1 00:00:28,469 --> 00:00:33,400 Suze: March 6, 2025. Welcome everybody to the Women and Money podcast, 2 00:00:33,630 --> 00:00:38,269 Suze: as well as everybody smart enough to listen. Now I know, 3 00:00:38,389 --> 00:00:42,990 Suze: I know today is supposed to be ask KT and 4 00:00:42,990 --> 00:00:49,110 Suze: Suze Anything, but I happen to be in Florida. KT 5 00:00:49,110 --> 00:00:53,549 Suze: is on the island, so I thought, I know... 6 00:00:54,060 --> 00:00:57,270 Suze: You know how I was supposed to give KT a 7 00:00:57,270 --> 00:01:01,619 Suze: quiz on Roth IRAs and all of that. She wasn't 8 00:01:01,619 --> 00:01:05,059 Suze: going to have it. She was like, I'm not doing that, Suze. 9 00:01:05,690 --> 00:01:08,220 Suze: So I'm like, OK, and I couldn't get her to 10 00:01:08,220 --> 00:01:08,620 Suze: do it. 11 00:01:09,010 --> 00:01:13,080 Suze: That's life. All right. However, I thought, well, if KT 12 00:01:13,080 --> 00:01:16,239 Suze: doesn't want to do it, why don't I, since she's 13 00:01:16,239 --> 00:01:20,319 Suze: not with me today, why don't I give you the 14 00:01:20,319 --> 00:01:24,279 Suze: quiz that I was going to give KT, because I 15 00:01:24,279 --> 00:01:29,470 Suze: have had 18 questions just sitting here waiting until she 16 00:01:29,470 --> 00:01:32,319 Suze: was ready to do this. So why don't you get 17 00:01:32,319 --> 00:01:36,190 Suze: out some paper, pencil, whatever it is that you need. 18 00:01:36,669 --> 00:01:40,610 Suze: And let's see how many of these that you can 19 00:01:40,610 --> 00:01:47,129 Suze: get right. So this really is now your wroth quizzy time. 20 00:01:47,379 --> 00:01:50,169 Suze: Are you ready? I'm gonna start out easy for you. 21 00:01:51,309 --> 00:01:59,260 Suze: Roth IRA contributions are made with pre-tax dollars. 22 00:02:00,019 --> 00:02:01,150 Suze: Yes or no? 23 00:02:03,720 --> 00:02:04,709 Suze: Did you answer? 24 00:02:05,949 --> 00:02:12,949 Suze: If you answered no, you are correct. Roth IRA contributions 25 00:02:12,949 --> 00:02:18,309 Suze: are made with after tax dollars, and the reason is 26 00:02:18,309 --> 00:02:22,080 Suze: that's why it gets to be in there and grow 27 00:02:22,080 --> 00:02:29,029 Suze: essentially tax free if you meet certain qualifications. Pre-tax dollars 28 00:02:29,029 --> 00:02:34,990 Suze: from traditional IRAs. Got that, everybody? All right. 29 00:02:35,940 --> 00:02:36,929 Suze: Next question. 30 00:02:37,630 --> 00:02:40,100 Suze: You can still contribute 31 00:02:40,860 --> 00:02:47,288 Suze: to a Roth IRA for the 2024 tax year until 32 00:02:47,288 --> 00:02:52,940 Suze: April 15, 2025. Yes or no? 33 00:02:54,270 --> 00:02:56,130 Suze: Or it could be true or false, up to you. 34 00:02:57,529 --> 00:02:58,440 Suze: Have you answered? 35 00:02:59,369 --> 00:03:02,539 Suze: You can still contribute to a Roth IRA for the 36 00:03:02,538 --> 00:03:08,759 Suze: 2024 tax year until April 15th of 2025. That is true. 37 00:03:08,990 --> 00:03:12,380 Suze: You can. You can also do it with the traditional, 38 00:03:12,550 --> 00:03:13,779 Suze: just so you know. 39 00:03:14,919 --> 00:03:20,910 Suze: Next, Roth IRAs or Roth 401ks, and by the way, 40 00:03:21,000 --> 00:03:25,788 Suze: when I say a Roth 401k or I mention a 401k, 41 00:03:26,399 --> 00:03:32,130 Suze: I also mean a TSP or a 403B all employer 42 00:03:32,130 --> 00:03:40,460 Suze: qualified plans. So a Roth IRA or a Roth 401k. 43 00:03:41,429 --> 00:03:48,589 Suze: Currently require RMDs by April 1st, after the year the 44 00:03:48,589 --> 00:03:50,550 Suze: owner turns 73. 45 00:03:51,320 --> 00:03:54,740 Suze: So whether it's a Roth IRA or a Roth 401k, 46 00:03:56,000 --> 00:03:58,600 Suze: are RMDs required 47 00:03:59,580 --> 00:04:05,639 Suze: by April 1st, after the owner turned 73, yes or no? 48 00:04:08,300 --> 00:04:09,190 Suze: What did you answer? 