Roth

Should I Do a Roth Conversion?

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When you leave a job, odds are you're going to have an old retirement plan out there. What should you do with it? You can usually leave it where it is, or roll it over into a traditional IRA, or, if the dollars are pre-tax contributions, consider converting it to a Roth IRA. That's the discussion on the latest call with Matt from Maryland.

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Eliminate Risk and Lower Your Tax Bracket

Let’s be honest...nobody likes paying Uncle Sam. I mean come on, who really wants to pay a big, fat tax bill?

That’s why you always hear me preaching about the power of Roth accounts. In a perfect world, we’d all be able to find a way into the 0% tax bracket.

While that’s unlikely, there are people out there trying to make it possible.

Today’s guest, David McKnight, has long warned that taxes in the future are likely to be dramatically higher than they are today. Given that, we need to dramatically change the way we approach retirement.

In his latest book, The Power of Zero: How to Get to the 0% Tax Bracket and Transform Your Retirement, McKnight aims to provides you with a road map of how to get to the 0% tax bracket, virtually eliminating the tax risk, which, if not addressed, will easily consume a solid portion of your retirement savings.

Unfortunately, if you’re like most Americans, you’ve saved the majority of your retirement assets in tax-deferred vehicles like 401(k)s and IRAs. If tax rates go up, how much of your hard-earned money will you really get to keep?

In The Power of Zero, David McKnight provides you with a step by step roadmap on how you can get to the 0% tax bracket, effectively eliminating tax rate risk from your retirement picture.

Why is the 0% tax bracket so powerful? Because if tax rates double, two times zero is still zero! The day of reckoning could be fast approaching. Are you ready to do what it takes to experience the power of zero?

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My Book, IRA Contributions and Rescuing Retirement

Okay, it’s time for a BIG announcement. My very first book, The Dumb Things Smart People Do with Their Money, is now available for pre-order!!

Do you have a “friend” who is super smart, has a great career, holds a graduate degree, has even saved a chunk of money for retirement, but who keeps making the same dumb mistakes when it comes to money? Is this “friend” you?

The book reveals thirteen costly mistakes you’re probably making right now with your money without even knowing it. Drawing on heartfelt personal stories (yes, money experts screw up, too), I argue that it’s not lack of smarts that causes even the brightest, most accomplished people among us to behave like financial dumb-asses, but simple emotional blind spots.

Click here for all the info on how and where to place your order. Thank you for the support!!

Now on to the latest radio show where we kicked things off with Virginia from Buffalo who is trying to solve a good problem. When is it time to stop contributing to her IRAs? Is there such a thing as having too much saved?

At a time when Congress can’t seem to agree on much, lawmakers are acknowledging that the main retirement savings vehicle, the 401(k), needs some fixing. Before you get too excited, the changes being considered are more like touch ups, rather than a complete renovation.

Early conversations include: requiring plan sponsors to let participants know how much their total savings would translate into monthly income; a repeal of the age limit on IRA contributions; a more liberal approach to pooled 401(k) plans, which would help more small businesses offer retirement benefits to their employees; and the option to use a portion of a tax refund to fund retirement.

While none of these ideas represents a game-changer for retirement savers, it would be the first major enhancement since 2006. But if lawmakers wanted to seek a more radical approach, they would consult with Teresa Ghilarducci and Tony James, co-authors of Rescuing Retirement: A Plan to Guarantee Retirement Security for All Americans, who claim that "The U.S. experiment with 401(k)s and IRAs, launched in the early 1980s, has failed miserably to deliver on its promises."

Ghilarducci, a labor economist and leading expert in retirement security, and James, Executive Vice Chairman of the investment firm Blackstone Group, have a detailed, well-researched and more extreme recommendation for rescuing the U.S. retirement system. It starts with a concept called a “Guaranteed Retirement Account” (“GRA”), which would be offered to every worker, "from Uber drivers to CEOs."

The GRA would be portable, whether you work for a number of different companies or for yourself – and each individual would control his or her account. It would be funded by a minimum 3 percent of salary, half contributed by the worker and half by the employer.

Perhaps the most interesting part of the GRA is that it fixes some of the big problems that are prevalent in current plans, the biggest of which is that right now, saving for retirement is voluntary. The GRA would mandate retirement savings for everyone, including those who work part-time or are self-employed.

If it all sounds too good to be true, I encourage you to check out the book. I was a cynic, but after reading it and interviewing Ghilarducci and James, I’m a convert.

