Top 5 Roth IRA Mistakes to Avoid in 2023 | My Roth IRA for Financial Independence

The IRS increased the contribution limit from $6,000 to $6,500 starting in 2023. Here are some common mistakes you should avoid while you're contributing or investing in your Roth IRA.
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⏰ Table of Contents ⏰
0:00 Roth IRA in 2023
2:26 Spousal Roth IRA
4:53 Contribution, Conversion, Earnings, Rollovers
7:33 More Roth IRA Mistakes
#FIREPsyChat #FinancialIndependence #RothIRA
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[@FIREPsyChat]

Do you need help with your personal finances? Schedule a free 20-minute financial coaching session by visiting www.firepsychat.com/coaching.

[@kenosis1]

Good stuff man - many blessings

[@catsmalats]

Thank you for this advice :)

[@glowwithmuna]

Wonderful video! I am learning a lot :-) Thank you

[@FIREPsyChat]

Of course!

[@Constitution1789]

Subscribed. Good info. Succinctly and cogently delivered. Do you share your Roth IRA investments in another video?

[@FIREPsyChat]

Thank you! Yes I believe I did one earlier this year with the 401k rollovers. I’ll make another one in 2023

[@carolinac4406]

THANK YOU!

[@FIREPsyChat]

You’re welcome!

[@arobi39134]

New subscriber here

[@FIREPsyChat]

Hey new subscriber!

[@BenJune09]

I'm going for VOO (40%) SCHD (40%) and MSFT/APPL 20% in my Roth IRA....will mix in some QQQ and XLV when it seems right.

[@undertherain8785]

I am 20 years old and have been very interested in opening my Roth IRA but I am self employed and would like to know if I can still open a Roth IRA given the fact that my income is not pre taxed. Do I have to wait until my income is taxed to contribute or should I add myself to payroll and contribute from there? Please helppp!

[@FIREPsyChat]

You can open a Roth IRA on top of your SEP IRA, Solo 401K, or whatever retirement account you have for your business. When you file your taxes in 2024 for the tax year 2023, your CPA should calculate or add taxes to the Roth IRA contributions because they're in after-tax dollars. You don't need to wait until your income is taxed to contribute. You just need to know the taxes you're going to owe based on the Roth IRA contribution you make this year. Feel free to schedule a session with me at www.firepsychat.com/coaching so I can understand your overall financial picture.

[@Aseesl8er]

Great video! Very informative! Quick question. If I have a roth 401(k) from my employer this year, can I still contribute to $7000 to my personal Roth for 2024?

[@alrocky]

For 2024 you may contribute $23,000 to your Roth 401(k) and $7,000 to your Roth IRA.

[@heffy2sick]

Quick question. I’m 18 years old and my supervisor told me about opening a Roth IRA. Do I need a 401k plan to start one??

[@FIREPsyChat]

You do not need a 401k or anything to start a Roth IRA. That is a stand-alone retirement account

[@eduardoaleman2773]

I just closed a 401K with the last employer last week and received the check; I'm retired (72) and tried to open a Roth IRA with Schwab sending a check, but they advised me to contact an advisor.

[@FIREPsyChat]

I agree with Schwab. You should contact an advisor if you’re not sure how this check from your last 401k impact your taxes this year

[@alrocky]

@ *Ed* If you or your spouse did not have earned income (a job) in 2022 or 2203 you cannot open and directly contribute to a Roth IRA. Was your idea to *_convert_* the traditional 401(k) to a Roth IRA?

[@eduardoaleman2773]

@@alrocky That's what I did, I converted a traditional 401K to Roth IRA during the 60 day period allowed to do it.

[@borutouchiha4291]

where to open IRA acct and which is the best?

[@K1LL3rAzn]

You could pick from the popular brokerages such as Vanguard, Fidelity, etc. I don’t know enough to choose for you or even for me. We gotta do research about that.

[@FIREPsyChat]

There are so many but I always recommend a broker that's been around for decades and with a proven track record.

[@carlapopper]

Hi, I'm new to your cannel. I'm 47. Is it too late for me to start investing in a Roth IRA?

[@MultiGcox]

Your chart shows annual contributions after the age of 45 (the year you plan to retire, and I’m assuming retire to mean no income). Don’t you need to have an income in order to make Roth IRA contributions? And those contributions need to be at or below the amount of your income? Maybe I’m understanding something incorrectly?

