Share This Episode
MoneyWise Rob West and Steve Moore Logo

Roth Over a Traditional IRA?

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
October 17, 2023 6:14 pm

Roth Over a Traditional IRA?

MoneyWise / Rob West and Steve Moore

On-Demand Podcasts NEW!

This broadcaster has 903 podcast archives available on-demand.

Broadcaster's Links

Keep up-to-date with this broadcaster on social media and their website.

October 17, 2023 6:14 pm

What’s the best investment option for you—a traditional IRA or a Roth? On Faith & Finance Live, we get that question a lot, as folks try to decide which type of retirement account will put them ahead in the long run. So be sure to tune in today as host Rob West welcomes Mark Biller to help us take a fresh look at these two options. Then they’ll tackle your questions about investing. 

See for privacy information.

Our Daily Bread Ministries
Various Hosts
Dana Loesch Show
Dana Loesch
The Rich Eisen Show
Rich Eisen

The average person makes 35,000 decisions a day, and one of them might just be traditional IRA or Roth. Hi, I'm Rob West.

We get that question a lot as folks try to decide which type of retirement account will put them money ahead in the long run. Mark Biller joins us today to take a fresh look at the problem. Then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance Live, biblical wisdom for your financial decisions. Well if anyone can shed new light on the traditional versus Roth IRA decision making process, it's Mark Biller and his team at SoundMind Investing, where he serves as executive editor. Mark, great to have you back on the program. Thanks, Rob.

Good to be back with you. Mark, as you well know in this month's SMI newsletter, you've got a great article to help folks make this decision titled, Should You Use a Roth IRA, or excuse me, Should You Use a Roth Account Even if You Prefer Traditional? And let's start there.

Why is this a good time to ask that question? Yeah, so a little brief background. Roth IRAs were introduced almost 30 years ago in 1996. And since then, while there have always been rules about who's allowed to contribute to a Roth account, no one's ever been required to choose a Roth over a traditional account.

However, that's in the process of changing. So there's a new law that's going to soon for some older higher income 401k plan investors to direct at least some of their contributions into Roth accounts. And I should add just for clarity that this whole conversation that we're about to have also applies to 403b plans, 457b plans, and the Thrift Savings Plan. So when I say 401k, I actually mean all four of those when we're talking about these new rules. So while this new law has been put on hold for a couple of years, it does raise a question that's really worth considering for all investors who are eligible for a Roth account. That question is simply this.

Regardless of your age or income, if you've been favoring a traditional account, would it be smart to direct at least some of your retirement contributions into a Roth account? Yeah, really helpful, Mark. And that, of course, serves as background. Folks may not understand, though, the difference between these two types of accounts. So why don't you explain that for us?

Sure. So first of all, whenever we're talking about Roth versus traditional, these are specific types of accounts that provide very specific tax benefits for savers. That's true whether we're talking Roth traditional in a 401k or Roth traditional in an IRA. A lot of times people get confused thinking that Roth means a certain type of investment, and that's not really the case. You can own most of the same things, whether it be stocks, bonds, mutual funds, cash, either inside or outside of a Roth or traditional account. Same investments, it's just that if you have them within a Roth or traditional account type, you get very specific tax benefits.

So what are those? Well, with a traditional IRA or a traditional workplace retirement account, the money that you contribute lowers your taxable income right now today. So if you put in $5,000 this year, your 2023 tax is going to be on $5,000 less income than if you hadn't made that contribution. Then down the road, when you take withdrawals out of that traditional account in retirement, you'll pay ordinary income taxes on all the money as it comes out of that account. A Roth basically flips that. So the money you contribute to a Roth today doesn't lower your taxable income, but down the road in retirement, when you take money out of the Roth account, you won't pay any income tax on any of that money coming out.

Yeah, very good. All right, when we come back with Mark Biller, we'll continue to unpack this, and especially around these higher income earners who would prefer the traditional tax treatment, the deduction now, they're actually the ones being pushed by the new rules into Roth contributions. We'll get Mark's take on that, as well as the pros and cons here of using both a Roth and a traditional together, which may be a new idea for you. We're also going to be taking your questions during this broadcast specifically on investments, your questions about your portfolio, where the market's headed, and how all of that affects your future long-term investments. Call right now, 800-525-7000. We'll be right back with Mark Biller. Stick around. Well, it's great to have you with us today on Faith and Finance Live. I'm Rob West.

