Major disclaimer omitted: check the income limits. If you are above the income limit: - you can still contribute to a Traditional IRA, but it is not tax deductible., and then... - you can roll that non-deductible Traditional IRA into a Roth IRA This is called the Backdoor Roth, because it is a loophole that allows folks with more income to still make use of an IRA. Note that if the rollover happens and there are gains, you are responsible for paying the taxes on those gains when you file your taxes, so ideally the rollover is done within a couple of days to avoid too many taxable gains. (There is also a tax form to fill out for the rollover when filling your annual taxes.)
Yeah but in 40 years 1.8 Million is less valuable due to inflation. For instance, $3million today only has the same buying power as $1million 40 years ago.
Well, there are several ways to see a Roth ira/401(k) as equivalent to a traditional ira / 401(k), so people aren’t missing as much information as they suspect that they are.
A lot of people can tbh…sinking funds can help you get closer to the oak. Investing something is better than nothing. It’s not an all or nothing situation.
@@luisfilipe2023 yeah you could also win the lottery, but that’s not the point of the video. And no, the inflation rate is not 2%, it’s much higher. Can never understand why some people are like you
How does the contribution limit work, if you have both a Roth IRA and traditional IRA? Are the two limits independent from each other? Or are the two limits cumulative with each other?
Combined unfortunately, so for 2024 you can contribute up to $7,000 between both. Makes more sense to focus on one to get the compound interest gains than split it between the two. Depends on your financial need to access the money, if you want to use it as an accessible savings account, use ROTH as you can access the money without penalty. If you want to just set and forget about funds until retirement, go with traditional.
What if I told YOU that many companies in the USA no longer offer IRAs as a retirement plan option to their employees? Most offer only 401K IF any plan at all. So that means having to use a bank or other company for IRA and that would be contributions from your net income (after tax).
IRA stands for Individual Retirement Account. They have never been offered by employers, they are Individual accounts. Tax law dictates whether or not something is taxable depending on your individual circumstances. You "true up" when you file taxes at the end of the year. It doesn't matter what your employer withholds or doesn't withhold.
@@tomoore1776 The median hourly wage in the US is $18.21, which is still less than than the cost per day. You making the number look smaller, doesn't make it better. The median mortgage cost in the US is around $2000 a month. Most people don't have an extra $541 a month to put back. Hell most people living in the US don't have $1000 in saving, and a significant portion of people would be crippled by a $700 expense, but due go on about how it's only $18 a day. Idiot.
Do a roth IRA! Pay taxes now, no tax on growth or tax when you pull it out. Ex. You'd pay your normal income tax on the $500 before you put it in, but when you retire and thay $500 is now $1000, you pull out $1000 tax-free
401k is still better because I can deduct it but I can also borrow some of it now, get the benefit of it, and insert it back into my account later. Or option 2 I borrow it now use it for my benefit, don’t pay it back to my account and when it gets taxed as income just use one of those tax resettlement programs and pay less.
@@whatzituya55 I'm not sure why, but it's pretty common to call it an account. The IRS classifies it as an Arrangement: www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Because an ira is not tax evasion. It's designed to be used by lower and middle income citizens to have a fighting chance with income limits low enough so billionaires can't effectively use it, and high enough that will be more than enough for someone to have a good retirement.
PBS is not actually government controlled, and this is not avoiding taxes. The real issue is being able to deposit that money each year, regardless of taxes.
The only "control" PBS gets from the government is just funding from the Corporation for Public Broadcasting. Otherwise, it's funded a lot by donations. No PBS sponsorship influences the content that's being produced.
Except it is. A brokerage account and roth are the same ONLY IN the sense that both are funded with after tax dollars. A roth ira has tax free growth. A brokerage account you pay taxes on the gains and dividends even though it's after tax dollars.
@@Spicy361 the growth and dividends are tax free in a roth ira. They grow and you don't pay tax on them because you already paid taxes. If you already have money in a bank account, it's better to have a chunk of it in a roth ira as opposed to a bank.