[@alrocky]

Chart 4:20 referring to hypothetical married couple

[@melissasigala6904]

Can I open up a Roth IRA and put $6500 into the account on the first day or do I need to put $541.6 each month to add up to 6,500 by the end of the year? Also, is better to have multiple Roth IRA accounts with small sums that equal 6,500 or 6,500 all in one account?

[@FIREPsyChat]

You can do $6,500 in a lump sum investment or do $541.60/month or $250 every 2 weeks as long as your broker allows it. I think Fidelity is the only one with the scheduling restrictions. How you want to invest depends on your budget. I personally like to just have one Roth IRA account because when I get my 1099-R from them, it's much easier to keep track instead of having multiple tax documents from different brokers. Great questions!

[@commentwisely3033]

Hi, great content. Can you cover tsp accounts. Thanks and keep up the good work.

[@FIREPsyChat]

If you search my channel and type TSP, I have 7-8 videos about my TSP strategy ✌️

[@commentwisely3033]

@@FIREPsyChat awesome!!!! I'll watch them 👍

[@CL-bu8mh]

I'm already 38. is it too lat to retire at 60 with over a million?

[@peu1285]

I'm a US citizen but started working abroad after college and my income hasn't reached the taxable level yet. Can I start a Roth IRA anyway with money from savings?

[@NicE-jq3wv]

You can contribute up to the amount you have earned, however you MUST file taxes for the year you contribute in order to document the earned income even if it’s not enough to trigger taxes.

[@cheen1996]

Tried to open a Roth IRA with my bank and they turned me down because they told me I was to young. I don’t fully understand how it works and would love to learn more. Could we pull money out of it over time to borrow against our self’s

[@FIREPsyChat]

Who’s your bank? I never recommend borrowing against your own money when you don’t have any saved. You can’t do that with a Roth IRA anyway. It should be used for your retirement when you can no longer physically or mentally work

[@cheen1996]

@@FIREPsyChat valley strong credit union

[@FIREPsyChat]

You don’t have to open a Roth IRA with a bank. There’s Schwab, Fidelity, Vanguard, and other large brokerage that offer Roth IRAs with long track records. Take some time to do research and compare each broker too. I hope this info helps

[@alrocky]

@@cheen1996 More important questions are what did SVCR say was minimum age to open Roth IR and are you under or over that age?

[@Mart9]

Is it required to contribute every year or is one time enough and can the money still grow ?

[@FIREPsyChat]

Your money won't grow as much if you don't continue to contribute to it. Have you used our Roth IRA calculator yet?

[@keithparker9503]

I contributed more to my Roth IRA than earned income for many years. I am estimating that I will probably lose about $15,000 to $20,0000 in excess contribution penalties. Opening up a Roth IRA is going to be my worst Financial mistake ever.

[@FIREPsyChat]

Yikes! Who was your broker? Most brokers don't allow you to over-contribute to the Roth IRA. Or are you saying that you were over the income limit?

[@kishorek7936]

Thanks for these details. If I open Roth IRA now in Jan2023, would I be able to contribute 6k towards 2022 limit?

[@FIREPsyChat]

Yes you still can until the tax deadline! So the 2022 contribution period is from Jan 1, 2022 until the tax deadline in 2023. Same thing for the 2023 tax year

[@freeacc909]

My wife and I earn a combined 250k/ yr. She has a Roth IRA. Can I open my own ROTH and max the 6500 contribution? Im confused if I can open an account. They also say there’s like a limit because of our income range.

[@FIREPsyChat]

If you and your wife file your taxes jointly, there’s an income limit to your Roth IRA contributions. You can each open Roth but how much you can contribute depends on your total income. I have a video on the backdoor Roth IRA for people over the income limit ✌️

[@alrocky]

2023 MAGI @ $228k you may not directly contribute to Roth IRA so must back door Roth IRA process: contribute $6,500 to traditional IRA and convert that $6,500 t-IRA to $6,500 Roth IRA. If you have existing traditional IRA balance from previous years you will owe pro rata tax.

[@axl6670]

now its 7k

[@roysmith8071]

Now convert it to AHSA so you can draw money when you need it

[@peterlee5409]

Hi FIRE Psy, My employee offers mega backdoor Roth IRA where I can contribute up to 66,000. Does this mean I have till the april 16th,2023 last day to file tax to contribute up to 66,000$ if I am able to? Thanks!

