10 Tips for Maximizing Your Financial Plan in 2023: Tip 3- Traditional IRA Planning

In 2023, Matt Blocki’s tip number three focuses on traditional IRA planning. He explains that while Roth IRAs are generally preferred due to their tax advantages, some individuals might need to consider traditional IRAs if they want a tax deduction. The contribution limit for IRAs in 2023 is $6,500 if you’re under 50 and $7,500 if you’re over 50.

However, Matt emphasizes that many viewers might benefit from the backdoor Roth IRA strategy, which allows you to contribute to a traditional IRA and then convert the funds to a Roth IRA, regardless of your income level. This approach can provide tax-free growth and distributions, making it a valuable option for many individuals. For more details, refer to tip number two and the video on completing a backdoor Roth IRA

Video Transcript

Hello, Matt Blocki with EWA. Today we are talking through ten tips for 2023 and how to maximize your financial plan. Tip number three for 2023 is traditional IRA planning. So traditional IRA is something that you potentially can fund into an IRA pre tax tax.

The limit 6500 in 2023 if you’re under 50 or 7500 if you’re over age 50. That’s a combination in the IRA world. So you can either do a traditional IRA or Roth IRA for most of you would recommend to do a Roth IRA, pay the taxes now, get the tax free growth, get all of the tax free distributions, assuming you’re 59 and a half and then also pass it to your kids tax free as well.

If it’s a Roth IRA. So generally speaking, we prefer Roth IRAs. Let’s look at the traditional IRA for a second, because some of you, to get the money in the Roth IRA, will have to go back to tip number two, which we discussed, the backdoor Roth IRA.

If you want the tax deduction for a traditional IRA, you have to meet the standards of if you’re an active employee and married filing jointly, your total income in your household has to be under 116 to be able to put the money in and get the deduction.

Once you’re over 136, you’re fully phased out. If you’re a non active participant in a 401K plan and married filing jointly, those limits go up to 218 to 228, where you’re fully phased out. But again, most of you watching this video will have already maxed out your 401K plans.

You’re probably already an active participant in a your employer or you have your own 401K, which would make you an active participant dependent. But this is all irrelevant. If we’re doing the backdoor off, we can, regardless of income, $1 a million dollars, $1 billion doesn’t matter how much income you make.

Anyone can contribute to this traditional IRA without the tax deduction. And then convert that money to a Roth IRA. And that’s the backdoor Roth mechanism. So please see tip number two for complete details.

And also please see our video five tips on completing a backdoor Roth to make sure that we don’t run into aggregation issues or any other issues. And it’s a clean backdoor Roth that you do in 2023. And moving forward.

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Playlist

10 Tips for Maximizing Your Financial Plan in 2023

10 Tips for Maximizing Your Financial Plan in 2023: Tip 1- 401ks and 403bs
10 Tips for Maximizing Your Financial Plan in 2023: Tip 2- Roth IRAs
10 Tips for Maximizing Your Financial Plan in 2023: Tip 4- Allowable Income for 401k and 403b
10 Tips for Maximizing Your Financial Plan in 2023: Tip 5- Social Security Tax
10 Tips for Maximizing Your Financial Plan in 2023: Tip 6- HSA's
10 Tips for Maximizing Your Financial Plan in 2023: Tip 7- Tax Bracket Management
10 Tips for Maximizing Your Financial Plan in 2023: Tip 8- Estate Planning
10 Tips for Maximizing Your Financial Plan in 2023: Tip 9- 529 Plans
10 Tips for Maximizing Your Financial Plan in 2023: Tip 10-Standard Deduction

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