59% of employees who are not saving for retirement believe they are, according to Principal Financial Group. IRAHelp.com Founder and CPA Ed Slott joins Wealth! to discuss retirement plans and some of the changes that you should take advantage of.
“Everybody thinks inflation is bad, and I get that because things cost more. But when it comes to taxes, inflation is great because tax brackets expand too. So more money can come out at lower rates. And the other opportunity now is the low rates… We have historic low tax rates now. So the key to anybody saving for retirement is if you have an IRA, a 401(k), remember those accounts are loaded with taxes. The only way you can get to that money is by paying taxes. So if you can get that money out now, because I’m worried about future higher taxes, we have debt limits, the laws may be changing, so anybody stockpiling money in an IRA or 401(k) should be taking action,” Slott explains.
He calls Roth IRAs “the best account ever created” as it grows income tax-free. He adds, “The only question is, how much are you willing to pay to get it? And the price you pay is the tax rate, which as I said, is very low now. So you talk about generations. Young people should only be doing Roth IRAs.” He notes that young people “have time on their side” to build tax-free wealth in a Roth IRA.
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This post was written by Melanie Riehl
Video Transcript
Saving for retirement can be confusing.
59% of people who are not saving for retirement think they are, according to Principal Financial Group.
And often times changes in the process could mean that you’re losing out on some cash or benefits.
So to break down what this year’s opportunities mean for you, we’ve got Ed Slot IRA, Help.com founder and CPA here with us in Studio Ed’s also the founder.
Uh, Excuse me, the author of the new book The Retirement Savings Time.
Bomb Ticks Ladder.
I guess it’s the founder of ideas going into the book here as well, Ed.
Nonetheless, thanks so much for taking the time to be here.
Absolutely so le.
Let’s dive into some of the changes that have turned into opportunities for this year.
For people who are saving for retirement, what is the top one that they need to be taking advantage?
Well, the change is the opportunities of things you wouldn’t think of taxes and inflation.
Why is that?
Well, everybody thinks inflation is bad, and I get that because things cost more.
But when it comes to taxes, inflation is great because brackets expand too.
Tax brackets, so more money can come out at lower rates, and the other opportunity now is the low rates is the low rates we we have now.
We have historic low tax rates now, so the key to anybody saving for retirement is if you have an IRA or 401k.
Remember, those accounts are loaded with taxes.
The only way you can get to that money is by paying taxes.
So if you can get that money out now because I’m worried about future higher taxes, we have debt limits.
The laws may be changing, so anybody stockpiling money in an IRA or 401k should be taking action.
That’s what I call this retirement savings time bombs louder.
It’s the tax.
I call it a ticking tax time bomb.
Say that three times fast I. I don’t wish to hear, but you IRA.
So timing is everything, and you talk about this in your book as well.
Here, I mean, looks different for everyone across generations and across what your actual target day funds might look like as well here.
So what is the best way to really kind of run the calculus around your own timing?
Where does the thought process need to begin.
One word.
Roth Roth.
Two words.
Roth IRA It’s the best account ever created of all, not even just retirement, because it grows tax free, income tax free for the rest of your life and even 10 years beyond to your beneficiaries.
So everybody knows it’s the best account to have.
The only question is, how much are you willing to pay to get it?
And the price you pay is the tax rate, which, as I said, is very low now.
So you talk about generations.
Young people should only be doing Roth IRA S. Imagine if people my age baby boomers ha had the opportunity to start from dollar one building a tax free retirement account.
All of their money is stuffed in taxable accounts.
So imagine if you starting a job or in a job, and you you have years.
You know young people have time on their side.
You should only be doing Roth 401k S at work where your money grows and builds and accumulates absolutely tax free or Roth IRA S to contribute to a 401k anymore, just for a deduction that you have to pay back at the worst possible time years late or in retirement, not worth it anymore.
And so one of the other mechanisms that people are trying to really familiarise themselves with in the event that they are feeling philanthropic, qualified charitable distributions as well here.
How can this help as part of the broader strategy?
Well, that a limited population It’s a great thing to give to charity if you’re charitably inclined.
I never say give to charity to save taxes, because if that were true, give all your money away.
You have no taxes.
Nobody’s doing that.
But if you’re giving to charity anyway, the best dollars to give are your IRA S, and they have this provision qualified Charitable distributions.
The only problem With it It’s limited.
It’s only available to IRA owners who are 70 a half years old or older.
But if you’re in that in that age group and you have an IRA and you want to give to charity, that’s the way to do it.
Because you can get your money out at 0% tax rate.
What generation would you say is the best equipped or prepared for retirement because of some of the the strategies that can be employed right now.
Gen. X.
Every generation, actually, I was gonna say Gen X and the Millennials.
I guess that’s Gen Y, or whatever it is, because they have time on them on their hands.
But the parents, the baby boomers or maybe grandparents, they have substantial accounts, and they could.
They’re in a position to do Roth conversions, get that money out at low rates, move to tax free territory and have more and keep more of their hard earned money and even pass it on to the their generations.
It’s at IRA Help.com, founder and CPA and author of the book The Retirement Savings Time.
Bomb Ticks Louder Thanks so much for taking the time here with us today, certainly.
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