Retire With Ryan

What if I don’t want a traditional long-term care plan? Last week, we covered the basics of traditional long-term care options. On this episode, I’ll continue my conversation with Nancy Simms and dive into the logistics of hybrid long-term care coverage and the Connecticut Partnership for Long-Term Care. 

You will want to hear this episode if you are interested in...

• What is a hybrid long-term care policy? [1:14] 
• Examples of life insurance policies with added long-term care [9:09]
• The tax-deductibility of long-term care plans [10:32]
• The underwriting process of long-term care plans [12:15]
• Looking at the logistics of hybrid long-term care plans [14:17]
• What is the Connecticut Partnership for Long-Term Care? [16:10]
• Starting the process of researching long-term care options [21:35]

Exploring hybrid long-term care options

There are essentially three different variations of a hybrid long-term care policy. The first is to have a life insurance policy that has an added long-term care rider. It works just like a normal life insurance policy that pays out in the event of your death. Except with the rider, it allows you to pay down your death benefit, dollar for dollar, to cover the costs of long-term care needs while you’re still alive. It’s a great way to add flexibility to a life insurance policy at a relatively low additional cost. 

Another type of hybrid long-term care is what’s known as a linked benefit product. It’s a similar concept to the life insurance policy with a long-term care rider except that it accounts for inflation. Adding a long-term care rider to a life insurance policy will not increase the amount paid out based on the cost of care, making it more of an insurance product with added benefits and flexibility. The linked benefit is more like a long-term care product that has a smaller death benefit. A big advantage to this plan is if you never have a long-term care need, the majority of your premium will be returned to your estate through the death benefit.

Digging deeper

The final type of hybrid long-term care combines an annuity with a long-term care plan. Annuities are long-term investments issued by an insurance company designed to help protect you from outliving your income. They typically provide a guaranteed stream of payments over a predetermined amount of time. When combined with a long-term care plan, these annuity payments increase to cover the cost of a long-term care need. 

When it comes to hybrid long-term care plans, the biggest benefit is flexibility. Plan beneficiaries can choose how to receive their benefits depending on the plans they select. A plan that pays through reimbursement works much like insurance. Benefits are paid out by submitting proof of long-term care services rendered. Indemnity (or cash) plans pay out a certain amount of money based on a daily or monthly limit. The major upside to this is that this money is paid out regardless of the actual cost of care so you could potentially receive more than you need. However, because the money can be used for anything, a potential downside is someone mismanaging the money. Listen to this episode for more information on long-term care plans!

Resources Mentioned

• 3 Ways to Cover Long-Term Care with Nancy Simm (Part 1), #95 
• Connecticut Partnership for Long-Term Care 

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

If you’re concerned about paying for long-term care in retirement or are wondering the best way to pay for it, this episode is for you! This week, I’m joined by Nancy Simm of Highland Capital Brokerage to discuss retirement longevity, the types and costs of long-term care, and the best ways to pay for them.

You will want to hear this episode if you are interested in...

• Getting to know Nancy Simm [1:13]
• The five ways to pay for your long-term care in retirement [1:58]
• What is long-term care? [2:54]
• Identifying the costs of long-term care [5:42]
• Diving into traditional long-term care products and policies [7:58]
• How do I apply for long-term care and when is the best time to do so? [14:25]
• What is an elimination period and shared benefits? [19:24]
• Final thoughts on traditional long-term care plans [22:32]

Understanding long-term care

Most people assume that long-term care is for people in their 90s with health issues. However, long-term care plans can be used at any age for several reasons including early-onset degenerative diseases, strokes, and injuries due to accidents. The reason is irrelevant as long as there is a long-term care need that inhibits the activities of daily living. Nancy defines these activities as bathing, eating, dressing, bathroom use, continence, and transfer. Difficulties in these areas don’t have to be permanent. As long as care will be needed for at least 90 days, it is considered long-term.

For example, a bone fracture that takes a month or two to heal would not be considered a long-term care situation even if it prevents you from completing the activities of daily living. Long-term care plans focus on care needs longer than 90 days, but they go beyond physical disabilities. Diseases like Alzheimer's are another reason to look into long-term care because while patients may be physically capable of completing tasks, their reduced cognitive ability makes them a qualified candidate.

