BlogLike Compound Interest, the Benefits Grow With Time
Posted about 1 year ago

Like Compound Interest, the Benefits Grow With Time

Compound Interest

Here are some examples of what you can do right now.

  • An eligible married couple has one month left to move $28K savings via the Backdoor Roth for 2021 & 2022, and, going forward $14K+/year. Only one spouse needs earned income.

Had they started ten years ago, they could have each moved $72K from savings to their Roth IRAs, they’d now have $340K protected, permanently tax-free, owing no taxes on the $196K gain (S&P 500).

  • One client was happily maximizing their 401(k) each year. When we learned they also qualified for the 403(b) plan, we nudged them to start moving, tax-free, an add’l $20K/year from taxable savings to their Roth IRA, through a combination of pre-tax contributions and IRA conversions.
  • A business owner, or even a side-gig worker, can tap up to $60K+/year of underutilized retirement contributions in 2022 to effectively convert taxable savings or “cash in their checking account” into a Roth IRA through a series of steps.

A solo-401(k) plan like this can be set-up in addition to their day-job 401(k) plan.

You can still set-up a 2021 solo-401(k).

  • We’ve helped clients set-up a wide range of defined contribution and defined benefit plans that can enable up to $150K+/year/person in retirement contributions.

Key ingredients to eliminating the tax drag:

  1. You must first have taxable savings
  2. You have earned income (sorry, retirees!)
  3. You have, or can set-up, underutilized annual retirement benefits

As always, work with your tax or financial planning professional before pulling the trigger. In the meantime, see our infographics and Roth IRA articles below.

Published in Member Blogs, Uncategorized