In this episode of Financial Discretion Advised, Abrin and Tyler work through some recent questions from clients. They also debut a new podcast segment, “In the Headlines”.
In the Headlines:
We saw the August Jobs report a miss 235,000 out of expected 750,000. However, unemployment numbers are starting to look up as the additional unemployment benefits start to wind down. The additional $300 a month expired on 9/6. We will have to keep an eye on this to see if it is a trend.
Question 1: I am single and sold my primary home and have more $250k in gains (about 500k total). Can I 1031 Exchange the sale of my primary residence into a new primary residence? If so, are the rules the same as commercial 1031 exchanges?
Abrin and Tyler unpack this a bit. If you are married, you can use an exemption to excuse up to 500k of gains on your personal property. If you are single, you can be exempt from up to 250k in gains. However, you are not allowed to use a 1031 exchange on personal property.
A 1031 exchange is when you have something like an investment or rental property that would incur gains if sold. You can locate a similar property (income producing, or rental for example) within 45 days, and if you can finalize the purchase of that property within 180 days you can defer the taxation on any gains you had. This is not allowed on personal property.
Question 2: I’m selling a house and will have a good sum of money I may need to use in the next year or two – how should I invest it?
Abrin and Tyler have a similar answer to this question. If you are looking to use the money within the next 5 years, the market is not a good place to put it. In this scenario, using high yield savings accounts or CD’s would be a way to gain a little bit of yield, while making sure you do not lose your principal.
Question 3: What are the PROS and CONS of putting all my money into the market at once versus a DCA strategy?
Dollar-cost averaging (DCA) is a strategy where you invest a set amount of money at certain intervals ($1000 a month for example). By doing this you remove the risk that the market falls immediately after you invest all your money. It allows you to buy some shares when the market is higher and again at times when it is lower. This strategy can help you get a lower buy in price. It also removes the emotional piece of “when should I invest”. However, studies will show that DCA does not always lead to higher gains in the long run.
Question 4: 401k/403b withdrawals:
RMDs start at 72. I have a spreadsheet that details how much is required to be removed, based on the IRS worksheet (https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf). My question is how is this accomplished? I assume (hope) this is something you do and transfer the required amount, say monthly, to me. Correct? If I want to retire early, or have expenses before the date of RMD, how do I withdraw from my 403b?
I assume whether I take 403b withdrawals before RMD age or not, I am still required to go by the RMD table; the only difference is that the amount required would be less as some may have been removed. Correct?
This question addresses a couple of important issues. The first is RMD’s. Required Minimum Distributions (RMD’s) are a required withdrawal out of qualified retirement accounts once you reach the age of 72 (was 70 prior to the SECURE Act). The formula for determining how much you need to take out is to take the balance of your account on 12/31 of the prior year and dividing it by a number the IRS associates with your age.
When you retire does not impact this distribution, it is completely driven by your age. This means you can retire early and not worry that the Government is going to immediately start asking for taxes!
You can also set up your RMD’s in any type of withdrawal schedule. Some folks will take monthly amounts, other will wait until the end of the year. It is up to you! You just need to take the distribution before the end of the year, or you will be penalized for 50% of what needed to be taken out.
Question5: Do Roth IRA contributions count against my 457 contribution limits?
Roth IRA contributions do not count against your 457 Contribution Limits. Roth IRA contributions are determined by two things. One is if you have earned income, two is does your income fall below the limits for being able to contribute. For people who file married filing jointly, the limit on Modified Adjusted Gross Income (MAGI) is 208k, for single filers that limit is 139k.
DISCLAIMER: The foregoing content reflects the opinions of Penobscot Financial Advisors and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security.
You can subscribe to have episodes delivered straight to your device by clicking the links below:
Abrin: Welcome to financial discretion advised, I’m Abrin Berkemeyer.
Tyler: I’m Tyler:. Let’s cue the music.
Abrin: Hey Tyler, how’s it going?
Tyler: Hey Abrin, how is it going? We’re in different offices today.