Covering the cost

Before deciding whether to pursue a long-term care insurance policy, it’s important to understand the out-of-pocket costs of long-term care. The Connecticut and New England areas have some of the highest long-term care costs in the country. Average home health care costs are between $5000 and $6000 per month for a few hours of care per day. While most retirees prefer to receive long-term care at home, sometimes that isn’t possible when the patient’s safety is in question. Nursing home costs can average around $15,000 per month for full-time care. A huge benefit of long-term care insurance policies, aside from saving your bank account, is that they cover any kind of care required and are no longer limited to a specific care type, whether in-home or at a facility.

Another cost-saving option is to retire in another state where long-term care costs are cheaper. If you live in Connecticut now but are debating retiring elsewhere, this may be the detail that gets you to reserve the moving truck. Midwestern states and most of Florida cut Connecticut's long-term care costs in half! Moving may be the best option for those looking to cut costs who aren’t tied down to their current area. For more info on long-term care plans and how to pay for them, listen to this episode!

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

Southwest Airlines offers what is arguably one of the best perks within the travel industry: the Southwest Companion Pass. If you are someone who likes to travel and would be interested in having your spouse or companion fly with you for FREE, this episode is for you! I’ll give you all the details you need about the Southwest Companion Pass, how to qualify for it, and how to get the most out of it.

You will want to hear this episode if you are interested in...

• What is the Southwest Companion Pass? [1:26] 
• How does the Southwest Companion Pass work? [3:05] 
• The best way to qualify for the Southwest Companion Pass [4:40]
• The best time to qualify for the pass and tips and trick to earn it faster [10:38]

First-class perks

One of the number one activities enjoyed by retirees is travel. After all, who wouldn’t want to see the world after completing a successful career? One of the best ways to travel is the Southwest Companion Pass. With the pass, designated companions can fly with you for free for as long as you hold it. Your companion will have to cover the taxes and fees associated with the cost of regular tickets, but that’s small in comparison to full-price airfare. 

Flyers earn a companion pass by either flying 100 qualifying one-way flights OR accumulating 125,000 qualifying Southwest points in a calendar year. Once you earn the pass, it’s valid for the remainder of the current year and the following year with no limit to the number of times the pass can be used. While you can only select one designated companion to fly with at a time, you can change your companion up to three times in a calendar year. 

Bang for your buck

As great as the Southwest Companion Pass is, there are definitely some things you need to be aware of to get the most out of it. While simply earning the pass is an achievement, earning it as early as you can in the year will help maximize your experience. Because the companion pass has to be earned within a calendar year, the sooner you qualify the more you can get out of it. On the contrary, even if you are only one point away, all qualifying points must be earned before the stroke of midnight on December 31st, or else all points will reset.

Another thing to keep in mind is that Southwest does not allow for reserved seats. Southwest boards in A, B, and C groups, and seats are first-come, first-serve via boarding order. You can however pay an upgrade fee to lock in your A Group status or earn it through their rewards program. Families with small children and flyers requiring wheelchairs are automatically upgraded to pre-board status based on availability. All of this, of course, rests on whether or not Southwest flies routes that you want to travel. Their offerings are extensive and growing so check their website for more information. Listen to this episode for continued tips on the Southwest Companion Pass!

Resources Mentioned

• Southwest Companion Pass 
• Southwest Rapid Rewards Credit Cards

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

Retirees often wonder how they are going to afford health insurance if they retire before the age of 65. Thankfully, many Americans qualify for healthcare subsidies through the Affordable Care Act (ACA). On this episode, I’m going to cover the five things you need to know about these subsidies and how you can become eligible for them.

You will want to hear this episode if you are interested in...

• What are ACA tax credit subsidies?[1:24] They are available to many people whose net income is between 100%-400% of the Federal Poverty Level
• Exploring eligibility for ACA tax credit subsidies [2:17]
• How does the federal government determine the poverty line? [5:33]
• The logistics of signing up for healthcare through the Marketplace [6:53]
• How do ACA tax credit subsidies work? [9:35]
• What info do I need to get started? [11:32]
• How do I apply for an ACA tax credit subsidy [14:19]

Reducing the cost of healthcare 

The years before retirement can be both exciting and nerve-wracking. That’s why retirement planning is an essential step! Set yourself up now so that life’s third act is enjoyable and stress-free. One major stressor most soon-to-be retirees face is figuring out healthcare coverage. Especially, if it’s not currently provided by an employer and they don’t yet qualify for Medicare due to age. Never fear, because the Affordable Care Act (ACA) may be the way to go. The ACA, also known as “Obamacare”, provides subsidies to qualifying individuals and families to help make healthcare costs more affordable. This is a great option to gain health insurance at a reasonable cost until you reach age 65 and qualify for Medicare. 