49 00:04:09,960 --> 00:04:17,760 Suze: That is false because RMDs are never required from a 50 00:04:17,760 --> 00:04:21,829 Suze: Roth account of any kind. That is why I love 51 00:04:21,829 --> 00:04:26,578 Suze: them so much a pre-tax retirement account or a traditional 52 00:04:26,869 --> 00:04:29,140 Suze: IRA 401k or whatever. 53 00:04:29,540 --> 00:04:33,980 Suze: You have to start taking RMDs in most cases out 54 00:04:33,980 --> 00:04:37,950 Suze: of your accounts by April 1st after the year you 55 00:04:37,950 --> 00:04:41,230 Suze: turn currently 73. In a few years that goes up 56 00:04:41,230 --> 00:04:45,339 Suze: to 75. However, in a Roth of any kind now, 57 00:04:46,029 --> 00:04:49,309 Suze: RMDs are not required. 58 00:04:50,559 --> 00:04:56,500 Suze: Next, if you withdraw contributions, not your earnings, but just 59 00:04:56,500 --> 00:05:00,739 Suze: contributions from your Roth IRA, and you can do it 60 00:05:00,738 --> 00:05:01,779 Suze: at any time. 61 00:05:02,440 --> 00:05:07,579 Suze: Is it always tax and penalty free? Yes or no? 62 00:05:10,380 --> 00:05:11,369 Suze: Think about it. 63 00:05:12,149 --> 00:05:16,100 Suze: The answer to that is yes. The reason why I 64 00:05:16,100 --> 00:05:21,579 Suze: love Roth IRAs more than any retirement account out there 65 00:05:21,579 --> 00:05:26,368 Suze: more than a Roth 401k anything is because any money 66 00:05:26,899 --> 00:05:32,059 Suze: that you have originally contributed, you can take out any 67 00:05:32,059 --> 00:05:36,970 Suze: time you want. No limitation on age or how long 68 00:05:36,970 --> 00:05:39,750 Suze: the account has been opened. It's your money. You can 69 00:05:39,750 --> 00:05:40,690 Suze: take it out. 70 00:05:41,160 --> 00:05:44,100 Suze: That's not true for the earnings of the account, but 71 00:05:44,100 --> 00:05:46,500 Suze: it's true for the contributions. 72 00:05:47,488 --> 00:05:54,760 Suze: Now the earnings, however, in a Roth IRA grow tax free. 73 00:05:55,549 --> 00:06:01,829 Suze: But withdrawal of those earnings are always subject to income tax, 74 00:06:02,519 --> 00:06:06,829 Suze: yes or no? So while they're in the account, everybody, 75 00:06:07,000 --> 00:06:10,320 Suze: they're really kind of growing tax deferred everything. This is 76 00:06:10,320 --> 00:06:11,480 Suze: the earnings. 77 00:06:12,299 --> 00:06:17,420 Suze: But withdrawal of those earnings are always the key word 78 00:06:17,420 --> 00:06:20,940 Suze: is always subject to income tax. 79 00:06:22,839 --> 00:06:27,950 Suze: And the answer to that question is no false, as 80 00:06:27,950 --> 00:06:31,260 Suze: long as the account has been open for at least 81 00:06:31,260 --> 00:06:36,077 Suze: 5 years and you are at least 59 and a 82 00:06:36,077 --> 00:06:37,869 Suze: half years of age. 83 00:06:38,329 --> 00:06:41,070 Suze: You're not going to have to pay income tax on 84 00:06:41,070 --> 00:06:45,790 Suze: any of the earnings. So truthfully, if you have a 85 00:06:45,790 --> 00:06:49,540 Suze: Roth IRA that has been open for at least 5 years, 86 00:06:49,549 --> 00:06:55,070 Suze: you're 59 and a half or older, you can take every penny out 87 00:06:55,070 --> 00:06:58,839 Suze: of that account absolutely tax free. 88 00:07:00,350 --> 00:07:00,959 Suze: Next. 89 00:07:02,000 --> 00:07:09,349 Suze: You must have no pre-tax funds in any traditional IRA account. 90 00:07:09,679 --> 00:07:14,359 Suze: That includes a simple IRA, a SEP IRA, a traditional 91 00:07:14,359 --> 00:07:19,609 Suze: IRA like I just said, to avoid tax complications when 92 00:07:19,609 --> 00:07:23,350 Suze: using the back door Roth strategy. 93 00:07:24,179 --> 00:07:27,649 Suze: Remember, everybody, I'll let you think about that for a second. 