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Target Date Funds and Robots, AI, and Automation

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We're kicking things off this weekend with Susan from Chicago who is in the process of reevaluating her 401(k) and is wondering which target date fund she should be using? Should she even be using a target date fund? Or are there better alternatives? 

Next up was Katrina from Alabama who is trying to game plan for retirement. Up until now almost everything has been saved in traditional 401(k) plans...should she and her husband start using the Roth feature?  

The robots are coming, the robots are coming!!

Okay, so maybe we’re not yet living in a world that looks like the movie Terminator, but it’s safe to say that changes are coming to the workforce as we know it. Robots, artificial intelligence, and driverless cars are no longer things of the distant future. They are with us today and will become increasingly common in coming years, along with virtual reality and digital personal assistants.

That’s what we’re talking about today with Darrell West, a decades-long connection of mine who is vice president and director of Governance Studies and the founding director of the Center for Technology Innovation at the Brookings Institution. In his latest book, The Future of Work: Robots, AI, and Automation, West explores the current state of the workplace, how technological innovation will disrupt it and why government policy needs to change to help workers adapt to it.

If companies need fewer workers due to automation and robotics, what happens to those who once held those jobs and don't have the skills for new jobs? And since many benefits are delivered through employers, how are people outside the workforce for a lengthy period of time going to earn a living and get health care and social benefits?

Throughout the pages of this book, West argues that society needs to rethink the concept of jobs, reconfigure the social contract, move toward a system of lifetime learning, and develop a new kind of politics that can deal with economic dislocations.

West presents a number of proposals to help people deal with the transition from an industrial to a digital economy:

  • Broaden the concept of employment to include volunteering and parenting and pay greater attention to the opportunities for leisure time
  • Workers will need help throughout their lifetimes to acquire new skills and develop new job capabilities
  • Political reforms will be necessary to reduce polarization and restore civility so there can be open and healthy debate about where responsibility lies for economic well-being

It’s a fascinating read about what faces us in the days ahead...a discussion that should take place sooner rather than later.

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Student Loans, Debt Consolidation, Roth IRA

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Should I refinance my student loans? Is debt consolidation the best option? Should I be using a Roth IRA? Those are the latest questions we answered as we attempt to clear out the inbox!

“Better Off” is sponsored by Betterment.

Have a money question? Email me here or call 855-411-JILL.

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Backdoor Roth IRA

If you make too much money and are not able to contribute to a Roth IRA, I'm all for implementing the backdoor conversion strategy. But there are some rules associated with pulling it off, and that's what Jeff from Chicago was calling about on the latest BONUS call.

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Listener Questions: Real Estate, Roth 401(k), Pension, Retirement Planning

Calls, calls, calls and emails, emails, emails! Today's show is all about your questions. We're so backed up that this may become a regular thing!

Hour one kicked off with Neil from Oregon who was wondering if now is a good time to buy a house. Neil currently rents but is worried if he waits much longer he may be priced out of the market. 

Next up was Brianne from the Bay Area who was looking for some pointers as she tries to help her parents get their financial lives in order. 

The final call of hour one comes from Samantha in North Carolina. Samantha is a grad student at Duke and wants to make sure she's on the right path for retirement when she retires in May. I love super young people who are already thinking about retirement! 

We kicked off hour two with Andrea from Minnesota who was wondering if it makes sense for her to start using the Roth 401(k) option at work. 

Next was Nathan from Albany, New York who is weighing the possibility of a new job. One huge factor is that his current job has a great pension plan and the potential new job does not offer a pension. 

The final call of the show comes from Ruth in Cleveland. Only 24 years old Ruth is finding herself with more cash in the savings account than she needs. What should she do? Is there a better alternative? 

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"Jill on Money" theme music is by Joel Goodman, www.joelgoodman.com.

BONUS call: Roth IRA Conversion

Another week, another BONUS call where we're once again discussing the benefits of using a Roth retirement vehicle. Today's question comes from Marshall (and his daughter) in Virginia.

“Better Off” is sponsored by Betterment.

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"Better Off" theme music is by Joel Goodman, www.joelgoodman.com.

Bonus call: 401(k) vs Roth 401(k)

In what is quickly becoming one of the most common questions we get, today we're discussing the Roth 401(k) option now being offered by many employers. Should you use it if available?

“Better Off” is sponsored by Betterment.

Have a finance related question? Email us here or call 855-411-JILL.

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"Better Off" theme music is by Joel Goodman, www.joelgoodman.com.