With me today, my good friend Mark Biller. He's executive editor at You can learn more there. You can also read the article we're discussing today.

It's a recent article featured in the Soundmind Investing newsletter titled, Should You Use a Roth IRA Even If You Prefer Traditional? Mark's helping us understand how to make that decision, especially in light of recent changes in the law that won't go into effect for a few years. But we need to understand now what's coming down the pike. We'll also be taking your questions in just a moment for Mark Biller today, specifically questions on investing related topics.

How do you handle your portfolio? Where's the market headed from here? Mark would love to weigh in on what you're thinking about today at 800-525-7000.

We've got some lines open again, 800-525-7000. Now, Mark, back to this article for just a moment. You know, the big question that we're often having to make when it comes down to Roth versus traditional is, do you want to pay taxes now or later? So what's the conventional wisdom on how to make that decision?

Yeah, that's exactly the right way to frame it, Rob. The conventional wisdom is that Roth accounts are typically great for younger workers. That's because when you're younger, you're starting your career, you're typically lower paid and probably have reason to believe that your income will be higher in retirement than it is today. So the idea is you want to pay taxes on your contributions now when you're in a lower tax bracket, and then hopefully you get tax-free income in retirement when you're going to hopefully be in a higher tax bracket. You basically flip that whole model for older, higher income workers. I say older just because typically that's the way most people's careers go.

As they get further along in their career, they're making more money. And so if you're in that situation and you're looking ahead thinking you might have lower income in retirement, as many people do, then the idea would be to take the tax break now on your traditional contributions while you're in a high tax bracket, and then pay taxes on the withdrawals in retirement when you very well may be in a lower tax bracket. Yeah, well, the higher earners who prefer the traditional tax treatment, they're the ones being pushed by the new rules into Roth contributions, though, correct?

Yeah, that's exactly right. So specifically, these new rules impact workers that are age 50 or older who are making what are called catch-up contributions. Those are contributions above and beyond the normal contribution limits allowed. And until these new rules came along, workers could choose whether they wanted to make those on either a Roth or traditional basis, as long as their employer plan offered both of those options. Now with these new rules, starting in 2026, retirement plan investors who are 50 and older and have income of $145,000 or more, they're going to have to make any of these catch-up contributions in Roth accounts. And the reason for that is the government wants the tax revenue now. They want you paying tax on it today, not 10, 20 years down the road in retirement. Of course, that may be good for the government, but if you're one of these impacted workers, that means your tax bill is going to be higher today. And so this tax law change could be pretty unwelcome news. Yeah, there's no doubt about that. However, could there be a silver lining to this though, Mark?

Yeah, there really could be. And that's because like you've told your listeners for years, Rob, there's a lot to like about Roth accounts. And so much so that, you know, we're posing this question in this article and in this discussion today, really saying, even for those who aren't affected by this new law, should they consider putting at least some of their contributions into Roth accounts as well? Yeah, that's really helpful. All right, we'll continue talking about this throughout the broadcast today. We also want to get to your calls and questions though. If you have an investing related question for Mark Biller today, be sure to give us a call. We've got some lines open, 800-525-7000. Let's go to Grand Rapids. Hey, Brad, thanks for calling. Go ahead.

Hey, thanks for taking my call. My wife and I are about five or six years from retiring. We owe 220 on our house. We have half a million in stocks. And we are wondering if it would be wise to liquidate some stocks, pay off the house, and then start investing into some mutual funds with what was going to be the house payment.

Yeah, very good. And the funds that you'd be pulling that from to pay off that mortgage, I assume that's in a tax deferred retirement account? It's not a tax. It's not a retirement account at all. It's just stocks that are gifted to us and are sitting there just kind of growing and not doing a whole lot. Okay, but in a taxable account. And then do you also have retirement accounts? Yes, we have about 400 in retirement accounts. All right.

And that's in addition to the half a million you mentioned? Yes, sir. Okay. Mark, your thoughts on how to think about paying off the house?