94 00:07:27,899 --> 00:07:32,179 Suze: There are modified adjusted gross income limits for you to 95 00:07:32,179 --> 00:07:36,829 Suze: be able to have a Roth IRA if you are single. 96 00:07:38,109 --> 00:07:43,429 Suze: You cannot make more than $150,000 a year of modified 97 00:07:43,429 --> 00:07:48,420 Suze: adjusted gross income to put the full max in a Roth. 98 00:07:48,929 --> 00:07:53,510 Suze: That amount goes down, and after $165,000 a year modified 99 00:07:53,510 --> 00:07:56,200 Suze: adjusted gross income, you do not qualify for a Roth 100 00:07:56,200 --> 00:08:02,070 Suze: at all. If you're married filing jointly, those numbers are 236. 101 00:08:02,850 --> 00:08:07,589 Suze: Goes away totally at 246. All right, you make more 102 00:08:07,589 --> 00:08:08,309 Suze: than that. 103 00:08:09,000 --> 00:08:13,230 Suze: So you want to do a backdoor Roth, and to 104 00:08:13,230 --> 00:08:20,269 Suze: do a backdoor Roth, you simply open up a nondeductible IRA. 105 00:08:20,309 --> 00:08:22,950 Suze: You do not take it off your taxes, and you 106 00:08:22,950 --> 00:08:27,869 Suze: convert it to a Roth IRA because you can convert 107 00:08:27,869 --> 00:08:29,670 Suze: any amount of money you want. 108 00:08:30,519 --> 00:08:36,820 Suze: And there are no income limitations on conversion, all right? Therefore, 109 00:08:38,450 --> 00:08:45,630 Suze: to avoid tax complications when you're using a backdoor Roth strategy. 110 00:08:47,309 --> 00:08:52,919 Suze: You must have no pre-tax funds in any traditional pre-tax 111 00:08:52,919 --> 00:08:56,909 Suze: retirement account, true or false? 112 00:08:58,570 --> 00:09:00,340 Suze: That everybody is true. 113 00:09:01,710 --> 00:09:06,630 Suze: Because if you have, let's say a traditional IRA, maybe 114 00:09:06,630 --> 00:09:09,940 Suze: you have a SEP IRA, maybe you have an IRA rollover, 115 00:09:10,590 --> 00:09:15,140 Suze: and you do a backdoor Roth like I just said. 116 00:09:16,190 --> 00:09:19,960 Suze: Then you're gonna have to pay taxes when you convert 117 00:09:20,450 --> 00:09:24,699 Suze: according to a pro rata formula which I have explained 118 00:09:25,270 --> 00:09:30,380 Suze: in previous podcasts, but if you happen to have a pre-tax, 119 00:09:30,510 --> 00:09:36,469 Suze: any kind of retirement account, don't do a back door Roth, 120 00:09:36,590 --> 00:09:38,950 Suze: all right, everybody, just that simple. 121 00:09:39,809 --> 00:09:42,299 Suze: How are you doing on these? Are you doing OK? 122 00:09:42,789 --> 00:09:47,179 Suze: All right, I still wonder how KT would have done anyway. Next, 123 00:09:47,650 --> 00:09:54,750 Suze: the pro rata rule does not apply when converting a 124 00:09:54,750 --> 00:09:58,989 Suze: pre-tax IRA to a Roth IRA. 125 00:10:00,500 --> 00:10:04,020 Suze: All right, does it, does it not? 126 00:10:05,890 --> 00:10:11,489 Suze: No, it does not apply. That is true. Doesn't matter 127 00:10:11,489 --> 00:10:14,570 Suze: how many retirement accounts you have out there when you 128 00:10:14,570 --> 00:10:19,569 Suze: are converting from a pre-tax account to a Roth, you're 129 00:10:19,570 --> 00:10:21,728 Suze: going to have to pay taxes on the entire amount 130 00:10:21,729 --> 00:10:25,969 Suze: you're converting. So the pro rata rule does not apply 131 00:10:25,969 --> 00:10:29,369 Suze: because you're already going to pay a 100% tax on 132 00:10:29,369 --> 00:10:30,809 Suze: everything that you are converting. 133 00:10:32,359 --> 00:10:36,130 Suze: If you convert a traditional IRA. 134 00:10:36,969 --> 00:10:38,869 Suze: To a Roth IRA. 135 00:10:39,869 --> 00:10:44,500 Suze: But the Roth IRA has already been open for over 136 00:10:44,500 --> 00:10:46,200 Suze: 5 years. 