In this podcast, they delve into the complexities of Roth IRAs, Backdoor Roth, Mega backdoor Roth, and Roth conversions. They discuss the importance of determining pre or post tax contributions considering tax rates. The conversation progresses from a basic to advanced level, exploring tips and tricks for making financial decisions. Guest expert Chris Daven shares insights on personal finance, while highlighting the benefits of retirement accounts and maximizing after-tax income in retirement.
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volunteer_activism ADVICE
Traditional vs. Roth Accounts
Traditional (pre-tax) retirement accounts let you defer taxes until withdrawal, usually at retirement.
Roth accounts require paying taxes up front but withdrawals during retirement are tax free if eligibility rules are met.
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Using Roth Conversions Smartly
A Roth conversion moves money from pre-tax to Roth accounts and is taxable in the year converted.
It is useful to convert during low-income years to pay less tax and reduce future required minimum distributions (RMDs).
insights INSIGHT
Tax Rate Timing Is Crucial
The key to Roth vs. traditional choice is comparing marginal tax rate at contribution to marginal tax rate at withdrawal, not just total tax paid.
Timing tax payments to occur at the lowest rate optimizes after-tax retirement income.
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Today Chris Davin, engineer and self taught master of all things Roth, joins Dr. Dahle on the podcast. For anyone who has ever wanted to get all the way into the Roth weeds, this episode is for you. We talk about Roth IRAs, the Backdoor Roth, the Mega backdoor Roth, Roth conversions, and what all of those things mean. We discuss how to determine if you should be doing pre or post tax contributions and why, and how your taxes and tax rate should be considered when deciding what kind of contribution to make. We start with a 101 level discussion before moving to a 201 level discussion and then diving into the graduate level tips and tricks.
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