Yeah. Well, for starters, Brad, I love the idea of having that mortgage paid off by the time you get to retirement. So I think you're on the right track. While that isn't like an absolute have to have it, it sure does make your retirement planning and your budget the whole deal going into retirement so much simpler if that mortgage is paid off.

So I like the way you're thinking about that. My first question, Brad, would be what is the interest rate on the mortgage that you're paying right now? 2.875.

Okay. So it's been such a long time since we've had mortgage rates that vary quite a bit. For a long time, the better part of a decade, pretty much everybody had a mortgage rate kind of in the range of what you're talking about. Now, today, we sometimes are running into folks who are paying 7, 8% on a mortgage, and that really does change the calculation a little bit. So, you know, when you're thinking about paying off that mortgage early, you're basically saying I'm going to take this money that's in stocks right now, and I'm going to get a guaranteed 2.875% return on that.

And the reason I say that is because by paying off that mortgage, you're not paying that interest on the mortgage. So that's essentially the rate of return that you're getting. But it is guaranteed. Every dollar you put against that mortgage is moving the ball down the field for sure in your favor and making your finances more secure. You can't ever say that with stock investments or most other investments because while we know what the average returns are over time, you don't know what's going to happen over the next one year, three years, five years, whatever, and obviously stocks can and have lost money before.

So it's not a guaranteed kind of return. One thing that I think is real important, Brad, is it doesn't have to be an all or nothing type decision. You know, I think that looking at using some of that stock money to pay down that mortgage could be a good idea without necessarily going all the way in on that.

Rob, I'm sure you have some thoughts as well. Well, I like the way you process the financial side. I guess the other side of the equation, Brad, is just your personal convictions around being debt free. You know, if you all, as you and your wife think and pray about this and you just really have a conviction to be out of debt, then I'd say go for it and don't look back.

Apart from that, I'd probably sink the payoff of this mortgage, as Mark said, to your retirement date and maybe spread it out over the next few years. I hope that at least gives you some things to think about here as you guys pray through this. Thanks for being on the program today. Well, folks, we're going to take a quick break back with Mark Biller right after this. Stay with us. I'm so thankful you've tuned in to Faith and Finance Live today.

I'm Rob West. With me today, Mark Biller, executive editor at We've been discussing the recent article from the SMI newsletter, should you use a Roth IRA even if you prefer traditional?

If you'd like to dive into this topic a little deeper, check out that article. You can absolutely do that when you head to Mark, before we go back to the phones to take some additional calls, just going back to Brad's question before the break, he asked, you know, with this half million we have in taxable investments outside of a retirement account, another $400,000 in retirement accounts. We're five to six years away from retirement.

We owe $220,000 on our mortgage. We'd like to pay it off. We're just wondering if you think we ought to pull out of the investments to do that. I'm wondering about timing the market here and just what the wisdom would say about that.

So here we are today. Let's say they know they'd like to pay this off in six years, but they're willing to be flexible about when they do it. Given we've had the market under pressure, we're probably heading into a recession. The market's going to be under further pressure probably over the next one to two years. Is it appropriate to say, I'm going to wait, you know, five years because I want to give the market time to rebound and then I'll pay off the house? Or once you make the decision, should you just do it regardless of where the market is?

Yeah, I think that's a great question. You know, I think that, you know, different people are going to respond to that a little differently for some folks making the decision to say, okay, we're just going to add another $2,000 a month to our mortgage payment that'll get it paid off by the time we're retired. And, and they've made that decision, they're just going to follow through and execute on that plan.

You know, that's going to give them a tremendous peace of mind that they've figured this out and they've laid out the steps that are going to make this happen and are going to have them where they want to be at when they get to the retirement finish line. You know, that's tremendous and I would never try to talk somebody out of that, especially for the vagaries of trying to figure out what the market is going to do because that's really, really difficult. Now, with that said, I completely agree with what you're saying about the prospect of a recession, the potential for that to weigh on stock market returns, you know, over the next year or whatever it may be. And that, if anything, would be a compelling argument to maybe do a little bit more now, actually in advance of a potential downturn in the market. You know, so maybe that would mean front-weighting, making some kind of a bigger payment on that mortgage now, knowing that if it does turn out that way and the market does go down, you'll be glad that you actually took that money from the market, put it in the house where that guaranteed return is happening, and you're not suffering the drawdown on that on the stock market side.