137 00:10:47,109 --> 00:10:51,939 Suze: The converted funds fall under the time frame of the 138 00:10:51,940 --> 00:10:56,130 Suze: Roth IRA. So in other words, when you convert from 139 00:10:56,130 --> 00:11:00,369 Suze: a pre-tax to a Roth IRA that has been open 140 00:11:00,369 --> 00:11:03,809 Suze: for over 5 years, you remember the 5 year rule, everybody. 141 00:11:04,849 --> 00:11:08,760 Suze: If it's been opened for over those 5 years, do 142 00:11:08,760 --> 00:11:14,950 Suze: the converted funds take on the time of those 5 years? 143 00:11:15,929 --> 00:11:17,000 Suze: Yes or no? 144 00:11:17,969 --> 00:11:21,229 Suze: And the answer to that is no they do not. 145 00:11:22,479 --> 00:11:28,280 Suze: Converted funds when you are converting from a pre-tax retirement 146 00:11:28,280 --> 00:11:34,559 Suze: account to an after-tax retirement account traditional to wroth, then 147 00:11:34,919 --> 00:11:38,598 Suze: the amount of money that you are converting starts the 148 00:11:38,599 --> 00:11:42,359 Suze: clock for those funds all over again. 149 00:11:43,010 --> 00:11:47,049 Suze: So if you convert 3 times, each one of those 150 00:11:47,049 --> 00:11:52,510 Suze: conversions are going to have their own 5 year clock. 151 00:11:53,049 --> 00:11:54,729 Suze: You have to know that, everybody. 152 00:11:55,869 --> 00:11:59,960 Suze: Now, this one's a little tricky, but if you listened 153 00:12:00,469 --> 00:12:03,329 Suze: to a podcast that I did just a week or 154 00:12:03,330 --> 00:12:07,450 Suze: so ago on a Sunday Suze School, which was about 155 00:12:07,450 --> 00:12:09,130 Suze: what happens, what do you do if you get laid 156 00:12:09,130 --> 00:12:11,359 Suze: off or fired, you should know this. 157 00:12:12,059 --> 00:12:15,859 Suze: You have a Roth 401k, and you've had it for 158 00:12:15,859 --> 00:12:19,599 Suze: 10 years now, right, past the 5 year limit. You've 159 00:12:19,599 --> 00:12:23,079 Suze: had it for 10 years, and now you are rolling 160 00:12:23,080 --> 00:12:27,960 Suze: it over to a brand new Roth IRA, one that 161 00:12:27,960 --> 00:12:31,359 Suze: you're going to open for the very first time. Does 162 00:12:31,359 --> 00:12:37,280 Suze: the time clock of the Roth 401k follow you to 163 00:12:37,280 --> 00:12:39,330 Suze: the Roth IRA? 164 00:12:39,840 --> 00:12:43,010 Suze: So in essence now is that money that's in a 165 00:12:43,010 --> 00:12:44,260 Suze: Roth IRA. 166 00:12:45,530 --> 00:12:48,609 Suze: Has it been deemed to have been open for 10 167 00:12:48,609 --> 00:12:52,099 Suze: years even though you just opened the Roth IRA? 168 00:12:53,679 --> 00:12:54,929 Suze: Yes or no? 169 00:12:55,890 --> 00:13:01,270 Suze: And the answer to that is no. Listen closely, everybody. 170 00:13:02,840 --> 00:13:08,200 Suze: When you go from a Roth 401k, which is a 171 00:13:08,200 --> 00:13:10,390 Suze: certain type of retirement account. 172 00:13:11,099 --> 00:13:15,450 Suze: And you roll it to a Roth IRA. 173 00:13:16,659 --> 00:13:20,590 Suze: Now you are changing the type of retirement account, even 174 00:13:20,590 --> 00:13:24,309 Suze: though they're both tax free from an employer sponsored one 175 00:13:24,309 --> 00:13:28,630 Suze: at work to your own individual one so it's brand 176 00:13:28,630 --> 00:13:29,819 Suze: new for you. 177 00:13:30,849 --> 00:13:34,449 Suze: It takes on the time clock of how many years 178 00:13:34,450 --> 00:13:38,689 Suze: the Roth has been opened, the Roth IRA, not the 179 00:13:38,690 --> 00:13:43,650 Suze: Roth 401k. So if you are just now opening a 180 00:13:43,650 --> 00:13:47,210 Suze: Roth IRA when you do it, the time clock will 181 00:13:47,210 --> 00:13:49,689 Suze: start ticking, and you will have to leave it there 182 00:13:49,690 --> 00:13:53,530 Suze: for 5 years. If your Roth IRA has already been 183 00:13:53,530 --> 00:13:55,679 Suze: opened for 5 years