Are you a woman with significant wealth? As of 2023, most account owners can contribute $22,500, or $30,000 for those aged 50 and over, into their 401(k) annually.
Suppose you earn too much to contribute to a post-tax Roth IRA. In that case, you can benefit through contributions to a 401(k) because each dollar contributed can reduce your adjusted gross income, which can lower your marginal rate. Other retirement options that may be suitable include a direct Roth contribution or a Roth conversion at a lower tax rate. How does this work?
Say you were in the 24 percent tax bracket and contributed enough to lower your taxable income to fall into the 22 percent tax bracket. You could then convert your prior 401(k) or IRA contributions into a Roth IRA at the 22 percent tax bracket. Roth contributions can be withdrawn at any time, tax-free and without penalty, and aren’t subject to required minimum distributions (RMDs).
If you haven’t done so already, take five minutes and schedule a consultation with a financial professional to learn how to work toward preserving your money using options appropriate to you and your situation.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This script was prepared by LPL Marketing Solutions
Sources:
WriterAccess article, “How Should High Net-Worth Women Use Their 401(k)?”
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