So there are, you know, there are a couple of ways to look at it. It is one of these cases where I wouldn't really say there's a right way or a wrong way, but I completely agree with what you're saying right before the break that, you know, you really have to factor in the non-financial side of this. You know, there's the financial, what are the returns look like, what's my likely outcome financially, but then you have to balance that against, you know, how badly do we want to be out of debt.

And I certainly would say, trying to line that up with that retirement date and making sure that you're not putting that at risk by trying to reach for a little extra return in the markets in the meantime should be the number one priority there. Yeah, that's really helpful. Thanks for weighing in on that, Mark. All right, let's head back to the phones to Cleveland.

Hi, Cindy, go ahead. Hi, thanks for taking my call. So I rolled over my IRA from several jobs, from my job that I had previously, and I had an advisor that was recommended to me by my sister. So I rolled over in 2018 and for about $103,000, and today it's the same.

While my advisor was getting paid, I guess with the difference in the stock market and all, it rose and then I just lost everything that it rose to, but it's still at the same point where I put it in in 2018. So I decided that I'd like to go ahead and get an annuity, which he had recommended earlier, and I'm interested in a fixed annuity with low risk, and he's trying to advise me to take a variable annuity, which I don't feel real comfortable about and that won't mature until seven years, and I'm hoping to retire in at least four years. And so I'm just trying to get an ideal if a fixed index annuity would be better than variable. Yeah, very good.

Mark, your thoughts? Yeah. Do you have any idea on the rates of return that are attached to these different annuity options, Cindy? Well, he's saying six percent. For the variable? Well, the variable, that would be the fixed. That would be the fixed.

Yeah. So of course, the big thing to consider there with the variable, usually with a variable annuity, there's some sort of a floor that you're not going to maybe lose any money, but then you're perhaps capped on the upside of the variable annuity. If the stock market does really well, you might get just a portion of that return. So you would want to really understand exactly what that profile looks like within the variable annuity before you would want to make that decision. Again, the change in interest rates has really impacted this type of decision pretty dramatically in just the last 18 months or so. A fixed annuity of six percent actually doesn't sound terrible. Now, I would tend to think that you could do a little bit better in the variable over time, but the six percent is certainly a viable option. I don't know, Rob, do you want to talk about this a little more after the break?

Yeah, I think, sure. Yeah, we can continue to unpack this, but Cindy, I think the bottom line is it sounds to me like you have more comfort in that guaranteed product and six percent, as Mark said, is an attractive rate. And so I think that perhaps is the best option for you because it gives you the greatest peace of mind. Thanks for calling. We'll continue to talk about this just around the corner. Stay with us. Thanks for joining us today on Faith and Finance Live.

I'm Rob West with me, Mark Diller. Today, we're talking about new tax law changes that are going to affect your contributions to traditional and Roth investments in the future. Mark, just before the break, we were talking to a caller and excuse me, I believe it was Patricia, but she was asking about annuities. Actually, Cindy was the name and she was wondering about, you know, in her retirement years, the guaranteed fixed annuity versus the variable. She's decided she wants an annuity, you know, a guaranteed fixed at six percent versus the variable.

What are the factors there in making that decision as you consider both? Yeah, so there are a few things, Rob. You know, one thing, you know, while that six percent sounds so much better than anything we've heard from fixed annuities for several years, you also have to weigh that against the fact that we're in a higher inflation environment. So if, you know, the Fed is successful in bringing inflation back down towards their two percent target, well, now the gap between two percent inflation and a six percent fixed annuity, that's pretty good. You're actually growing your purchasing power over time. On the other hand, if they continue to struggle, as they have been, to get that inflation down and say it settles in pretty close to where we are now, which is in the high threes, pushing four percent.

Well, now you can start to see that that six percent return is only just barely growing your purchasing power over the rate of inflation. So you have to kind of factor that in. And another thing that's always a little bit tricky with this type of discussion on the radio like this is, you know, the rest of the retirement picture really does matter quite a bit. I like the annuity a lot better as a piece of somebody's portfolio than I would as their entire retirement portfolio.

