“Fully fund your Roth IRA” is sound advice

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  • #82110 Reply

      .. To those of you who max out their Roth every year or who make too much money to contribute, what are you doing to grow more money in a “tax-free” environment?

      #82111 Reply

        In my roth I utilize moderately leveraged investments strategies in order to achieve higher expected returns.

        It makes sense to do this in a Roth because it maximizes the tax benefits of the roth, whereas a conservative investment strategy may be better in a traditional IRA or 401k.
        Additionally, the roth allows me to rebalance my portfolio more often, which allows for higher expected returns due to the volatile nature of leveraged investing. Google “Shannon’s demon” for more info on this.

        #82112 Reply

          Don’t underestimate a taxable brokerage account. If you invest with tax efficiency (ETFs, some index funds, Vanguard Tax managed funds) you can pay very little if any tax. If your total income is under a certain level long term capital gains and qualified dividends are taxed at zero rate. I FIRED at 53. Paid zero federal income tax last three years.

          Of course tax laws could change but a taxable account managed properly is a good thing.

          You also avoid all the pain in the butt rules for accessing your money in an IRA before 59 1/2, no RMDs, no limits on how much you can save, and those who inherit from you get a stepped up cost basis.

          #82113 Reply

            Max all tax advantaged space, and then do a taxable brokerage.

            If you make too much for a Roth IRA, you likely should do a backdoor Roth.

            #82114 Reply

              I put extra into my employer 401k as an after tax in plan Roth conversion. But of course your employer has to offer this. Also I have an HSA plan I max out then invest.

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