial planning is rooted in a relentless pursuit of enhancing the client experience through innovative technology, offering services like interactive financial planning, risk analysis, and income tax reviews. Beyond his professional achievements, Dan's passion extends into youth basketball, where he has made significant contributions as a coach and board member for the East Greenwich Basketball Association, leading his Girls' HoneyBadger AAU team to consecutive Zero Gravity National Championships. Forbes Financial Planning’s virtual home may be found at https://www.forbesplanning.com. He may be reached at dforbes@forbesplanning.com.
Quick Points:
Gold standard for retirement account in the Roth IRA as there is no minimum distribution (RMD)
Roth IRA should be at least discussed for tax planning.
Can invest in Roth along w traditional IRA simultaneously - Year to year can review tax liability and make decisions re investment dollars
Each year can maximize retirement contributions to a limit of $23,500
Back door Roth is an option to transition traditional IRA to a Roth which would traditionally not be available for those w incomes > $160,000
Roth IRA can be gifted to future generations and has tax benefits to those receiving the Roth
Traditional IRA can also be gifted to a non-spouse but must all be withdrawn by the inherited rule of 10 years and they must pay at their tax bracket when the money is distributed.
RMD must be part of the tax planning for traditional IRA it varies by person but could be as late as 75. (approx. 4 % of account value and recalculates each year. Essentially IRS forces you to take money so they can have the taxable income. The RMD is based on the year you were born. )
Roth is not subject to minimum distributions as the income is not taxable
Roth IRA for Minors. – as long as minor has earned income highly recommend children starting Roth IRA as has significant benefits for finical literacy as well as long term financial benefit. Roth IRA has benefit of tax free growth & compounding interest which will yield significant value over the longer lifespan of the account. Earned income limits apply to the minor Roth IRA
Recent law change that now allows contribution to 529 Plan to convert to a Roth IRA. Previously the any monies left in the 529 fund could not be used for any other purpose other than education however now w new rules can transition 529 funds without tax consequence to a Roth IRA (up to $35,000). Money will be to be in 529 account for 15 years .
No limit to number of retirement plans one can have however each year limited by dollar amount that can be invested ($23,000/year w additional benefits after age 50)
Almost always want to maximize any match your employer may offer.
Most employers will offer a Roth 401k option, it is then on the employee to determine the % contribution to the various plans. Employers can still match into a 401k and the employee can often decide where they want the match to go.
Planning and saving for retirement is an individual process. There is no one size fits all.