or longer, 184 00:13:56,210 --> 00:14:01,229 Suze: now it takes on that 5 years of the Roth IRA, 185 00:14:01,400 --> 00:14:06,080 Suze: but the 10 years of the Roth 401k mean absolutely 186 00:14:06,080 --> 00:14:11,950 Suze: nothing when you are rolling it to a Roth IRA. However, 187 00:14:12,940 --> 00:14:16,169 Suze: if you leave that Roth 401k 188 00:14:17,510 --> 00:14:21,549 Suze: at your place of employment, so therefore it has been 189 00:14:21,549 --> 00:14:27,390 Suze: open longer than 5 years, and you are 59 and a half years 190 00:14:27,390 --> 00:14:29,669 Suze: of age or older. You can take it all out 191 00:14:29,669 --> 00:14:34,390 Suze: without any taxes or penalties. So you just decide, but 192 00:14:34,390 --> 00:14:37,869 Suze: my suggestion to all of you is, can you just 193 00:14:37,869 --> 00:14:41,469 Suze: all open up a Roth IRA right now if you 194 00:14:41,469 --> 00:14:44,700 Suze: don't have one. Just open it with a dollar. 195 00:14:45,150 --> 00:14:49,859 Suze: And that starts the time clock ticking. So for all 196 00:14:49,859 --> 00:14:52,780 Suze: the money then that you might have in a Roth 401k, 197 00:14:53,179 --> 00:14:58,340 Suze: Roth TSP, Roth 403B, if you roll it at that 198 00:14:58,340 --> 00:15:02,090 Suze: point into the Roth IRA whenever you decide to do so, 199 00:15:02,419 --> 00:15:06,260 Suze: it takes on the time of how long that Roth 200 00:15:06,260 --> 00:15:10,380 Suze: IRA has been open. All right. 201 00:15:11,289 --> 00:15:15,840 Suze: Next, this is a trick one, so listen closely. 202 00:15:16,890 --> 00:15:23,869 Suze: The IRS aggregation rules require you to consider all your 203 00:15:23,869 --> 00:15:27,070 Suze: Roth IRAs as one account, 204 00:15:28,150 --> 00:15:34,140 Suze: when calculating your RMDs, true or false? 205 00:15:36,789 --> 00:15:40,380 Suze: The answer to that is false. Did I not say 206 00:15:40,380 --> 00:15:45,419 Suze: to you in one of the previous questions, that Roths 207 00:15:45,419 --> 00:15:48,099 Suze: never have RMDs? 208 00:15:49,020 --> 00:15:52,090 Suze: That was a trick question. So what you do need 209 00:15:52,090 --> 00:15:55,659 Suze: to know, however, is if it was a traditional IRA. 210 00:15:56,500 --> 00:16:00,059 Suze: Traditional whatever you may have, even 401k, anything. 211 00:16:00,750 --> 00:16:08,039 Suze: The IRS will absolutely aggregate all your pre-tax accounts to 212 00:16:08,039 --> 00:16:14,880 Suze: determine how much you should pay in RMDs again. Roths 213 00:16:14,880 --> 00:16:19,919 Suze: never pay RMDs, which is why I love them so much. 214 00:16:20,929 --> 00:16:21,479 Suze: Ready? 215 00:16:22,669 --> 00:16:28,989 Suze: Withdrawals of only your contributions in a Roth IRA are 216 00:16:28,989 --> 00:16:33,429 Suze: always tax free and penalty free regardless of your age 217 00:16:33,429 --> 00:16:35,890 Suze: and how long the account has been open. 218 00:16:36,609 --> 00:16:39,869 Suze: Think about it a little bit ago. 219 00:16:41,250 --> 00:16:45,919 Suze: I answered that I explained how a Roth works. So 220 00:16:45,919 --> 00:16:50,070 Suze: this is, if you only want to withdraw your contributions, 221 00:16:50,239 --> 00:16:53,799 Suze: can you always do so tax free and penalty free 222 00:16:53,799 --> 00:16:56,080 Suze: regardless of your age and how long the account has 223 00:16:56,080 --> 00:17:00,880 Suze: been open? Can you? The answer is yes you can. 224 00:17:01,890 --> 00:17:06,390 Suze: That is again I'm driving this point home because that 225 00:17:06,390 --> 00:17:10,329 Suze: is again why I love Roth IRA so much. 226 00:17:11,138 --> 00:17:16,048 Suze: Next, I'm 60 years of age and I opened a 227 00:17:16,048 --> 00:17:19,168 Suze: Roth IRA 3 years ago. 228 00:17:20,038 --> 00:17:23,119 Suze: If I take out my earnings, I'm not talking about 229 00:17:23,119 --> 00:17:24,308 Suze: contributions now. 230 00:17:25,239 --> 00:17:29,329 Suze: If I take out my earnings, remember the 5 year rule, everybody, 231 00:17:29,939 --> 00:17:35,329 Suze: will I have to pay taxes and the 10% penalty 232 00:17:35,329 --> 00:17:37,540 Suze: on my earnings? 