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Originally Posted by CoachKandSportsguy
just checked the ROTH allowances for funding from salaries, and we aren't allowed to fund new, actually got into IRS violation and had to re-characterize the account. . as far as a conversion, that is best when not working and have a lower tax rate than when you are working with a high tax rate. . . So for us, the ROTH in any form would be too expensive. .
However, recently, the IRS and other investment houses have created 401K roth accounts, which you can fund after the 401K is full, with after tax dollars with the same tax free benefits. This seems like a no brainer, but the same total applies to > 50 at @25K. With a 401K Roth, the income grows tax free, assets always grow tax free until sold. But a Roth 401K has an RMD, even though its tax free. .
so, the key is in a high tax bracket, put as much away in qualified plans, 401K, especially with matching. When transitioned to a lower tax bracket, then conversions make sense, or even using IRA money to defer Social security and putting what you can into the ROTH, while your $30,000 SS income is growing at 3-4 % per year. . the often quoted 8% includes continuing to work. . . screw that!
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We too had salaries that prevented funding of any ROTH IRA accounts while working in High Tech.
Fortunately, the Backdoor ROTH Conversion has no limits. Just have to pay current taxes on the amount being converted. Since our future RMD tax rate would be similar, makes sense to start doing it now before RMDs are required. Advantage is that new ROTH IRA investments continue to grow without any additional taxes due in the future if/when we make withdrawals.
The good news/bad news is that we expect to be in a higher tax bracket with RMDs if we do nothing. Our investments have done well during our working years.
For the time being, our income (outside of ROTH conversion) now is quite low and we are living off savings until we start SS in a few years. That is enough to take care of current expenses. We even took a mortgage as our investment return is considerably higher than our mortgage rate.
Wife and I are both retired now, and have no interest in working. We are not selling anything, either. Just providing info about ROTH conversions.