It’s time to clean up the inbox. Here’s a smattering of questions that I have fielded lately:

Fred: Are there income limits to consider for a backdoor Roth IRA conversion? My wife and I are in our late 50s and make about $300,000.

JS: The first step of a backdoor Roth is a contribution into a nondeductible traditional individual retirement account. Because it is not deductible, there is no income limit. The second step is to convert the nondeductible IRA into a Roth IRA, which can be done almost immediately. Just remember that in order for this to work to your best advantage, make sure that you do not have traditional IRA accounts, which would trigger the pro rata rule and limit the effectiveness of the backdoor Roth.

David: I have been converting big blocks of my traditional IRA to a Roth over the last two years. Thanks to Secure Act 2.0, I think I have a few more years before I’ll need to begin taking required minimum distributions. Does it make sense to continue to convert and pay the taxes now?

JS: Secure Act 2.0 increased the RMD age to 73 (and it’s going to increase again in 2033 to age 75). As long as you are not soaking up all of your available cash to pay the tax that is owed, I would continue with the conversions. Try to do a little at a time and stay in the tax bracket that’s affordable to you over the next few years.

Bobby: I’m 45 years old, divorced, with no children. I receive full disability benefits from my service in the Army, but luckily, my injury does not prevent me from working, so I have extra money at the end of each month. Before you ask, I have an emergency fund and I am completely debt free (including on my house). I max out my Roth retirement plan at work but after that, I’m not sure what to do … should I open a brokerage account? If so, how should I invest it — just like the retirement account?

JS: A brokerage account would be great — and no need to make it too complicated, just choose a few index funds to start out, maybe a stock index fund, an international stock index fund and an intermediate term bond index fund. Because you may need (or want) to access the account sooner than the retirement funds, consider making the account a little less aggressive than the retirement account.

Mary: I’m 64, single, still working, no debt. My total assets (brokerage, IRA and 401(k)) total just over $1 million. My mortgage balance is $80,000 and I’m thinking of using some of my 401(k) to pay it off. I know it's probably not the best financial decision; it's psychological. What do you think?

JS: The big downside of paying off the mortgage is that you lose liquidity (or easy access to your money). But if you're really hyper about the outstanding debt, do not pull from the tax-deferred retirement account and pay taxes; instead tap the taxable brokerage account. Try to leave yourself with ample post-tax dollars, just in case!

Andy: I'm 60, still employed with no children or spouse. My investments and savings total about $500,000 and my house is worth about the same amount. Should I be considering a revocable trust?

JS: It does not seem like you need a revocable trust, especially since you don’t have any heirs to whom you wish to direct your assets. That said, you need a will, a power of attorney and a health care proxy. A qualified estate attorney can handle all of this for you.


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