These subsidies are available to many people who qualify and the money is put towards significantly reducing your health insurance premium. In some cases, it can even make healthcare free! In 2020, it was estimated that 87% of the roughly 11 million people enrolled in the Healthcare Marketplace received a premium subsidy. If you don’t qualify for Medicare and you haven’t looked into this yet, what are you waiting for?

Do I qualify?

While the idea of affordable health insurance is appealing to everyone, some requirements need to be met in order to qualify. ACA tax credit subsidies work on a sliding scale that limits the amount you pay each month for health insurance premiums based on your modified adjusted gross income (MAGI). Most people are eligible for these subsidies if they annually earn between 100% and 400% of the Federal Poverty Level. However, in March of 2021, the American Rescue Plan Act (ARPA) added further relief to those struggling to find affordable health insurance during the COVID pandemic.

For 2021 and 2022, many retirees can take advantage of several ARPA provisions that will further reduce their healthcare costs. For example, no citizen or legally present non-citizen without access to other affordable healthcare options will pay more than 8.5% of income for a Marketplace Silver Plan. Additionally, individuals who earn 500% of the Federal Poverty level and don’t have access to other affordable healthcare options can take advantage of cost-sharing reductions through low-cost Healthcare Marketplace plans. For more information on reducing your healthcare costs and qualifying for subsidies, listen to this episode!

Resources Mentioned

• Access Health CT 
• HealthCare.gov

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

Several accounts allow you to name beneficiaries, some of which are likely familiar. It’s always important to name beneficiaries when given the opportunity. Doing so has some major benefits! On this episode, I’m going to discuss the different types of accounts that allow you to name beneficiaries, who you should and should not name as a beneficiary, how often you should update beneficiaries and more essential estate planning info!

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You will want to hear this episode if you are interested in...

• These accounts allow you to name beneficiaries [1:36]
• List these people as your beneficiaries [3:16]
• Keep these people off your beneficiary list [4:08]
• This is how often you should update your beneficiaries [7:46]
• Common beneficiary mistakes and mishaps [9:11]
• What is per stirpes and per capita? [10:33]
• Do your homework [12:40]

Knowledge is power

When starting the estate planning process, it’s important to list a beneficiary on every account possible. Ideally, the naming process happens when the account is opened. However, because one (or many) may have slipped through the cracks, you need to know which accounts allow you to name a beneficiary in the first place. Some of the most obvious are insurance products and annuities. I say that because who pays for a life insurance policy that benefits no one? Less obvious accounts that need beneficiaries are retirement accounts. Companies will often have physical or digital paperwork that needs to be completed to name these beneficiaries so talk to your HR representative to make sure everything is in order.

The following retirement accounts are eligible to name beneficiaries:

• 401k plans
• 403b plans
• 457 plans
• Simple retirement plans
• Simplified Employee Pension Plan (SEP)
• Profit-sharing plans
• Keogh plans
• Health Savings Accounts (HSA)
• Flex Savings Accounts (FSA)
• Traditional IRAs
• Roth IRAs

Keep it in the family

The next biggest question most of my clients have is who they should name as their beneficiaries. A great rule of thumb is that if you have family, they should be named as your beneficiaries. Generally, spouses are your primary beneficiary with children listed as your contingent beneficiary. Children can be named as the primary beneficiary, but if your spouse is alive when you pass away it can create unnecessary complications that would award them the benefit anyway. Another great option is donating the benefits from these accounts as a legacy gift. Charities and other qualifying 501(c)(3)s can be named as beneficiaries on these accounts as well. 

One question that some clients fail to ask is who they SHOULDN’T list as a beneficiary. At the top of my list is anyone who is receiving any type of financial assistance such as a special needs child or a spouse on Medicaid. Receiving these assets upon your death could disqualify them from these programs. Another beneficiary to avoid is your estate. You would think that naming your estate as the beneficiary of a retirement account is a good idea, but it’s often an overly complicated one. Assets that pass through your estate are likely subject to probate, which can delay receipt of these benefits for up to 9 months. You’re better off directly naming your beneficiaries so that it’s an easy process in an already difficult time. Listen to this episode for more information on naming beneficiaries!