Abrin: Yeah, little remote podcast. It’s going well, pick the Bucks last night. So pretty happy about that.
Tyler: Geez. All right, all right. Let’s tell the, anyone listening. I am a Cowboys fan. I’m getting that out there. I feel like I should acknowledge it, and all the pain that comes with that, but we came up short and there’s no moral victories. So, today is a down day for me. And now we’ve gotten that out of the way Abrin, so we can get onto more important things.
Abrin: Yeah. All right. So we’re going to start out this podcast just with a little bit of the in the headlines before we move into our topic of the day, which is just going to be some questions that we’ve received over the past month, that might apply to anyone. So going to be answering those for folks today. But to start in the headlines, we are recording this on September 10th. So just everybody probably knows that tomorrow, September 11th is the 20th anniversary of 9-11.
Abrin: And so obviously just want to, our hearts go out to everybody, anybody, any Americans that lost family that day, and all the brave firefighters and emergency service folks that ran into the the towers on that data to help save other Americans’ lives. So, a little bit of remembrance coming up tomorrow.
Tyler: Yep. Yep.
Abrin: But, back to finance news in the headlines, we had the August jobs report and that was a bit of a big miss. We added 235,000 jobs to the economy when we were expected to add 750,000. So pretty big miss there.
Abrin: We’ve had a lot of mixed jobs reports over the past couple months, but I’ll kick it over to you, Tyler, to the other thing that happened in the news that might help grab some more jobs and keep ticking that…
Tyler: Yeah, yeah. Anyone who listened to our In the Headlines podcast heard us talk a little bit about that jobs report. A big miss there, it’s like if I went to do a math equation and that was the answer I came up with, 700,000 was what they were looking for. Yeah. So a big miss, but what we saw is a ending of the unemployment benefits. So that, kind of the coronavirus recovery bills put out these extended increased unemployment benefits for folks. Those came up early September. So I think that was the sixth, those ended.
Tyler: And we saw promising kind of reports on unemployment in the country. It seems like folks might be trying to find a place to work, which is great. There’s still close to, I think I’m hearing numbers between one and three million more jobs out there than people looking for work. But hopefully this is a trend up as folks kind of get back out there and get into the workforce.
Abrin: Yep. So why don’t we get into our questions of the day? I’m going to start out with a couple of housing questions to start, and they’re tax related as well. So this first one. “I’m single. I sold my primary home and have more than 250,000 in capital gains. I have about 500,000 total. Can I 1031 exchange the sale of my primary residence into a new primary residence? And if so, what are the rules? Are they the same as commercial 1031 exchanges?”
Tyler: So let’s unpack this a little bit before we dive into the answer of this question. There’s a couple of things that was mentioned in this. They said that they had more than $250,000 in gains on their house. Why that’s important: if you are filing single, if you’re not a married couple and you sell a home, and you have $250,000 in gains on that home, so more than you purchased it for, you have an exemption on gains tax there. So you don’t have to pay taxes on that 250,000.
Tyler: If you were married, you could have up to $500,000 on exemption there on any gains on the property. So, important that that was brought up. Now that is just on your primary residence. A 1031 exchange, you can take an investment property and exchange it for another investment property. Something similar, like another rental property within the state or another state, if you do it within timelines, you have 45 days to identify a new property, you have 180 days to close on that property. You can defer that tax burden down the road. And what they’re asking here is, all right, I have my primary home. I’m selling it. I’m going to have all of these gains above my exemption. Can I do that 1031 exchange?
Abrin: Yeah. And the answer on this one’s pretty clear, pretty concise from the IRS, and the answer is going to be no, the 1031 exchange is only for commercial properties or investment properties. Clearly excludes primary residences. So you wouldn’t be able to defer that extra $250,000 in gains that you have above your exclusion amount into the new primary residence. So are the rules the same as the commercial 1031 exchanges? No, they just are, the rules just don’t apply. So that last question doesn’t really apply either.
Tyler: And just a little side note here for folks. On personal property like this, you can be taxed on any gains on that personal property. You cannot deduct losses. So if this was a question where she has had a loss, right? She purchased a home and she’s going to be taking a loss here, can’t deduct that on your taxes. That’s a little bit different than an investment property or something like that.
Abrin: Yeah. Good add-in there. All right. Next question. Also related to selling a house. “I am planning to sell my house and we’ll have a good sum of money. I may need to use those proceeds in the next year or two. Where should I invest it? Should I invest it in the markets at all?”
Abrin: This answer’s pretty clear and cut to me. Typically, the rule of thumb is that if you’re going to need to use the money within five years, don’t invest it in the markets. That timeframe kind of goes back to 2008, where we had the market declined and then it took five years in total to get back up to breaking even. So if you have less than a five-year timeframe and you put it in the markets, then maybe you just get super unlucky and the market declines, then you don’t have the money there when you need it.
Abrin: So typically like to hold money that you need on the short term or your ultra short term, one to two years in just a high yield savings account. Yeah, It’s not that sexy. Yeah, you’re not going to make a lot of money, but it’s going to be liquid. It’s going to be safe. And there are other investment vehicles out there where you can get a little bit more of a yield than just say your regular credit union, your regular bank account. So any high yield savings accounts you like to use, Tyler?
Tyler: Yeah. I think they’re all pretty good. You got Ally, Marcus, I think Capital One 360, all those, they’re going to give you a pretty competitive rates on that, but I’m with you here. If you’re going to be using your money in the short term like that, keep it away from the market. If you need it, you would hate to see a market decline and have to pull out of the market and take those losses.
Tyler: So just like you said, Abrin, we want short term, high yield savings accounts. We want maybe C D strategies that are going to have durations that allow you to get your money out in the time that you need it. Trying to squeeze a little bit of yield out of there, but geez, risking the market that is almost rolling the dice there, and you don’t want to do that with money. You’re going to be needing, so. Yep. Nope. Keep it away from the market.
Abrin: All right. Next question. “What are the pros and cons of putting all my money into the market at once versus a dollar cost averaging strategy?”
Tyler: Yeah. So we can unpack this too. Dollar cost averaging strategy is taking a set amount of money on a certain timeline and consistently putting it in the market, instead of saying, all right, I have all my money. I’m just going to shove it in the market and see what happens. Pros and cons to using that strategy. The pros are, you’ve removed the emotional, ‘when should I get in’ question. You are just doing it across a certain time frame, no matter what the market’s doing, up down, or anything in between. It allows you to potentially get a lower buy-in price if we’re seeing dips in the market from when you’re buying in.
Tyler: Certainly some cons to it too, though. I think when we look at out-performance of both strategies, the dollar cost averaging, sometimes doesn’t win out in that. Right? We see higher returns when someone just kind of puts all the money in. The downside of putting all your money in is that you don’t know when the next market crash is coming, and it could be tomorrow and you put the money in and everything takes a tumble.
Tyler: So I do think there are some pros and cons to those strategies. I think a dollar cost averaging strategy is a solid one, and one to explore, again, removing that question of when should I get in? Well, let’s get the money working and we’ll buy in at different intervals. And if the market’s up, we’ll buy in then, if the market’s down, we’ll buy in then. Hopefully, we’ll end up with a lower buy in price.
Abrin: Yeah. Yeah. And just, it takes that timing risk out of the equation, where you put your money all in at once, then you’re subject to whatever happens right after that, whereas with the dollar cost averaging strategy, if the market’s high and you’re buying in and it keeps going higher, that’s great. You’re earning money. You’re just learning a little bit less than you could have if you put it all in, but overall you’re going to continue to make money.
Abrin: And if the market drops off and say, we see a market correction, you can accelerate your dollar cost averaging strategy. An opportunity might arise that you couldn’t foresee. They are true black swan events in the market. We saw one in 2020. And if you’re in a dollar cost averaging strategy versus dumping all your money in all at once, then you can take advantage of that event that happens, say, three months down the road that no one ever would have ever seen coming, cause you actually have money on the sidelines because you didn’t put it all in all at once today.
Tyler: Really good point. It really allows you to be nimble and you can kind of change up your strategy as you go along. Once you put that lump sum in, it’s in there. And-
Abrin: Subject to whatever happens.
Abrin: All right. So this next question kind of has to do with a little bit of legacy planning and a lot of, just more mechanics of withdrawing money. So one of the big questions that folks have and households is, if something happens to me, what happens to my spouse? How is my spouse going to get going to get income from our portfolio? So, this is one thing that we deal with routinely as advisors is, when we’re managing assets for a household, we kind of take that onus off of either one of the spouses to manage the withdrawals.
Abrin: We do that for them, and help them with their distributions from their retirement accounts. So in this case, the question was, “If something were to happen to me, what is the procedure for my spouse to get money out of our accounts so that I know that they’re taken care of when I’m gone?”
Abrin: And there is a couple other little follow-ups there, can the spouse simply call in and say, “Hey, send me X amount of money every month?” What’s the process like, and then some questions about RMDs, which we’ll tackle as well.
Abrin: But yeah, I think it’s generally pretty straight forward. Typically what we like to do is, if you have a retirement account, say it’s a traditional IRA, Roth IRA, even if it’s a non-retirement account, it’s just a joint account, when you work with an advisor like our firm, you can call us up anytime and say, “Hey, I need a withdrawal,” and we’re going to help you through the tax implications of those withdrawals. And if there’s any tax considerations, and then hopefully just send your money straight to your bank account, like a paycheck. So you can do that on a one-off basis. But ideally what we’re doing is helping that spouse find their retirement needs while you’re gone.
Abrin: Maybe household costs are lower because you don’t have to buy as many groceries and maybe you’re not using as much hot water, electricity, or heat. So maybe some of the living costs have gone down, and helping them identify that, and then getting them set up on a routine distribution from their account so that we know that their needs are met every month, and they don’t have to worry about calling their advisor and making sure that they get another lump sum into their checking account that they can go spend every month.
Tyler: Yeah. I’m going to take a moment here and I’m going to bang the table. I know that you don’t like when I bang the table, cause it screws up the camera, but I’m going to bang the table. Check your beneficiaries. If you have a retirement account, the beneficiary on that account will act like a will substitute, and it will skip the probate process.
Tyler: So if I have a retirement account and Abrin is listed on there and I die, Abrin just has to call, provide proof that I’m dead, So get that death certificate, and the money will be shifted into Abrin’s name and he can take the money out immediately. He doesn’t need to play the game, and it doesn’t have to go through the court system. So if you have a retirement account, please go and check who the beneficiary is on that account. It is one of the most important and cheapest estate planning things that you can do. In this case, Abrin would be able to just call in and say, “I need all of Tyler’s money. Put it in my name and I’m going to go buy a boat.” And that’s all you’d need to do.
Tyler: So I apologize for banging on the table. If you take one thing out of our podcast today, check your beneficiaries.
Abrin: Yep. And when it’s your spouse as your primary beneficiary, especially for a traditional IRA, that money just goes directly into their name and becomes their account, and then any future RMDs, since RMDs were question is tagged onto this, any future RMDs would be based on that spouse.
Tyler: Yeah. Why don’t we unpack the RMDs right now? I know we were going to do it later, but RMD: required minimum distribution. You made contributions into a retirement account, qualified account, throughout your life. You were getting tax breaks every time you did that. Once you turned, it’s now 72, which has been upped from the original 70-year-old RMD. But once you hit 72, Uncle Sam comes knocking and says you’ve got to take some money out the way they figure that out is they take the value of your account at year end, the prior year, and divided by a number that’s associated with your age. So every year you get older, that number changes. And they’re going to tell you to take a percentage of your money out.
Tyler: The reason why that’s important. When you pass away and someone else receives your accounts is that, if your spouse gets it, it essentially becomes their account, and the RMDs will work off of their age and their values. If someone other than your spouse receives that inherited IRA or retirement account, they have 10 years to get the money out of the account and take the taxes on it. So, important how people understand the RMDs, but required minimum distributions is what we mean with RMDs. And it’s just the government saying that we gave you that tax break, but we’re not giving it to you forever.
Tyler: Another big thing here, you’re going to want to take your RMDs. A lot of people don’t want to take their RMDs cause they’d rather get it in there. If you don’t take that RMD out by December 31st, they’re going to tax 50% of the money that you were supposed to take out of the account. So if you had to take $5,000 out, that’s going to be a $2,500 tax penalty for leaving that money in there.
Tyler: Additionally, something for people who are just turning 72. So I just turned 72, when do I have to take my RMD? You have till April of the following year to take the first one. Everyone else in every other RMD, after that, the end of the year. It’s a big one, don’t forget it. Mark your calendars. If you’re working with an advisor, mark their calendars. I know that around November, Abrin and I will start going through the list of our folks that need RMDs and reach out and say, “Hey, you’re going to want to take these.” But big one, make sure you’re taking your RMD.
Abrin: I was going to say, your advisor should be all over that with helping you to take those RMDs, especially if that’s something that you’re worried about, leaving a surviving spouse behind. And if they’re not handling the household finances, then an RMD might be something that slips their brain. Knowing that the advisor is in control and knows that they’re going to need to take an RMD if anything happens to you, it’s another one of those peace of mind aspects to helping somebody with their assets after one of the people in the household is gone.
Abrin: That’s nice and morbid, but it’s an important topic that needs to be covered, and a common question. People want to make sure that their spouses are taken care of and that their family is taken care of when they pass, so.
Abrin: So kind of going straight into some more RMD questions here, when it comes to 401ks and 403(b)s, let’s see… “There are RMDs at 70, now 72” question mark. That’s correct. So RMDs used to be at, actually age 70-and-a-half was the kickoff point. The year you turn 70-and-a-half, you had to take it by April 1st of the following year, as Tyler already said. And then now that has been moved up to age 72. So that’s good, you get an extra year-and-a-half that you don’t have to take money out of the account and allow that to defer tax-free growth.
Tyler: Now, however, if you’re 71, you are required to continue making RMDs, even though you’re under the new 72.
Abrin: Right, yeah. So you don’t get grandfathered in. If you, or you do get grandfathered in, if you already started taking RMDs, you have to maintain your regular schedule. And when I said that you get to leave the money in there, and it gets to grow tax free, I meant it gets to grow tax deferred.
Abrin: Whereas you don’t have to pay taxes until you take the money out of the 401k or 403(b). Slight correction there. All right.
Tyler: And remember your RMD, or anything coming out of the IRA, it’s going to be taxed as income.
Tyler: So it’s going be taxed like you’ve made that money in that year. So no capital gains on the IRAs, just taxed at your income rate.
Abrin: Yep. And this is great, Tyler already explained this next part of the question. Let’s see, they have a spreadsheet here that details how much needs to be removed based on the IRS worksheet. And like Tyler said that IRS worksheet, you just take your year end balance from the prior year, and then look up your age and divide that balance by that number, and that arrives you at your RMD for the year. So you can do it manually. Luckily, a lot of the custodians these days will calculate your RMD for you since it is just a very simple formula based on your date of birth, and how much was in the account on December 31st of the previous year.
Abrin: So let’s see. So my question is, “How is this accomplished? I assume this is something that you could transfer to me the required amount, say monthly, is that correct?” So you have a lot of different options there. You could decide to take your RMD out monthly. You could decide to take it out once a year. Really, it’s going to depend on your income needs. Some folks where we know we need to take money out of the account. We might just set up a systematic withdrawal plan. Other folks that don’t need the income from the portfolio, You still might set up a systematic withdrawal plan, whether it’s, you just want a little bit of money extra each month to take the RMD out by the end of the year, you could do that, or you could take it out as a lump sum.
Abrin: One common strategy that I’ve seen, especially for folks that don’t need the money is, they might still want to keep the money invested, it just can’t stay in that pre-tax account. So we take the money out, we pay the taxes on it, satisfy the RMD, and then reinvest that money in a taxable account where you can continue to get growth on your investments. You just can’t do it in that pre-tax vehicle anymore.
Tyler: Yep. So, same type of strategies here. If you want to keep it invested, just open up a brokerage account, move the money in there, keeps it in the market, you’ve paid your taxes. Arguable. You could do that beginning of the year. So any new growth would be held in that taxable account, not in the IRA, which would help you on next year’s RMD. But yep. You can kind of set it up any way you want to. The big thing is getting the money out before the end of the year.
Abrin: Yep. And then the next question was, “How do I withdraw from my 403(b)? I assume whether I take 403(b) withdrawals before my required minimum distribution age or not, I am still required to go by the required minimum distribution table. The only difference is the amount required would be less now that some has been removed. Is that correct?”
Abrin: So actually, if you’re before your required minimum distribution age, before age 72, you don’t have to go by the table. You can take out as much money as you want from your 403(b) at any time, even after your required minimum distribution age. That’s just the minimum you have to take out, per the IRS. You can take out more than that whenever you want, so you’re not limited or confined by that figure, and before that age, 72 starts, you are not subject to that table. You could take out as much or as little as you want. So you could be $0, you could take out the whole kit and caboodle. The only stipulation there is, that might not be the best plan, because as we’ve been talking about with these pre-tax retirement accounts, any money that comes out is going to be taxed as income. That’s why the IRS is making you take money out in your later age so that you do pay taxes on it while you’re living.
Tyler: Could be a really interesting time to explore those Roth conversions, and if anyone doesn’t know what that is, go back and listen to the podcast. But if you retired early, income’s dropped down, you’re in a low tax bracket, might be time to take a few bites of the apple, move it out of the retirement account, into a Roth and make sure that RMD is a little bit lower once you hit 72.
Abrin: Yep, and the other beautiful thing about a Roth is that there are no RMD requirements on a Roth IRA.
Tyler: Yep, yep.
Abrin: One little trip up that people can have is with a Roth 401k, you do have RMDs cause you’re in the 401k bubble, where you’re not in a Roth IRA. It’s only Roth IRAs that aren’t subject to RMDs, Roth 401ks are subject to RMDs. So I think that kind of leads us to where you were going, Tyler, which is, you have this 403(b), you have this 401k you’re retired. You can take money out of it. Should we leave it in the 401k or the 403(b)?
Tyler: No. I’m not going to bang the table again because I don’t want to break it, but if you’re in a work account, and you have the availability to roll it out to an IRA, almost 98% of the time, that is going to be a better strategy for you, for a couple of reasons. One, within the work plan, you’re kind of limited in your investment options, right? They’re just giving you a few choices. You’ve got to build out a portfolio. You roll it out to an IRA, you can invest in anything in the world that is going to help diversify, broaden your investment portfolio. It’s going to help lower risk by being able to diversify a little bit better. So that’s one reason.
Tyler: The second reason is that it’s going to make your life so much easier. With your work plan, you have a third-party custodian, who’s holding onto the money. You have to kind of put in paperwork through them. You’re going to have to do signatures. It’s just going to be a little bit more of a hassle than if you have an IRA. If you’re doing it yourself, click a button, ends up in your account the next day. If you’re working with an advisor and say, “Hey Abrin, I need my RMD, can you send that to me?” Abrin says, “All right, we’re going to withhold taxes. We’ll send it to you.” You have it within a couple of days. Makes life much easier.
Tyler: But with the 401k Roth problem, that Abrin was just describing, that you’re going to have to take RMDs, roll that out to a Roth IRA and change the rules a little bit. Now you’re not required to take money out. It’s just going to grow tax-free. So I want to bang the table here, but if you have retired and you have an old work plan, get it out to an IRA, talk to someone who can help you do that. There’s no tax implications for doing that as long as you get it in within 60 days, if they send you a check, into a qualified, traditional IRA, it’s going, going to make your life better.
Abrin: Yep. And depending on the retirement plan, like you said, all these retirement plans have their own provision. Some retirement plans do require fees to take money out of the account. So we run across this all the time when we do rollovers. So there might be a small 25, $50 fee. Those fees could also apply to distributions from your account. And, if you’re going to be taking monthly distributions of income, why pay that fee every time when you need to take a distribution? If it applies to your plan, not all plans does that apply to, so you’d have to read the fine print if you’re thinking about leaving it, but if it’s in a traditional IRA, typically, you’re not paying any of those distribution fees just to process the distribution.
Tyler: And just for folks may be like, “Geez, I just don’t want to go through the hassle. Like it’s there. It seems easy.” That process, all it looks like, cause I think it’s good to kind of set expectations, you give your custodian a call, say “I’ve opened up an IRA at X, Y, and Z investment house, and that I’d like to roll it out.” And they’re going to give you some tax notice about it and let you know that if you don’t get the money in there in 60 days, it’s going to be a taxable event, but you have the right to roll it over. If you get it in that account, it’s not going to be taxable, blah, blah, blah.
Tyler: But what they’ll do is they’ll probably cut a check to you or the custodian in which it’s going to. You get the check, deposit in that IRA, and it’s done. So it’s not as complicated as you may think it is. Certainly, an advisor can help you do that process. But it’s something that you could easily take care of yourself, and be done within seven to 10 days.
Abrin: Great point. All right, last question.
Tyler: Hit me.
Abrin: “Do my Roth IRA contributions count against my 457 contribution limits?”
Tyler: Oh, you’re asking me.
Abrin: Yeah, I hit you hard with that one, Tyler.
Tyler: No, they do not count against your 457 contribution limits. The Roth IRA is going to be dictated by your income levels. So if you’re married, filing jointly, if your modified adjusted gross income is, not what you’re making, but after adjustments, is over $208,000, can’t contribute to a Roth. Well, you can’t traditionally can contribute to a Roth. You can do a backdoor Roth, but that’s a different podcast. Or if you’re filing single, if you’re making over $139,000, can’t contribute to a Roth. That’s what’s going to limit you from getting into a Roth IRA. The contributing to a 457 will have an impact.
Abrin: Yep. Yeah. And yeah, neither impact each other at all. The Roth IRAs and individual retirement account, all the only thing you have to worry about is those income limits, or if you’ve contributed to a traditional IRA throughout the year, those are the only things that impact you when contributing to the Roth, besides, you have to have the income to do it.
Abrin: Contributing to the 457, that has its own contribution limits and that’s an employer-based plan. So you’re going to just be subject to the 19,500 with a few exceptions. Once again, another podcast, but they don’t counteract each other. You can contribute, just say the full amount to the Roth IRA and the full amount to the 457. Neither of them are gonna impact the contributions of the other or for any tax purposes. So, you should be good to go.
Abrin: And I think we’re good to go. Cause that was the last question.
Tyler: Yeah, that was a good, those were good questions. Anyone listening to this thinking, geez, I wish they would tackle something I’m having a problem with, send us your questions, email us, write it in the comments, anything like that. Additionally, we’re going to try doing the news on every podcast. So if you have headlines that have come up that you think that we should tackle, happy to do that as well.
Tyler: Share this podcast, find us on any pod catcher, get on YouTube.
Abrin: Subscribe, like.
Tyler: Yeah. Tell, your mom. Any new listeners is great, and we’d love to add them to add them to the following.
Speaker 3: The forgoing content reflects the opinions of Penobscot Financial Advisors, and is subject to change at any time without notice. Content provided here in is for informational purposes only, and should not be used or construed as investment advice, or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Thank you.