Retirement / What am I working for?

[Riffraft]

It's not a matter of not having the money (although I need to do a little to make it liquid), it's a matter of not knowing what the hell I'm doing and how to set it up properly...

I think the ideal thing would be to set up the account, sell some of my holdings in my ETrade account that are long-term capital gains (15% tax, and only on the gain, not on the gross) which is below my marginal income tax bracket anyway (so it's better than using post-tax income to fund it). Put it into a traditional IRA and then immediately move into a Roth (backdoor). And then that helps me diversify my stock from only two companies I hold.

Maybe some of the folks on the board can tell me if I'm completely stupid for thinking that's the optimal idea.

But the question I have is... What do I need to do to make this happen? Can I do this on my own via some online option (I think Vanguard)? Are there simple ways to do the backdoor Roth online without the use of a financial advisor?

My wife worked at schwab.  You can do just about anything you want to do on their website without help.  However help is just a phone call away if you need it.

[FearlessF]

the Schwab commercials used to be pretty good

[SuperMario]

My wife worked at schwab.  You can do just about anything you want to do on their website without help.  However help is just a phone call away if you need it.

Completely agree with this. I used to trade on OptionsXpress in the mid 2000’s and eventually Schwab bought them out which upgraded their platform from a technology standpoint. Since being with them, they’re honestly incredible from a service level. Service, research and platform are all top notch.

[MikeDeTiger]

if you don't presently have a roth...
folks who do not qualify for a Roth IRA should always do a  back door Roth contribution each and every year.


1. fund IRA to max. 
2. next day convert to a Roth.

I did not know that some people don't qualify for Roth IRA's.  I looked it up and apparently it has to do with being over a certain income threshold.  

I have a Roth, but now I'm questioning that and thinking about abandoning it for a traditional.  There seems to be some conventional wisdom that suggests Roths are a good idea if you expect to be in a higher tax bracket in retirement, but not necessarily the best option if you expect to be in a lower tax bracket in retirement.  We'll probably be in a lower bracket, I'd expect, but I'd have to do some number-crunching.  

otoh, I'm also reading that we might not even get the tax benefits of a traditional IRA because tax deductions are limited to MFJ households of $149k or less if one or both has a 401k.  So if that's the case, then there's no reason to mess with a traditional IRA because there's no tax relief at present or in future.  

I should probably quit trying to figure this stuff out myself and get professional help.  (insert joke here about needing professional help)

[847badgerfan]

Roth is the way to go. Who knows where taxes will be in the future? We know they are low now.

[FearlessF]

I'm pretty sure I can either be in a higher, the same, or a lower tax bracket when I retire - I'll have choices

and then chose to cash in traditional, convert traditional to roth or just cash in roth

[MikeDeTiger]

All the talk about converting traditional to Roth near or in retirement is confusing to me.  I know you can do it, but it'd be a giant tax payment, even if one-time only, and who wants to sign up for that?  

[FearlessF]

well, if you can convert some while staying in a lower bracket..........it's a good move

[Gigem]

Welp, as I posted about a month ago I made 50. That was my threshold for retirement, the bare minimum. The guy in the office next to mine retired last week, but he’s in his late 50’s, like 57. I actually have more time at our company because he was a contractor here for many years before he was hired as a full time employee. 

Last year, there were three of us doing this job. We split our coverage up into roughly equal thirds. Now, admittedly, last year my workload was very low. I only had a few projects that executed in the field. As an example, in 2023 I executed 27 projects on my own, in ‘24 I did 7, and last year I did a grand total of two.  

[MarqHusker]

yet another reason to at least consider or have a Roth IRA.

RMDs (required minimum distributions) are not required in retirement for you as the original account Roth owner.   that too is a feature for it.  any beneficiaries who take ownership will be forced to withdraw starting 10 years post inheritance (current law).

the act of converting is not hard, especially with a large online broker.   the backdoor roth process is a piece of cake.
1. fund the IRA on one day in cash.  2. day two convert to Roth IRA 3. handle your Form 5498 (IRS form for conversion).
this basically eliminates any tax as the 'cash' is presumed to have been taxed previously as earned income or some other form of post tax cash, most importantly there are going to be no 'gains' or fractional interest 1099 income.

separately,   taking a chunky traditional IRA and converting it, yes, you have to prepare for that tax bill.

[Gigem]

My previous post was incomplete. 

One of the guys who was in my group was a contractor. Our boss told him in the Summer if he had an opportunity he should take it. Hint hint. He really wanted to stay and try to get a company job but with a new baby at home and dwindling workload he saw the writing on the wall and found a job with another company doing something similar. 

The other guy retired. He was upset about something he felt they screwed him out of, probably also he needed a change of scenery. 

So now all the workload is 100% on me. It really shouldn’t be too bad, as we still have less work this year than in years past.  But the beginning of this year has been brutal. I’ve got 3-4 projects going in one facility at the end of this month, a couple more going on in February, it’s just been super busy. 

And I really don’t care or want to be there. It’s tough because I know I’m ready to exit, and I have tons of stuff going on inside and outside of work.  

I’m going to tell my boss in our 1:1 I have a 3 year plan and if he needs to cut manpower I’ll be your huckleberry. What I’m not telling him is that I’m probably hanging it up in April. I figure I’ll keep that close until I’m 100% sure.