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

If you’re thinking about enrolling in Medicare or collecting Social Security benefits this year and you still contribute to a Health Savings Account (HSA), there are tax penalties that you need to be aware of! On this episode, I’m going to cover how to avoid triggering those penalties and what to do if you’ve overcontributed to your HSA.

You will want to hear this episode if you are interested in...

• The wonderful world of HSAs [1:16]
• The six percent overcontribution penalty [2:02]
• When should I enroll in Medicare and Social Security if I have an HSA? [4:59] 
• Using HSAs to save for retirement [10:22]
• How to fix HSA mistakes you’ve already made [11:26]

Don’t pay the price

It will be no surprise to regular listeners of the podcast that I love Health Savings Accounts. I’m such a huge fan because they are a largely unknown way that you could be saving for retirement. Even if you are utilizing an HSA, you may not know how to get the most out of it. Or you’re making mistakes with it that could cost you down the road. 

One common HSA tax penalty is the 6% overcontribution penalty. This penalty triggers when you’re enrolled in Medicare and you inadvertently contribute to your HSA. Enrolling in Medicare means that you can no longer contribute to an HSA. It also means you’re employer can’t contribute to an HSA on your behalf either. If you’re planning to work past 65 and enroll in Medicare, it’s crucial to communicate that with them. 

Slow your enroll

The most frequent HSA mistake that people make is not knowing when to enroll in Medicare. Medicare has two standard parts: Part A and Part B. Part A is free as long as you or you’re spouse has worked for at least 10 years and covers the partial cost of a hospital stay. Part B helps cover medically necessary services like doctors' visits, outpatient care, and other medical services that Part A doesn't cover. If your plan is to work past the age of 65 and continue to make HSA contributions, you wouldn’t want to enroll in Medicare until you retire. 

Another HSA mistake I see often is people who work past 65 and collect Social Security benefits. For some, this is the best option for their situation. But like I’ve said in numerous past episodes, waiting to collect Social Security until full retirement age, or even age 70, will put far more money in your retirement savings than collecting as soon as you can. However, it’s even more necessary to wait if you want to contribute to an HSA because collecting Social Security benefits will automatically enroll you in Medicare Part A. Listen to this episode for more information on Medicare enrollment and HSAs!

Resources Mentioned

• How To Make The Most of Your Health Savings Account, #1 
• The Top Providers For HSA Accounts, #44 
• 7 Things To Know About Working and Collecting Social Security Benefits, #74 

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

How do married people make retirement contributions for both spouses if only one is working? Whether you’re dragging your feet to file taxes for 2021 or planning ahead for 2022, this episode is for you! Learn how to keep your significant other’s retirement planning on track while getting them a tax deduction they would otherwise miss.

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You will want to hear this episode if you are interested in...

• Getting familiar with spousal IRA contributions [1:21] 
• Which type of spousal IRA contribution is right for you? [4:05]
• Exploring spousal IRA income limitations [5:50]
• Where do I set up a spousal IRA? [10:37]

The basics of spousal IRA contributions

As a married person, you likely want your spouse to be just as prepared for retirement as you are. After all, you’re in it together! But what happens if your spouse needs to take a year off from work to focus on themselves or take care of children? Do they have to put their retirement planning on hold as well? Absolutely not. Spousal IRA contributions allow a working spouse to contribute on behalf of a partner who isn’t working or didn’t have access to a company retirement plan.

Spousal IRAs are almost identical to normal IRAs and are fairly straightforward. If your spouse is under 50 years old you can contribute up to $6,000 to an IRA in their name. After 50, the IRS gives you a “catch-up bonus” of a thousand dollars bringing the maximum contribution amount to $7,000. The IRA contribution deadline is easy to remember because it’s Tax Day (April 15th) so there is still time to make a contribution for 2021. If you’ve already filed taxes for last year and would still like to make an IRA contribution, be aware that you need to amend your return to reflect that contribution. 

