Investing the right way
For many individuals, saving for retirement is a top priority. One popular savings vehicle is the Roth IRA, known for its tax-free growth and withdrawals. However, not everyone is eligible to contribute directly to a Roth IRA due to income limits. Enter the Backdoor Roth IRA and Mega Backdoor Strategies, which provide high-income earners with an alternative path to tax-advantaged retirement savings. In this article, we’ll explore these strategies, their benefits, and potential pitfalls.
I frequently get asked about investment options that parents can establish for their children. It’s an important question, and there are several options available. In this article, I’ll compare and contrast some of the most popular types of investment accounts for children that parents can set up. For this exercise, I’ll focus on 529 plans, UTMA/UGMA accounts, Roth IRAs, and regular taxable brokerage accounts.
In the great divide between active and passive investing strategies, Luther Wealth is definitely in the passive camp. All of my clients are fully invested in low cost mutual funds and ETFs. I use a proprietary asset allocation algorithm, but the securities themselves are just vanilla index funds. But lately I have been considering altering this ETF strategy for certain clients. Not in favor of an active strategy, but rather in favor of a different passive style known as direct indexing.
Do you have money invested in a retirement account? If so, you may be responsible for taking Required Minimum Distributions (RMDs) every year to avoid IRS penalties. Unfortunately, the IRS guidance on the topic is quite confusing. I have attempted to assemble my own RMD notes into a helpful flowchart for determining if you are subject to RMDs. Please keep in mind that I am not a tax adviser or accountant. This is not tax advice. You are ultimately responsible for correctly calculating your RMD.
Most retirement accounts confer some type of tax advantage. The federal government designed them to help individuals save for retirement. The government didn’t design them to establish multi-generational tax shelters. So, in most cases, when a retirement account holder reaches a certain age, or passes away, the IRS requires the account to start gradually liquidating.
401k investments are often the entry point for young investors into the market. There are a lot of factors that can and should influence an investor’s strategy for 401k selection, but the two most important decisions are:
This article was originally published May 4, 2019 and was updated on September 5, 2022.
Continue reading “401k Selection: Focus on These Two Things”The past 50 years have seen incredible advances in investment accessibility for average Americans. With the development of simple indexed mutual funds in the 1970s, average investors gained access to the equity and bond markets that had traditionally only been open to wealthy families and institutions. Further innovations such as ETFs, retirement savings vehicles, and online banking opened the gates even wider. Today, average investors by and large play on a level field with even the wealthiest among us. Yet, because of poor personal finance management, many middle and working class families are missing out on their full retirement potential.