[@FIREPsyChat]

I need to double check but the mega backdoor Roth is different. That’s supposed to be by the end of the calendar year because it is technically a 401k contribution that you do a in-plan rollover. I would check with your broker to find out

[@osirisbladeworks6219]

Funny I'm learning about roth Ira's since I have been doing so well with my trading lately.... I've just scratched the surface about iras and really like the excel spreadsheet u made so I can get some projections but when I went to your website to download the file I can't find the link for it

[@FIREPsyChat]

Did you go to www.firepsychat.com/contact? You’ll get a link to my Google drive with my spreadsheets

[@tyro16jeff]

Where is the Roth IRA spreadsheet that you showed in the video? I looked in the resources but do not see it.

[@FIREPsyChat]

Did you open the retirement calculator one? There are like 10 tabs in there

[@KaDooGB]

How exactly does withdrawing contributions work? Since all my contributions are invested, would I sell my investments and only make sure to take out the amount I contributed? Or will my broker (Schwab) automatically deny me from withdrawing more than my contributions?

[@FIREPsyChat]

it's FIFO (First in First Out) with the Roth IRA. Schwab or any brokers can't deny you from selling your shares. When you look at your investment positions, there should be a detailed list of tax lots that tell you if they're short-term or long-term positions. What you take out first will be your contributions. I never recommend selling Roth IRA until retirement because it could slow down your retirement for the long term.

[@00dkm]

What about balancing the different cost points per share. Jan 150 Feb 155 Mar 160 if you purchased each month you have 3 different entry positions or is it better to sell and reinvest ?@@FIREPsyChat

[@jeannytrang183]

Can I invest into a ROTH IRA if my joint household income is over $214k?

[@FIREPsyChat]

There's an IRS table you can look at for the max income for Roth IRA contributions. The income limits increase based on inflation every year. I don't know your entire financial situation so I don't want to say "oh yeah $214K is fine" because there's a lot more to it.

[@alrocky]

*@jeannytrang18* are you familiar with back door Roth IRA?

[@jeannytrang183]

@@alrocky no I’m not… do you have a video about it

[@alrocky]

@@jeannytrang183 Contribute $6,500 to traditional IRA and promptly convert that $6,500 t-IRA to $6,500 Roth IRA. If you have no existing t-IRA from previous years thee is no pro rata tax.

[@commentwisely3033]

If you roll over a previous pre taxed 401k from a pre employment that you had for over 10 years into a roth ira, do you still have to pay tax on the roll over?

[@FIREPsyChat]

Any time you do a pre taxed to Roth, you’re going to owe taxes. It’s not a rollover, it becomes a conversion

[@commentwisely3033]

@@FIREPsyChat I meant to say after tax. So with a after conversion, You won't owe taxes, is that correct? Thank you for your reply; great channel.

[@FIREPsyChat]

If it’s a Roth 401k to a Roth IRA then you don’t owe taxes. I would speak to your investment brokers to make sure they’re in Roth. They have the rollover forms for you to fill out. Thanks for tuning in! ✌️

[@commentwisely3033]

@@FIREPsyChat awesome, keep up the good work, great info!!!!

[@Dwinston99]

How much is the income tax for a rollover from traditional to roth ira?

[@FIREPsyChat]

It depends on your income

[@Dwinston99]

@FIRE Psy Chat Right. Duh idk why I didn't realize that.

[@ryantruong3565]

My wife is currently not working and taking care of our baby girl. Can I create/add her to my 401k company roth account to get an additional $6500?

[@alrocky]

Since you have earned income (a job) you may contribute $6,500 toward her 2023 Roth IRA.

[@lr9215]

I have a ROTH IRA through my government job. I know that I have to invest my funds that I have so far but I dont know how to do that if I made the account through my job. Hope that makes sense.

[@alrocky]

Government job likely offers 401(k) or similar plans not Roth IRA.

[@kylebarone8659]

Psy, by chance, when you separated from the military did you roll over your TSP to your IRA/self directed IRA account? Also when a roll over is done, for example in the TSP account does it sell all of your share, and what you get is cash to then invest in your account?

[@FIREPsyChat]

I kept my TSP where it is since I dont have a lot in there from my time in active duty. I’ll need to do some research on the rollover process. I’d imagine they would sell instead of roll over in kind

[@kylebarone8659]

@@FIREPsyChat found out recently if you decide to rollover your TSP and for any reason you want to keep your TSP account open, then you’ll just need to keep $200 in the account.