233 00:17:38,400 --> 00:17:39,989 Suze: Yes or no? 234 00:17:42,300 --> 00:17:46,310 Suze: The answer to that is a little tricky, right? You 235 00:17:46,310 --> 00:17:50,000 Suze: will have to pay taxes on your earnings, but you're 236 00:17:50,000 --> 00:17:53,160 Suze: not going to have to pay the 10% penalty because 237 00:17:53,160 --> 00:17:57,599 Suze: you are over 59 and a half years of age. So what I 238 00:17:57,599 --> 00:18:01,260 Suze: want you to take away from that question is, once 239 00:18:01,260 --> 00:18:07,439 Suze: you turn 59 and a half years of age, don't ever again when 240 00:18:07,439 --> 00:18:09,719 Suze: withdrawing money from a retirement account, 241 00:18:10,270 --> 00:18:14,270 Suze: worry about the 10% penalty. It doesn't matter what the 242 00:18:14,270 --> 00:18:18,229 Suze: rules say, whatever you are 59 and a half years of age or older. 243 00:18:18,869 --> 00:18:23,339 Suze: And therefore the 10% penalty does not apply. However, 244 00:18:24,060 --> 00:18:29,439 Suze: the 5 year rule will apply for earnings, so the 245 00:18:29,439 --> 00:18:32,919 Suze: account has got to have been opened for at least 246 00:18:32,920 --> 00:18:38,270 Suze: 5 years for you to also withdraw the earnings tax free, 247 00:18:38,400 --> 00:18:42,959 Suze: even if you deposited everything 2 years ago. If the 248 00:18:42,959 --> 00:18:46,829 Suze: account had been opened for at least 5 years, it qualifies. 249 00:18:47,119 --> 00:18:50,910 Suze: Open your Roth IRA today. Got that, everybody? 250 00:18:51,550 --> 00:18:52,609 Suze: OK, we're almost there. 251 00:18:54,439 --> 00:18:59,739 Suze: In a non-eligible designated beneficiary inherited Roth IRA. 252 00:19:00,400 --> 00:19:04,550 Suze: The account has to be wiped clean in 10 years. 253 00:19:05,619 --> 00:19:10,050 Suze: Do you all remember the difference between an eligible designated 254 00:19:10,050 --> 00:19:15,550 Suze: beneficiary and a non-eligible designated beneficiary when it comes to 255 00:19:15,550 --> 00:19:21,129 Suze: retirement accounts? Almost all of you are going to be 256 00:19:21,130 --> 00:19:27,640 Suze: non-eligible designated beneficiaries, unless of course you are a spouse, 257 00:19:27,810 --> 00:19:30,760 Suze: you are a minor child until you turn the age 258 00:19:30,760 --> 00:19:31,569 Suze: of majority. 259 00:19:32,060 --> 00:19:36,239 Suze: You're 10 years younger than the owner of the IRA 260 00:19:36,880 --> 00:19:38,329 Suze: or you are disabled. 261 00:19:39,380 --> 00:19:42,738 Suze: That makes you an eligible designated beneficiary, and essentially you 262 00:19:42,739 --> 00:19:45,569 Suze: have the same rights as if you were the owner, really. 263 00:19:46,400 --> 00:19:51,280 Suze: However, a non-eligible designated beneficiary, a child, most of you 264 00:19:52,699 --> 00:19:57,380 Suze: are governed by certain laws, but this is a Roth 265 00:19:57,380 --> 00:20:00,419 Suze: IRA I'm talking about here. 266 00:20:01,189 --> 00:20:07,079 Suze: So in a non-eligible designated beneficiary inherited Roth IRA. 267 00:20:08,619 --> 00:20:13,770 Suze: Does the account have to be wiped clean in 10 years? 