@@IJoeAceJRI again, all I said was it's misleading. Taxes are still paid. You don't just get money without paying taxes. I'd say go work in finance instead of listening to finance bros on tik Tok
Major disclaimer omitted: check the income limits. If you are above the income limit:
- you can still contribute to a Traditional IRA, but it is not tax deductible., and then...
- you can roll that non-deductible Traditional IRA into a Roth IRA
This is called the Backdoor Roth, because it is a loophole that allows folks with more income to still make use of an IRA. Note that if the rollover happens and there are gains, you are responsible for paying the taxes on those gains when you file your taxes, so ideally the rollover is done within a couple of days to avoid too many taxable gains. (There is also a tax form to fill out for the rollover when filling your annual taxes.)
Yep it’s tax form 8606. Don’t forget about the pro-rata rule as well!
I actually didn't know about the backdoor. Dammit! Did that a few years ago before I even realized there were income limits.
I’ll cash out my 6.5 million dollar Roth IRA to bring back the mustache.
This offer is valid until tonight at 10pm.
And to cut the hair short too, yes?
But he needs to flip the hair during filming, that’s the requirement from the Fed.
With rare exceptions, I wouldn't waste my time on a man thst didn't have a decent, but tasteful mustache.
I believe it’s now up to $7,000 a year 😬
And $8,000 for folks 50 and older. It updated again this year after $.02 made the video this is cut from.
The limit is $7000 now. I just checked mine.
Yeah but in 40 years 1.8 Million is less valuable due to inflation.
For instance, $3million today only has the same buying power as $1million 40 years ago.
Okay but what else are you gonna do?
And in 40 years, your wages are also gonna increase. Even if your wages didn't increase proportional to the inflation, it's still a great option.
Cool. So what’s your advice then, do nothing?
Dude it's still $1.8 MILLION dollars!!!
Yeah so why try right? I hope you don’t approach life with such a defeatist, negative mentality
me, a 25 year old: man i wish i made 6,500 a year
Why is this not taught to EVERY SINGLE senior in HS every year.
UGGGGGG schools bruh....
Well, there are several ways to see a Roth ira/401(k) as equivalent to a traditional ira / 401(k), so people aren’t missing as much information as they suspect that they are.
How kind of the government to not take quite so much of my money as they would like to.
Plus who can save $6500.
A lot of people can tbh…sinking funds can help you get closer to the oak. Investing something is better than nothing. It’s not an all or nothing situation.
Time to fund the Irish Republican Army!
No subtitles? 😢
at average 3% annual inflation, that $1.8m is equivalent of about $500k today. so no, it’s not a golden jar at the end of rainbow
You can update your contribution as your income grows with inflation also inflation is 2-2.5% not 3%
@@luisfilipe2023 yeah you could also win the lottery, but that’s not the point of the video. And no, the inflation rate is not 2%, it’s much higher. Can never understand why some people are like you
It also means that the market magically kept growing 8% every single year, which it doesn't, that's just the average.
@@gilbertoflores7397 exactly the market actually tends to grow more then that it’s only as low as it is because there are periods of market decline
500k today is still a lot of money for a lot of people
How does the contribution limit work, if you have both a Roth IRA and traditional IRA?
Are the two limits independent from each other? Or are the two limits cumulative with each other?
Cumulative I believe. The IRS has info on their website
Combined unfortunately, so for 2024 you can contribute up to $7,000 between both. Makes more sense to focus on one to get the compound interest gains than split it between the two.
Depends on your financial need to access the money, if you want to use it as an accessible savings account, use ROTH as you can access the money without penalty. If you want to just set and forget about funds until retirement, go with traditional.
Does this mean it’s better to max out contribution to a Roth IRA than enroll in a 401k?
What if I told YOU that many companies in the USA no longer offer IRAs as a retirement plan option to their employees? Most offer only 401K IF any plan at all. So that means having to use a bank or other company for IRA and that would be contributions from your net income (after tax).