And of course, we didn't have time to get into all of that with Cindy. But, you know, if you're looking at this type of decision and you want to lock in a guaranteed return with a piece of that portfolio, that can give you a lot of peace of mind. But again, because of the vagaries around the rate of inflation and so on and so forth, you have to be careful about locking up your whole portfolio in a vehicle that you can't get out of.

If the situation changes and you want to adapt, you don't have a lot of flexibility because you're facing big fees and expenses to make changes. So that's kind of my overview on the whole annuity piece. Hopefully that's helpful for folks, you know, thinking through that. It sure is, Mark.

That was a great explanation. All right, let's go back to the phones to Cleveland, Ohio. Annette, you'll be our next caller. Go ahead.

Yes, hi. You know, my question might be similar to the girl right before me, but I have some money in an Ohio Deferred Comp program, about $60,000. And my advisor is recommending that I put my money into an annuity. And I'm really questioning whether or not this is a good idea. Right now, this money in the Ohio Deferred Comp, I think, has been averaging, I think, about 10% interest, I've been told.

So I'm just questioning what I should do. Yeah, Mark. Yeah, so that 10%, I would imagine, Annette, that that's a blend of stocks and bonds and not any type of a guaranteed type investment return? Or do you know any detail about that?

You know, I think what I've been told is that it's in a very fidelity contra, contra bond. It's all in one. Right. Okay. Right. Exactly. Exactly.

Okay. Okay, so that that's a stock fund. And so over a long extended period of time, you know, 10% is about what stocks have have returned, of course, with huge variability from year to year, but that's a long term rate of return.

So that that would make a lot of sense. You know, the thing to weigh here, Annette, is most folks as they get into retirement, approaching retirement age, they tend to want to make their portfolio more conservative, less variation year to year not suffering through 20, 30, 40% drawdowns in their stocks. And that's why people usually layer in more bonds and less stocks as they they get older. You know, the the key is really going to be what is the the rate of return that the annuity is offering. Typically, we are not really big on annuities just because they tend to have pretty high fees. They tend to have a lot of restrictions that keep you from making changes.

If you want to get out of it and do something else, you pay a lot of surrender charges and those sorts of things. So it's just an expensive way to get a lot of security around the rate of return that you're going to earn. So you're kind of weighing the trade off of do I go with something that isn't guaranteed like a traditional portfolio of stocks and bonds?

Or do I transfer the responsibility for managing this to the insurance company who's guaranteeing me a rate of return that I don't have to worry about, but that rate of return very well may be lower than what I would get if I were to either engage this myself, manage it myself or manage it with an advisor. So that's kind of the trade off there. Rob, what are your thoughts on this one? Yeah, I like that a lot. So I think that's the decision to make here in that you've been doing well, you have the ability to do that. You know, especially in light of inflation, this is going to help to avoid the erosion of your purchasing power by continuing to grow this. But if you'll have more peace of mind by knowing you have a guaranteed return, there are some trade offs.

Mark mentioned them the illiquidity, the cost, the fees and so forth. But ultimately, it's a decision around risk and return. And that's something you have to be comfortable with this in this in this next season of life. The other option is to consider, you know, getting a second opinion from another advisor.

Hopefully, this is giving you some things to think about, though, we appreciate your call. Quickly to Lebanon, Ohio, Steve, you have a question about Roth IRAs and income? Yes.

Don't presently in the Roth IRA, if you make so much certain amount of income, you can't can't even contribute to a Roth. Is that correct? That's right.

Yeah, 2023. It's 153,000 for a single filer 228,000 married filing jointly. So this new law, so you know, you're talking about this new law affecting higher income earners is still that's, that's for the Roth IRA. How does that affect the for Roth 401k?

Mark? Yeah, so one of the great things about Roth 401k is those contribution limits don't apply. So that's where a lot of people who wouldn't wouldn't be eligible for a Roth IRA can still make Roth contributions if their workplace retirement plan offers that option. So a lot of people really like that, because it's their only route to a Roth.

