Roth IRA Conversion Ladder For Early Retirement

Join the Private Financial Independence Community here: bit.ly/PrivateFI
Check Out My Recommendations (It helps support the channel):
🔥 M1 FINANCE Investing- Free $10 (once you deposit at least $100 within 30 days) bit.ly/427KBBn
📚 Here's a video on how to use M1 Finance • M1 Finance Investing T...
📝 NewRetirement - The retirement planning tool I personally use to make sure I'm on track with saving for retirement. It's perfect for "Do it yourself" investors bit.ly/3EAAhrJ
🔒 AURA - 14 day free trial to see if your personal information has been leaked online and have it removed aura.com/jarrad
📝 Empower - Free Net Worth Tracker bit.ly/3NUNtwq
📧 Business Inquiries: [e-mail]
Accessing money from your investment account is going to be important to pay for your expenses during early retirement. But if you withdraw from your largest accounts like a 401k, 403b, or IRA before retirement age then you'll pay an early withdrawal penalty.
The good news is that there's a Roth IRA hack called the Roth Conversion Ladder. With this investment strategy, you're able to access money from those 3 retirement accounts before retirement age without incurring any penalties.
In this video, we’ll go through what a Roth Conversion Is, How it plays into a Roth Conversion Ladder, How you can benefit from it by potentially saving thousands of dollars, I’ll walk you through step by step what to do, then I’ll give you a real life example so you can see it in action.
To pay for an early retirement you're most likely going to need to start withdrawing money from your largest investment accounts.
Affiliate Disclaimer: Some of the above may be affiliate links. Support the channel by signing up or purchasing through those links at no additional cost to you. I appreciate you for helping me keep this channel running
Disclaimer: This video is for entertainment purposes only. Everyone's situation is different so do your own research before making any decisions with your money. If you need help then contact a Certified Financial Fiduciary before trying anything that is mentioned in this video. I prefer a Fiduciary financial advisor that charges an hourly fee as opposed to an ongoing fee based on a % of your portfolio. Always remember that incentives determine the type of advice they give you so one that charges an hourly fee is less likely to be problematic.
#RothConversion #RothIRA

[@JarradMorrow]

Check Out My Recommendations (It helps support the channel): 🔥 M1 FINANCE Investing- Free $30 m1finance.8bxp97.net/eX16D Here's a video on how to use M1 Finance kzbin.info/www/bejne/oXayhGCtZ5aIacU ---------- 🔥 Personal Capital- Free Net Worth Tracker personalcapital.sjv.io/3PBNmk ---------- 💎 WEBULL - Up to 12 Free Stocks When You Deposit Any Amount Of Money bit.ly/WeBullJM ---------- 💵 ROBINHOOD - 1 Free Stock robinhood.c3me6x.net/PoaWz ---------- 📈 PUBLIC- Free stock worth up to $300 public.qwjcdi.net/Xx4MXa

[@hersheykiss722]

This was one of the best videos I've seen for the ROTH conversion ladder! Thank you!

[@JarradMorrow]

Thanks for the kind words! I appreciate the feedback

[@2TOTGA]

Love this! As always, thx Jarrad!

[@JarradMorrow]

Thanks!

[@kevinhawthorne5257]

Thank You for all of your videos that you did. I am enjoying all of them.

[@JarradMorrow]

Appreciate the feedback! Glad you’re liking them!

[@symantha351]

"I lost my crystal ball the other day" 😂😂

[@SvetaSveta-ms4hi]

Love this! Thanks a bunch! ☺️

[@JarradMorrow]

No problem 😊

[@SethKerechanin]

Great video! Killer content.

[@JarradMorrow]

Thanks, brother!

[@iamjane9628]

Great video!

[@JarradMorrow]

Thank you!

[@kyliefan7]

not retiring early but earlier than my older co-workers! Goal is 62 and am now 55! Good video! New Sub!!

[@juliegreb6859]

It’s worth mentioning to have bridge money to cover the Roth IRA conversions taxes

[@tim22292]

Accuracy is everything. The IRS code known as 55 rule is the exception.

[@jasonfbaker]

This video needs more views

[@JarradMorrow]

I agree. Unfortunately I don't make the rules haha

[@bryanpride4787]

I believe there’s a five year waiting period for a Roth conversion whether it’s the principal amount converted or the earnings on that amount

[@jasonfbaker]

…Call us all bums in advance… and lost the crystal ball 🔮, geez….lol Great, focused content. Love the new graphix too! This channel needs more views!

[@JarradMorrow]

Thanks!

[@inea-fijourney22]

Yes! this is the strategy we plan to use!

[@JarradMorrow]

Nice! It’s such a great strategy.