[@alrocky]

@@kylebarone8659 If you wish to keep only $200 in your TSP account, opt to keep it that $200 in *G* Fund so your TSP balance will not drop below $200. Remember that other funds might experience drop in price causing your balance to fall below $200 at which point will TSP close your account and send you check for the sub $200 balance.

[@kylebarone8659]

@@alrocky thank you, that’s sound advice!

[@feela6375]

I just opened a Roth IRA with Edward Jones. Should I keep it with them or use someone else or do it myself?

[@FIREPsyChat]

Does Edward Jones charge you a big fee to have a Roth IRA with them?

[@takeitasacompliment.]

I did the math. If you can't afford to max out with a Roth 401K then you're better off using a standard 401K. If your saving budget is $20k a year, with a regular 401k you can put all $20k in. With a Roth 401K, you have to pay about $5k in the taxes and really put only $15k of your money into the account. Let's say you aggressively, invest and average 8% gain/ year. Do the math over 30 years of depositing 20k versus depositing 15k. You will have way more in retirement and the taxes you pay will be less (edited to 401K)

[@alrocky]

"Roth IRA, you have to pay about $5k in the taxes and really put only $15k of your money into the account." You're conflating 401(k) and Roth IRA as contribution limit to Roth IRA is $6,500 so you *_cannot_* "put only $15k of your money into" Roth IRA.

[@takeitasacompliment.]

@@alrocky You're right. I meant Roth 401k. I'm gonna edit my original comment.

[@ChunjingYang-wl2ml]

Hi Psy, You mentioned that you had to contribute to your traditional IRA and convert to Roth IRA, due to your income. I assume your first step traditional IRA contribution is after tax. When you convert to Roth IRA do you have to deal with pro rata rule? If that is the case, I assume you are still glad to do so?

[@FIREPsyChat]

Yes unfortunately I have to deal with the pro rata rule because of my balance in traditional IRA, but it’s still worth it in the long term. Check out the video I did on the backdoor Roth IRA if you go my Roth IRA playlist. The pro rata rule can be fixed if they just simply segregate pre-tax and post-tax dollars 😑

[@jeenkp5594]

May I ask, Which way is better to invest Roth IRA with financial advisor or with the broker apps?

[@Zacon2mlg]

I think since you can only put so much in a Roth ira just do it with a broker app or website. Financial advisors cost more I really wouldn’t get one until you have 500k in net worth

[@FIREPsyChat]

I always encourage my audience to educate themselves with the Roth IRA. I have an entire Roth IRA playlist that you can learn from. However, it is not a bad idea to find a financial professional who can educate you on the Roth IRA, and not someone who sells you investment products.

[@kidplayinginthemud9284]

Does it make your wife angry because you don’t wear a wedding ring or are you just lying about being married ?

[@claudia3539]

What’s happens when you leave a job?

[@crooked52h]

60% SCHD ,20% DIVO ,20% JEPI 🤑

[@Jonathan_Ace]

What if your contributions are already invested? Can you sell your investments and withdraw only the amount of money you contributed without being taxed or penalized?

[@FIREPsyChat]

Yes it’s called FIFO or first in first out. Before you withdraw, contact your broker to make sure you’re doing it right. But withdrawing it will also slow down your investment growth

[@scottspears1555]

500 every 2 years is unrealistic and doesn't follow any pattern/history of increase.

[@FIREPsyChat]

Tell me the realistic pattern

[@dhimanbiswas732]

Your video is very informative and thank you for everything you share to help community. I recently started learning about IRA. I made first time contribution to IRAs in 2022. I contributed 6K to Trad IRA and 6k to Roth IRA for 2022 so total 12K. Now while doing tax filing I learnt that I can contribute combinedly 6K to both the IRAs. So now I have to take out 6K excess. Whether any rule exists in this kind of situation about from which IRA I need to take out the excess. My preference would be Trad IRA as I am not getting tax deduction due to income limit. Now another thing 6k investment is down to 3K in trad IRA. I will be able to take out 3K instead of 6K. Can you please suggest how to solve?

[@FIREPsyChat]

Hey there! Please visit firepsychat.com/coaching to schedule your complimentary coaching session. I can’t give you personalized financial advice in the comment section. I’d love to chat with you

[@laubachm11]

Saving 65% of your income? Bullshit lol