IRA stands for Individual Retirement Account. They have never been offered by employers, they are Individual accounts. Tax law dictates whether or not something is taxable depending on your individual circumstances. You "true up" when you file taxes at the end of the year. It doesn't matter what your employer withholds or doesn't withhold.
Imagine having an extra $541.66 a month
That’s $18 a day. That’s less than an hours worth of pay for most people.
@@tomoore1776sigh to make that much money
@@tomoore1776$18 a day is a lot. I couldn’t afford that.
@@tomoore1776 The median hourly wage in the US is $18.21, which is still less than than the cost per day. You making the number look smaller, doesn't make it better. The median mortgage cost in the US is around $2000 a month. Most people don't have an extra $541 a month to put back. Hell most people living in the US don't have $1000 in saving, and a significant portion of people would be crippled by a $700 expense, but due go on about how it's only $18 a day. Idiot.
@@tomoore1776that’s an hours pay for me lol
Do a roth IRA! Pay taxes now, no tax on growth or tax when you pull it out.
Ex. You'd pay your normal income tax on the $500 before you put it in, but when you retire and thay $500 is now $1000, you pull out $1000 tax-free
Does this work ?
Depending on inflation the actual growth may be much smaller. 2% yearly?
not rich enough for loophole
Where can I sign up?
Literally anywhere.
@@brookekathryn1980 so i can do this at the bottom of the ocean?
401k is still better because I can deduct it but I can also borrow some of it now, get the benefit of it, and insert it back into my account later. Or option 2 I borrow it now use it for my benefit, don’t pay it back to my account and when it gets taxed as income just use one of those tax resettlement programs and pay less.
Legal tax evasion
Not evasion if it's legal
Tax "Avoidance" = Legal
Tax "Evasion" = Illegal
8% interest - nice bait ;)
Are these two transitioning?
😂😂omg lmao
bRain dropping mics
Solid video that everyone needs to hear! But just one small criticism...IRA standa for Individual Retirement Arrangements, not "Accounts".
It is account. Had me doubting for a second lol look it up
@@whatzituya55 I'm not sure why, but it's pretty common to call it an account. The IRS classifies it as an Arrangement: www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
And consequently you are never in control of your money bad investment
What?
Is this dude gay now? Wtf happened
Yup, they both look like they are transitioning
@@brianthomas3451 crazy shit, what people would do for money. Smh
I miss the porn moustache...
Needs the moustache
So it's taxed at the end, with taxes Goin up every year. Genius. Woooo
It’s not taxed
Did you even pay attention to the entire clip?
Why is PBS, A government control service, Telling you how to avoid taxes from another government agency?
Because an ira is not tax evasion. It's designed to be used by lower and middle income citizens to have a fighting chance with income limits low enough so billionaires can't effectively use it, and high enough that will be more than enough for someone to have a good retirement.
PBS is not actually government controlled, and this is not avoiding taxes. The real issue is being able to deposit that money each year, regardless of taxes.
Because PBS is not government controlled and because being intelligent with your money is not evading taxes.
Good Lord.
The only "control" PBS gets from the government is just funding from the Corporation for Public Broadcasting. Otherwise, it's funded a lot by donations. No PBS sponsorship influences the content that's being produced.
You pay taxes on the money put in so you don't pay them when you get a withdrawal, it's not tax free and that's very misleading
Except it is. A brokerage account and roth are the same ONLY IN the sense that both are funded with after tax dollars.
A roth ira has tax free growth.
A brokerage account you pay taxes on the gains and dividends even though it's after tax dollars.
@@IJoeAceJRI you pay regardless and that's what's misleading. Idk man, working in finance teaches you that.
@@Spicy361 the growth and dividends are tax free in a roth ira. They grow and you don't pay tax on them because you already paid taxes.
If you already have money in a bank account, it's better to have a chunk of it in a roth ira as opposed to a bank.
@@IJoeAceJRI again, all I said was it's misleading. Taxes are still paid. You don't just get money without paying taxes. I'd say go work in finance instead of listening to finance bros on tik Tok
So, I am lending my money to government at 8%(max) and when I claim it back, I will be taxed.
Sounds reasonable.