Know your options and your limits

Similar to a regular IRA contribution, spousal IRA contributions have the option of going into either a traditional IRA or a Roth IRA. If you are looking to receive a deduction for your spousal IRA contribution then the traditional IRA is the way to go. The only downside is that all withdrawals on a traditional IRA will be taxed. With a Roth IRA, you lose the ability to deduct the contribution, but you pay taxes on the money upfront so all distributions are tax-free. Choosing which option is best for you really depends on your financial situation so pick the one that best suits your needs.

Another thing to consider is the spousal IRA income limitations. If your modified adjusted gross income (MAGI) is under $198,000 and the spouse you plan to contribute for didn’t have access to a company retirement plan during the year, you can make the full six or seven thousand dollar contribution. If your spouse had access to a company retirement plan for part of the year, they are subject to a different adjusted gross income limit. To learn more about these limits and other valuable information about spousal IRA contributions, listen to this episode!

Resources Mentioned

• Episode 87: How a Mega Backdoor Roth Can Accelerate Your Retirement Savings 

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

You may have seen that the Federal Reserve is officially increasing interest rates. The question on many of my client’s minds is “How will this affect my retirement?” If you’re asking the same question, this episode is for you! Join me, as I break down this new interest rate hike and give you strategies to continue planning for and living in retirement successfully. You will want to hear this episode if you are interested in...

• How DOES the Fed and central banking work? [1:13]
• How interest rates impact spending [2:55] 
• Fighting inflation and examining historical interest rate changes [5:23]
• Why higher interest rates impact bonds and other investments to keep your eye on [8:24]
• What interest rate increases mean for U.S. stocks [12:22]

Getting to know the Fed

One of the ways that central banks around the world control economic activity is by raising interest rates. If an economy is doing well, banks will raise interest rates to curb inflation. Alternatively, banks will lower interest rates to help jumpstart a sluggish economy. In the United States, interest rates are controlled by the Federal Reserve Board, aka the Fed. Our Fed’s dual mandate also includes the responsibility to promote maximum employment and promote price stability. 

Currently, the Fed is in the difficult situation of balancing low price stability and high-interest rates with the geopolitical climate. As of March 16th, the Fed raised interest rates a minimal 0.25 percent. This is definitely on the low end of what some economists were predicting, nevertheless, it’s still an increase with the expectation that there will be further increases later this year. Don’t get caught off guard! Read on to learn how these increases could impact your retirement.

Measuring the impact of higher interest rates

For every loan you take, interest is typically paid to compensate the lender. Several factors go into determining your interest rate, such as your credit history, the amount of money that you’re borrowing, and the timeframe chosen to pay back the loan. The banks we borrow from have to keep a certain amount of capital on hand to meet minimum deposit requirements. When they run short, they borrow money from the Fed to keep the economy rolling. 

However, when the Fed increases interest rates, they raise the cost for banks to borrow the money they are lending to you. Fed interest rate hikes force banks to increase their interest rates when you borrow money to purchase things like homes, cars, and other kinds of loans. The more you have to pay in interest, the less money you’ll have in your pocket to go towards the principal, thus diminishing the amount of money you can spend. That means a $500 per month payment buys less house and less car than it did before, potentially limiting your buying choices. It also further complicates an already complicated housing market, especially if more increases are on the way. For more ways interest rate increases impact you and your retirement, listen to this episode!

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

Has inflation gotten you down? Are you worried about rising prices and how to combat them in retirement? This episode is for you! Let me show you five ways to hedge your retirement income against inflation and why these methods are effective. You will want to hear this episode if you are interested in...

• Delay collecting Social Security benefits [1:56] Waiting till full retirement age. You can 
• Does your pension have a cost of living adjustment? [6:07]
• Invest in stocks and real estate [7:21]
• Why you need I-Bonds in your retirement portfolio [10:38]
• Is your portfolio worth its weight in gold? [13:16] 

An essential retirement planning strategy

Any regular listener of the podcast has heard me talk about delaying the collection of Social Security benefits until their full retirement age. The longer you wait until age 70, the more your monthly benefit will be. If you can wait, do it! However, with the current rise in inflation, waiting to receive your maximum benefit is quickly becoming an essential strategy for retirement planning. Not only will your monthly benefit be larger, but the cost of living increases to that benefit will be as well. A 5% increase on $2,000 is obviously more than the same increase on $1,000. That extra money in your pocket will help you keep pace with inflation.

