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How to Use Roth Accounts
I like to call Roth Accounts the “Never Taxed Again” account because you are taxed on the money you put in, but you are not taxed when you take it out nor are you taxed on the earnings.
How to Use Traditional Retirement Accounts
Traditional Retirement Accounts are tax-deferred. This means you get a tax deduction when you put money in, and you pay tax when you take money out (usually in retirement). Most typically, these are your Traditional 401k and Traditional IRAs.
Consider Making Roth Conversions Regularly
Last week we talked about the three types of accounts we can use for our Long-Term Portfolio and I said it’s important to have balances in all three types. The Already-Taxed or Roth account is the most difficult to contribute to so I want to talk this week about how we can get money into a Roth by making conversions.
Use All 3 Tax Structures for Your Long-Term Portfolio
We want to use all three of these when investing our Long-Term Portfolio and I’ll tell you why in a moment. But first, I want to talk through how each of them works.