So if you're one of these high income earners, you've been kind of locked out of the Roth IRAs. Mark, sorry, didn't mean to step on you there. Go ahead. No, that's okay. So exactly what you're saying there, you've been locked out of the IRA, you can still do it in the retirement plan. Yeah. And that's what we've been talking about here today, Steve, is these changes are related to company retirement plans where they offer the Roth variety.

And as Mark said, those income limits don't apply in that situation. Thanks for your call today. When we come back with Mark Biller, we'll talk about a rule of thumb to know how much to contribute to traditional 401k versus a Roth, plus a few more of your questions. Stay with us. Great to have you with us today on Faith and Finance Live.

I'm Rob Last. With me today, Mark Biller, executive editor at Sound Mind Investing. You can read this article we've been talking about today. Should you use a Roth account even if you prefer a traditional at

Mark, before we head back to the phones, let's unpack this just a bit more. You know, we've said there might be some wisdom in considering for at least a portion of your contributions from your company sponsored retirement account, at least a portion going into the Roth. What are some of the benefits of that?

Yeah, so there are a few. You know, one is just simply that nobody knows what the future is going to hold. They don't know how long they'll be able to work, how high their income will be in retirement. And so if your retirement income turns out to be higher than you're expecting, you'll really be glad to have some money in a Roth account that you can tap into without paying taxes. Another big thing is there's uncertainty always about what the future for tax rates and tax laws might be.

We mentioned a couple of University of Arizona researchers in the article who say that since 1913, the tax rate for a couple making the inflation adjusted version of $100,000 a year, their tax rate has changed 39 times since 1913. And so their contention is that the conventional wisdom about older workers funneling most of their contributions into traditional accounts just doesn't consider the risks around those increasing tax rates. So that's another big thing. And then there are some other factors as well. There's kind of a domino effect that happens with required minimum distributions and how that can push you into a higher tax bracket, how it can increase the amount you actually have to pay for Medicare, for Medicare Parts B and D. So there are a number of these things that when you combine them all, you really start to see there are some pretty compelling advantages to having at least some Roth money.

It really gives you flexibility to be able to handle a broader range of situations if you can tap some of the taxable money from a traditional account and some non-taxable money from a Roth account. Yeah. So that begs the question then, how do you figure out how much to put in each of them? And in the article, you provide a helpful rule of thumb here.

Share that with us. Yeah. So that rule of thumb comes from those University of Arizona researchers, which I thought was really interesting. So they've studied this idea around the risks of future tax rate increases.

And the rule of thumb that they came up with is simply this. You add 20 to your age and you put that percentage into a traditional account. You put the rest into a Roth account.

So for example, a 40-year-old making these contributions would say, okay, my age is 40. I'm going to add 20 to that and get 60%. I'm going to put the 60% into a traditional account. The remaining 40% would go into a Roth.

I really like that rule of thumb. And there are a couple other things that we mentioned in the article that are additional reasons to like having some Roth exposure even for older workers. So if this is an article, a topic that applies to you, I would definitely encourage people to take a look at that article and look at some of those details. Yeah. Very good. You'll find it again at All right.

Iman in Wakanda, Illinois. Go right ahead. How can we help? Hi. First of all, I want to just like this opportunity to say I love more radio. This always give me like, give me optimistic every day. I'm a nurse.

I drive half an hour in the morning, half an hour in the evening when I'm going home. And I hear you guys and I sometimes I cry. But I just want to say that before my questions. Well, I'm so glad you did. Thank you for sharing that. I appreciate it.

Okay. My question is, I'm a nurse. I work full time. And my old job, they offer me a 401k. So I have like $240,000. So now I am scared because now I don't put more in that because I left my job. Now I work agency and the new job, they don't offer 401k. So I just have this $240,000 in that 401k and managed by Securian. It's a big company manage it. And now I am scared. There is a new recession and they saying the market is going to crash.

My question is, do I have to keep it on this company to manage it or to get it out and buy the CDs, which gives me more income, like more interest rate. And so I'm so like, I'm starting to figure it out, but I am scared. Sure. Yeah, no, I appreciate that.

We'd love to weigh in on this. Let me ask you a couple of questions first. How long do you anticipate continuing to work in your current capacity? Just as long as you can? Or do you have a certain time horizon?