[@KaizenEC]

Hello, I would really appreciate if you would be willing to answer my question. I am trying to understand why a traditional IRA is needed for the conversion process? I have googled online, watched other videos, and many folks keep saying you can convert from 401k to Roth IRA, but no mention of traditional IRA OR if the traditional IRA is mentioned no explanation of why one must convert to it before converting to a Roth IRA. Would really appreciate if anyone can link me to sources explaining this !

[@ChristianHernandez814]

Okay dumb question. I see people say "Roth IRA ladder" but the diagrams always show a trad IRA in the middle. So does it go... 401k ~> Trad IRA ~> Roth IRA. Is that right?

[@JarradMorrow]

Great question. Technically you could do a 401k to a Roth IRA as long as the 401k provider allows you to do a partial conversion so you have more control over the taxes you’ll pay. If they don’t then some people find it easier to roll their whole 401k into a traditional IRA so they have more control over the amounts they’re going to convert from the traditional IRA to the Roth IRA to keep themselves within certain income tax brackets. Does that make sense?

[@m_hall]

Man learning about the roth conversion ladder is now making me second guess prioritizing a roth 401k. I'm in a 24% tax bracket right now. If I understand correctly, I'm loosing some potential investing money to taxes that I could be differing instead, and then one day use the roth conversion ladder to only pay 10% (if taxes don't increase in 15 years... and I could lower my tax bracket). So essentially missing out on some savings that I could be investing. Problem is, it's so hard to know what life is going to be like 15 years from now. Do you feel there is an argument to just contribute to the roth 401k and avoid the hassle and uncertainty? Regardless, using this withdrawl strategy is a good rule to follow for pre-tax retirement money. I have both.

[@121mzc]

Roth is King-well that and LIRPs. Read the Power of Zero.

[@Sony-ox7wx]

I did a spreadsheet accounting for taxes and inflation. Traditional 401k or IRA doesn't work for me because I would run out of money age 57, 3 years before I'd be allowed to use the funds. And if I did a ladder conversion, I'd still be making money and also my short term investments would have grown putting me at risk of a higher tax bracket when doing the rollover ladder. But if I do Roth IRA or roth 401k I would be able to live 3 years pulling out my contributions and then the gains after age 60. Run a spreadsheet and see for yourself

[@AmarjeetManhas]

Can this strategy be used to convert Traditional IRA to Roth IRA? Traditional IRA was funded by converting 401k from the previous employer(s) many years ago.

[@JarradMorrow]

Yes

[@EllenIsLovex42]

Are you unable to do a Roth Conversion if it is a Roth 401K?

[@JarradMorrow]

Great question. A Roth Conversion pertains to taking a Traditional 401k then moving it into a Roth IRA. If you have a Roth 401k then you'd be "transferring" it to a Roth IRA. Since the money you contributed to your Roth 401k was already taxed you won't have to pay any taxes when you transfer the money from that account to a Roth IRA.

[@Sony-ox7wx]

I'd rather do all Roth 401k and Roth IRA contributions a soon as I get the income.

[@ryanferguson1588]

so if the starting point is Traditional 401k it’ll work. What if the starting point is Roth 401k? Would it work to transfer into Roth IRA and then withdraw after 5 year waiting?

[@rumteen]

My exact question as well!

[@eric.roquet]

​@ryanferguson1588 @rumteen Looking into the same question, I discovered Roth 401k to Roth IRA rollovers would not count as 'contributions' to withdraw early. Thus, you wouldn't be able to access those funds until 59.5. Depending on how much you will have contributed to your Roth IRA and expected retirement age it may be wise to diversify your 401k with both traditional and Roth contributions for the conversion ladder.

[@rowddyone3570]

If you convert Roth 401k to rollover Roth IrA at 67. Do you still have to wait 5 years to withdraw tax free thank you

[@JarradMorrow]

Great question. Yes, that is one of the 5 year rules that are associated with a Roth IRA.

[@donjohnson8255]

Why not convert all of your 401k money in year 1?

[@JarradMorrow]

You technically can, but that’ll most likely put you in a very high tax bracket. It would be more cost effective (from a tax perspective) to convert based on trying to keep yourself in a lower tax bracket.

[@johnyjsl9219]

If I already have a Roth account, no reason to wait 5 years right ?

[@JarradMorrow]

As long as the money was initially deposited into the account then no need to wait 5 years. The 5 year rule is only for the money that was converted. You'll have to keep track of which portion is converted and which one is not. A simple spreadsheet would do the trick

[@stevemlejnek7073]

I'm thinking it would be best to have a separate Roth account for conversions from accounts with contributions and its own growth. The various 5 year rules and withdrawl order rules, I can see scenarios where things are not only complicated but also could be restrictive.

[@rocal4717]

Your jokes like "I lost my crystal ball the other day" are so corny and cringey.

[@JarradMorrow]

Happy to hear you don't like them. I'll make sure to continue doing it 😂

[@J-D248]

Corny and cringey are the best kind 😂