268 00:20:15,569 --> 00:20:19,280 Suze: And the answer to that is yes, it does. They 269 00:20:19,280 --> 00:20:22,959 Suze: are not going to allow you to continue to accumulate 270 00:20:22,959 --> 00:20:25,150 Suze: growth tax free. Now listen to me. 271 00:20:26,040 --> 00:20:30,319 Suze: If this was a traditional IRA, it has to be 272 00:20:30,319 --> 00:20:34,560 Suze: wiped clean as an inherited traditional IRA within 10 years 273 00:20:34,560 --> 00:20:37,958 Suze: as well. But because it will be taxable to you 274 00:20:37,959 --> 00:20:40,839 Suze: in that situation, you want to start taking it out 275 00:20:40,839 --> 00:20:43,439 Suze: year by year by year. So in the 10th year 276 00:20:43,439 --> 00:20:45,040 Suze: it's almost all wiped out. 277 00:20:45,930 --> 00:20:49,939 Suze: In a Roth you would let it accumulate for all 278 00:20:49,939 --> 00:20:53,510 Suze: 10 years and grow and grow and grow. 279 00:20:55,010 --> 00:20:56,859 Suze: Because when you take it out, it's all going to 280 00:20:56,859 --> 00:21:00,469 Suze: be tax free, so you would be taking advantage of 281 00:21:00,469 --> 00:21:03,869 Suze: the tax-free status of that account. 282 00:21:05,329 --> 00:21:10,250 Suze: All right, little trick one here. I have $200,000 in 283 00:21:10,250 --> 00:21:12,079 Suze: my 401k at work. 284 00:21:12,989 --> 00:21:16,929 Suze: And I want to convert it all at one time 285 00:21:17,180 --> 00:21:18,810 Suze: to a Roth 401k. 286 00:21:20,319 --> 00:21:25,459 Suze: Is this smart? I still have at least 20 years 287 00:21:25,459 --> 00:21:28,859 Suze: till I need this money. Is this a smart thing 288 00:21:28,859 --> 00:21:32,379 Suze: to do, everybody? Yes or no? 289 00:21:33,810 --> 00:21:33,819 Suze: Mhm. 290 00:21:35,599 --> 00:21:38,550 Suze: It is not a smart thing to do, and the 291 00:21:38,550 --> 00:21:44,458 Suze: key there was all at once. If this person converted 292 00:21:44,989 --> 00:21:51,659 Suze: all $200,000 at once, all $200,000 is going to be taxable. 293 00:21:52,069 --> 00:21:57,189 Suze: So why not convert maybe 20,000 1 year, maybe 20,000 another, 294 00:21:57,359 --> 00:21:59,800 Suze: maybe take 10 years to get it in there or 295 00:21:59,800 --> 00:22:04,079 Suze: whatever your tax person says you can convert without you 296 00:22:04,079 --> 00:22:07,119 Suze: really screwing up your taxes, all right. 297 00:22:08,290 --> 00:22:11,550 Suze: Next, if I have a Roth 401k, 298 00:22:12,510 --> 00:22:16,659 Suze: that I max out every year. Can I also max 299 00:22:16,660 --> 00:22:18,979 Suze: out a Roth IRA? 300 00:22:20,339 --> 00:22:24,540 Suze: Can you have really this question is asking. Can you 301 00:22:24,540 --> 00:22:27,139 Suze: have a Roth 401k at work? Can you have a 302 00:22:27,140 --> 00:22:30,819 Suze: Roth IRA as well? Could you even have a traditional 303 00:22:30,819 --> 00:22:34,849 Suze: 401k at work and a traditional IRA if you wanted, 304 00:22:34,859 --> 00:22:39,659 Suze: or any combination thereof? Can you do that and max 305 00:22:39,660 --> 00:22:40,770 Suze: them all out? 306 00:22:41,709 --> 00:22:43,270 Suze: Did you write your answer down? 307 00:22:44,760 --> 00:22:48,149 Suze: The answer is yes, you can max out a Roth 401k. 308 00:22:48,479 --> 00:22:51,449 Suze: You can also max out a Roth IRA. 309 00:22:52,660 --> 00:22:58,569 Suze: Next, can I open multiple Roth IRAs in a single year. 310 00:22:59,489 --> 00:23:05,280 Suze: And fully fund each one with $7000 since I'm under 311 00:23:05,280 --> 00:23:07,000 Suze: the age of 50. 312 00:23:08,819 --> 00:23:11,829 Suze: Remember, the maximum amount you can put in a Roth 313 00:23:12,219 --> 00:23:15,489 Suze: or traditional if you're under 50 is $7000 a year. 314 00:23:16,650 --> 00:23:19,459 Suze: Or 8000 if you're 50 and older. 315 00:23:21,109 --> 00:23:24,409 Suze: So can you open up 3 or 4 Roth IRAs 316 00:23:24,410 --> 00:23:27,729 Suze: in one year and put $7000 in each? Yes or no? 317 00:23:28,709 --> 00:23:31,290 Suze: And the answer to that is no, you cannot. 318 00:23:32,660 --> 00:23:36,619 Suze: You can open up multiple Roth IRAs, however, but you 319 00:23:36,619 --> 00:23:38,139 Suze: can't max out each one. 320 00:23:39,030 --> 00:23:41,459 Suze: The most you could do is put maybe $2000 in 321 00:23:41,459 --> 00:23:46,520 Suze: 1 $3000 in another, $1000 in another, another $1000 so 322 00:23:46,520 --> 00:23:50,349 Suze: it all adds up to $7000 but that's the max. 323 00:23:50,560 --> 00:23:53,109 Suze: But it would make no sense for you to have 324 00:23:53,880 --> 00:23:58,569 Suze: multiple accounts like that, none if you ask me. Last 325 00:23:58,569 --> 00:24:01,719 Suze: question is a very hard question. 326 00:24:03,300 --> 00:24:05,270 Suze: Is there any reason 327 00:24:06,180 --> 00:24:12,880 Suze: that you should have a traditional IRA or a traditional 328 00:24:12,880 --> 00:24:17,000 Suze: 401k instead of a Roth, 329 00:24:18,160 --> 00:24:20,050 Suze: in Suze's opinion? 330 00:24:23,170 --> 00:24:27,770 Suze: And the answer to that is no. There is absolutely, 331 00:24:27,839 --> 00:24:32,439 Suze: in my opinion, not one reason in the world you 332 00:24:32,439 --> 00:24:38,520 Suze: would ever want to do a pre-tax retirement account. For 333 00:24:38,520 --> 00:24:43,109 Suze: those of you who don't qualify for a Roth IRA income-wise, 334 00:24:43,439 --> 00:24:47,000 Suze: there are no income limitations if you do a Roth 335 00:24:47,000 --> 00:24:47,750 Suze: at work. 336 00:24:48,500 --> 00:24:51,400 Suze: So if you are offered a Roth of any kind 337 00:24:51,400 --> 00:24:55,400 Suze: at work, you should be taking it. You also can 338 00:24:55,400 --> 00:25:01,040 Suze: always do a back door Roth IRA. Just don't have 339 00:25:01,040 --> 00:25:06,000 Suze: any pre-taxed or really other retirement accounts because then you'll 340 00:25:06,000 --> 00:25:09,640 Suze: have to do the pro rata rule. I can go 341 00:25:09,640 --> 00:25:12,000 Suze: on and on forever. 342 00:25:12,790 --> 00:25:18,680 Suze: About why a Roth IRA or a Roth 401k 403b 343 00:25:18,680 --> 00:25:22,229 Suze: or TSP, it should be mandatory. 344 00:25:23,510 --> 00:25:27,188 Suze: Especially if you're not making a lot of money and 345 00:25:27,189 --> 00:25:31,550 Suze: if you listen to a few Sundays ago podcast which 346 00:25:31,550 --> 00:25:35,030 Suze: is about what do you do when you lose a job. 347 00:25:36,099 --> 00:25:38,959 Suze: It would explain to you why you would have made 348 00:25:38,959 --> 00:25:46,199 Suze: a big mistake by opening a pre-tax retirement account. Remember, everybody, 349 00:25:46,290 --> 00:25:49,770 Suze: you never know what can happen and when it's going 350 00:25:49,770 --> 00:25:53,280 Suze: to happen. Now I would love for all of you 351 00:25:53,500 --> 00:25:57,369 Suze: to post on the Women and Money Community app by 352 00:25:57,369 --> 00:26:00,609 Suze: going to Apple Apps or Google Play. I want you 353 00:26:00,609 --> 00:26:05,209 Suze: to post under today's podcast. How many did you get right? 354 00:26:06,020 --> 00:26:09,209 Suze: Out of all of these, how many? Tell me how 355 00:26:09,209 --> 00:26:11,659 Suze: you did. Tell me if this was helpful. 356 00:26:12,579 --> 00:26:16,750 Suze: And hopefully KT will listen to this cause I got 357 00:26:16,750 --> 00:26:19,739 Suze: news there is no way she is going to do 358 00:26:19,739 --> 00:26:25,300 Suze: a quizzy, and that is her prerogative. So until Sunday, 359 00:26:25,550 --> 00:26:27,659 Suze: there's only one thing that I want you to remember 360 00:26:27,660 --> 00:26:30,060 Suze: when it comes to your money, and it is this 361 00:26:30,060 --> 00:26:34,819 Suze: people first, then money, then things, and the best retirement 362 00:26:34,819 --> 00:26:39,109 Suze: account in the world is a wrath of any kind. 363 00:26:39,300 --> 00:26:39,619 Suze: Now 364 00:26:39,619 --> 00:26:41,729 Suze: you stay safe.