I'm thinking like another like five years. Okay, great. And do you have the ability now Iman? I know there's not a 401k available any longer. But if you had a retirement account to contribute to, do you have the ability to do so? Do you have the surplus available? No.

Okay. I don't have a retirement or anything just right. But at the end of the month, at the end of the month, do you have anything left over after the bills are paid? Yeah, yeah, I have. Yeah, I have.

Like every month, few thousand dollars. Yeah. Okay, very good. And are you considered a sole proprietor? Are you self employed, based on your current work situation? Yeah, it looks like they consider it like a self contractor. Yeah, so independent contractor. Yeah. Okay, very good.

Yes. Yeah, Mark, how would you help her just think about I mean, obviously, you know, we've got to talk about a recession. Most economists think I know you would agree, we're likely to have some sort of recession next year. She's five years out from retirement, got about a quarter of a million, a couple of thousand a month. But that's not going into retirement accounts. So we could talk about a SEP IRA, but just general thoughts for her.

Yeah, so a few things there, Iman. First of all, to answer your initial question, you don't have to keep the 401k money with the old company, you do have the option to roll that out into an IRA. And you can do that when you're doing that with a 401k into an IRA, you always want to have the company that is going to administer the IRA actually do that transfer, you don't want the money to go through your hands, because that can be a problem tax wise. But like you would determine where you want the IRA to be at what company and then have that company actually engage the 401k and do the transfer. So that is an option. You know, I think that the big decision there is you want to figure out how you want to invest that. And you don't necessarily want to get too conservative too quickly, even though retirement is approaching, because most people in retirement need to make that money continue to grow for a while.

But that is an option to roll that out. And then you would be in control of how you invest that money, whether that's very safe things like CDs, or more bonds, you know, that type of thing. Of course, another option would be to simply get in touch with the company managing it now, and tell them that you want to move to a more conservative mix. So you're still in charge of that money, even though they're managing it. So I wouldn't assume that you can't make the changes that you'd like to make.

Without moving the account, you can move it, but you don't necessarily have to. The second thing as Rob was alluding to is there are options for self employed people to make regular retirement contributions into a tax advantaged account, the SEP IRA is one. There are others depending on your work setup for self employed people.

We have an article on our website that anybody can search our site for self employed retirement accounts. And you'll you'll see some of those options. But that can also be a very helpful option. If you have money to be investing to do it through one of these retirement accounts. So those are some things to think about.

Rob, what else would you? Yeah, the only other thing I would add here, Iman is I think you're ripe for a financial advisor to enter the equation, somebody who can help you do some thoughtful retirement planning. So you know, what is it going to take to fund my lifestyle in retirement when I when it's five years from now and God redirects me away from paid work to something else? How am I going to live on Social Security plus the 401k and the savings that I have? Am I on track?

Or am I going to come up short? And therefore, maybe I need to think about working a little bit longer. Those are all the questions that an advisor can answer for you. And if you find a financial planner who's also a wealth manager, you can actually have somebody that would take over management of the money that's now with secure in.

So you'd have an advisor giving kind of active management and oversight to that, managing it with your goals and objectives in mind, but where it's not just on autopilot, where you've got somebody that's really taking a responsibility acting as a fiduciary where they have to put your best interest and heart. So I think that's probably the next step for you. In addition to what Mark shared, and in order to find a certified kingdom advisor, which is the designation we recommend, I'd head to our website faith

That's faith click find a CK. Thanks so much for your call today. Michelle, I'm so sorry we didn't get to you.

If you stay there. We'll see if Amy can schedule you for tomorrow's broadcast. We'd love to get you on first and tackle your question today. Thank you for calling Mark. So appreciate your time, my friend. Thanks for stopping by. Always a pleasure, Rob. All right. God bless you, buddy. If you'd like to check out this article we've been discussing today, it's available at faith and finance lives, a partnership between moody radio and faith by thank you to Gabby, Amy, Dan, and Robert. Couldn't do it without them. We'll see you tomorrow. Bye-bye.
Whisper: medium.en / 2023-10-17 20:32:22 / 2023-10-17 20:47:44 / 15

Get The Truth Mobile App and Listen to your Favorite Station Anytime