Wall St. Veteran Breaks Down IRA Rollovers In Plain English

Retirement Is Full Of Complexities

Doug McIntyre and Lee Jackson discuss the benefits of rolling an IRA into a Roth IRA, especially for individuals in their late 40s and early 50s. They highlight the significant advantage of tax-free distributions after age 62 and the simplicity of converting through financial institutions like Fidelity or Vanguard. The conversation emphasizes the importance of understanding the process and the long-term benefits of making this financial decision, particularly for those with existing 401k plans.

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Transcript:

Okay.

So you’ve got an IRA. Right. Do you roll it into something else?

And if so, why?

Well, I think for people that are approaching the last stretch of their career, men and women in their late 40s, early 50s, if you’ve got an IRA, you need to roll it to a Roth now.

Because if your company 401k is really where all your money is going, because that’s where you’re taking the big deduction.

And in most cases, that’s where everybody gets some matching money from their company.

If you roll into a Roth, there is no year-over-year benefit anymore.

In other words, you can always deduct $2,000 or $8,000 or whatever you can put in your IRA account.

If you don’t have a 401k, but if you have a 401k, that’s typically your major input for the year.

But in a Roth, there is no tax benefit.

But after you’ve been in for five years and when you’re 62 years old or older, all of the distributions that come out of there are tax-free.

They are not taxable.

And that is the huge advantage because when you take a distribution from your IRA when you’re 62 or older or at whatever age, that is taxable, which isn’t fair, but it’s taxable.

So that’s a really good argument for everybody, especially if you do have the 401k to convert your IRA to a Roth.

So for people who don’t understand this, it hasn’t been explained to them. This is pretty easy. I mean, how would I go about it?

Well, often you can do it yourself if you are at Fidelity or Vanguard or someplace like that.

But if you’ve got a broker or a Schwab guy or somebody like that, just call them and say, hey, I need to convert this and they can convert it and give you the paperwork and do everything, do all the setup.

And then you just roll the assets in there.

And again, there’s limitations on this because it takes, you have to have been in it five years and you have to be 62 or older.

But if you’re taking those distributions and, in addition to a pension or something down the road.

And who knows, your IRA could be smaller, it could be sizable, but it would be really great to take those distributions cash-free after age 62.

And if you’ve been in for five years.

But the bottom line is, is I can do this myself.

Oh, yeah. Yeah. I don’t think it’s that difficult. People don’t have to go out and pay a lot. This is something if I decide it’s a good idea, I can do it myself.

It’s unlike a lot of other financial decisions and move where I’m paying somebody money.

Yeah. Oh, no. I’m sure you could go on the Vanguard site or if you have an account at Schwab or wherever you may have an account, I’m sure that it says it right on their account.

You convert to a Roth or change to a Roth. I’m sure it’s very, very simple.

Good. Well, that’s good advice. And we’re going to start to do more of this financial advice as we go down the road.

So thank you for that.

Yeah, I think it’s a really good idea. And I think people should consider this, especially those, again, like I said, 48 to 55, who maybe still have some working years and could still tuck a fair amount of money away in their self-directed and convert it.

Yeah.