So what does a cost of living increase for Social Security benefits look like? The percentage is determined by the Consumer Price Index. Over the last decade, we haven’t seen much of an adjustment. However, last year saw a large 5.9% cost of living increase. The downside to this strategy is that you have to live long enough to make back what you’re giving up by deferring your Social Security benefits. Give this episode a listen to learn how to figure out YOUR specific “break-even point”.

Weigh your options and do what makes sense

Another great way to use retirement income to shield yourself from inflation is through your pension. If it allows for a cost of living adjustment, it would be in your best interest to know exactly how it works. You need to know how that cost of living adjustment is determined. Any pension that offers you a cost of living increase will clearly communicate what they tie that number to. Similar to delaying Social Security benefits until your full retirement age or age 70, there is a “break-even point” to consider because a pension with a cost of living adjustment always pays out less initially than one without. Weigh your options and do what makes sense!

Investing in stocks and real estate is another way to fight inflation with your retirement portfolio. Since 1957, the S&P 500 has reported an average annualized return of 10.5% through 2021. When you have a significant allocation of your retirement investments in stocks and stock funds, you’re trusting in the time-tested reliability of the market to eventually adjust for inflation. However, volatility can be an issue. Over the last 30 years, the S&P 500 has seen an average intra-year decline of 15.7% and it’s declined over 30% a total of six times. Including when the pandemic hit in March of 2020. Obviously, we can’t take the good without the bad, but stocks have proven to be a useful hedge against inflation. For more information, listen to this episode!

Resources Mentioned

• https://www.ssa.gov/cola/

Connect With Morrissey Wealth Management 

• www.MorrisseyWealthManagement.com/contact

 

401k and IRA contribution limits can stand in the way of trying to save a lot of money in a short amount of time. If you got a late start on retirement planning and you’re trying to save as much money as possible in a tax-advantaged way, this episode is for you! I’m going to tell you all about the Mega Backdoor Roth IRA: what it is, how it works, who should consider it, and what the alternatives are if you don’t qualify. You will want to hear this episode if you are interested in...

• What is a Mega Backdoor Roth IRA? [1:08] 
• How a Mega Backdoor Roth IRA works [3:10]
• Who should take advantage of a Mega Backdoor Roth IRA? [9:37]
• Alternative options if you don’t qualify for the Mega Backdoor Roth IRA [11:47]

Understanding traditional Roth accounts

Before diving into what a Mega Backdoor Roth IRA is and how it accelerates retirement savings, we need to understand how a traditional Roth account works. With both a Roth 401k and Roth IRA, you contribute money that you’ve already paid taxes on, allowing it to grow and be withdrawn tax-free. While Roth 401ks are pretty straightforward, Roth IRA contributions are a bit trickier because they depend on your adjusted gross income (AGI) and your tax filing status. For example, the 2022 AGI for those filing as single needs to be under $129,000 to make the full contribution. Additionally, people who are married and file jointly need an AGI under $204,000 to do the same. You can also convert traditional 401k and IRA money over to a Roth IRA by paying taxes on it at your current rates. 

There are also limits to how much you can contribute to both accounts. If you are over 50 years old, you can contribute up to $27,000 to a Roth 401k and $7,000 to a Roth IRA. Those under 50 can contribute up to $20,500 and $6000, respectively. These limits pose a potential problem for those who waited for retirement planning and need to increase their saving power. That’s why a Mega Backdoor Roth account might be your next best option! 

Using a Mega Backdoor Roth IRA

To determine if you’re eligible for a Mega Backdoor Roth account, you need to make sure your company allows for after-tax contributions and in-service withdrawals on your traditional 401k. The next thing to look at is the total profit sharing contribution limit. This limit is the combined contributions of what you and your employer make. Pending eligibility, those under 50 can save up to $61,000 while those over tap out at $67,500, depending on your specified limit. 

The final step to setting up this account would be converting the money over to a Roth IRA as soon as possible. This is why you need in-service withdrawals! Transferring the money out of your pre-tax 401k account into a Roth IRA means you would benefit from the tax-deferred growth that occurs on top of whatever amount you are contributing. To learn more information about Mega Backdoor Roth IRAs and alternative options for those who don’t qualify, listen to this episode!

Resources Mentioned

• Episode 25 - Which is Better: Roth IRA or Traditional IRA 
• Episode 67 - Elimination of the Backdoor Roth IRA and Other Possible Tax Changes 

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact