The back-door Roth contribution method has always had an air of skepticism around it. With the passage of TCJA, the skepticism should be gone.
IRA
A SIMPLE Kind of Plan
The SIMPLE Plan is a type of retirement account for small businesses that is simpler (ah hah!) to administer and more portable than the 401(k) plans that are more appropriate for larger businesses. SIMPLE is an acronym (probably a backronym, more likely) which stands for Savings Incentive Match PLan for Employees. A SIMPLE typically is based on an IRA-type account, but could be based on a 401(k) plan. What we’ll cover here is the IRA-type of SIMPLE plan. The difference (with the 401(k)-type) is that there are more restrictions on employer activities, and less room for error (as can be the case with 401(k) plans). A SIMPLE Kind of Plan Much like a regular 401(k) plan, a SIMPLE Plan is an agreement between the employer and employee where the employee agrees to a salary deferral. This deferral effectively reduces the employee’s taxable take home pay, and the employer then contributes […]
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5 No-No’s for IRA Investing
It is generally well-known that in an IRA account you have a wide range of investment choices. These choices are typically only limited by the custodian’s available investment options. However, there are specific prohibited transactions that cannot be accomplished with IRA funds. Often these prohibited transactions can cause your IRA to be disqualified, which can result in significant tax and penalty, along with loss of the tax-favored status of the funds. What’s Not Allowed for IRA Accounts? Self-Dealing. You are not allowed, within your IRA, to make investments in property which benefits you or another disqualified person. A disqualified person includes your fiduciary advisor and any member of your family, whether an ancestor, spouse, lineal descendant (child) or spouse of a lineal descendant. It is important to note that this limit applies to both present and future use of a property. So if you purchased a condo and rented it […]
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IRA or 529?
After my post last week (Higher Education Expenses Paid From an IRA) I received a question from a reader: “If it’s possible to pay QHEE from an IRA then why would it be beneficial to contribute to a 529 specifically?” In today’s post I’ll cover the reasons you might choose an IRA or 529 plan. These two types of account will help you prepare for the twin future requirements of retirement and college expenses. As covered in the prior post, an IRA plan can be used in part to pay for college expenses. This is allowed in the Internal Revenue code, §72(t)(2)(E). So why would you choose to place funds in an IRA or 529 plan? Specifically, why would the 529 plan ever be superior to an IRA for this saving activity? Segregation One reason a 529 plan might make sense is to specifically segregate your education saving activities from […]
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Rollover Risk
The idea of an IRA rollover, or a rollover IRA, isn’t necessarily a cosmic mystery – this happens all the time. You leave your job, and you rollover your 401(k) to an IRA. No problem, right? Unfortunately, there often are problems with the process of moving funds from one account to another – because there are a couple of very restrictive rules regarding how this process can and cannot be done. It’s not terribly complex, but you’d be surprised how easily these rules can trip you up. Rollover Risk Let’s start with a few definitions: A Rollover is when you take a distribution from one qualified plan or IRA custodian, in the form of a check made out to you, and then you re-deposit that check into another qualified plan or IRA account (at a different custodian). A Trustee-to-Trustee Transfer (TTT), even though it is often referred to as a […]
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How to Make Your Saving Automatic
Sometimes it can be difficult to save for emergencies or for retirement. While physically not demanding, the mental strain can be a hump that is hard to get over. In other words, we experience a little bit of “pain” or mental anguish if we have to physically hand over money or write a check. So how can we overcome this anguish? Automate. First, determine how much you need for an emergency. This can either be to start the fund or to replenish amounts that have been used. Generally, it’s a good idea to have 3 to 6 months of non-discretionary expenses (expenses that don’t go away if you lose your job or become disabled) set aside in an FDIC insured bank account. Some individuals may find it more comforting to have 6 to 9 months or 9 to 12 months. It’s up to you. For retirement, I recommend saving 15 […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.