Main Street Business

#609 Should You Contribute to Your Traditional IRA, or Go Roth Instead?

• Mark J Kohler and Mat Sorensen

Share episode

Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.

0:00 | 30:23

Should you take the tax deduction today… or build tax-free wealth for tomorrow? In this episode of the Main Street Business Podcast, Mark J. Kohler and Mat Sorensen break down the Roth vs. Traditional IRA debate and explain why the “lower tax bracket in retirement” argument doesn’t always hold up in the real world.

They walk through the math, the mindset, and the long-term strategy behind both options — including inheritance planning, self-directing for higher returns, tax rate uncertainty, flexibility in retirement, and why most entrepreneurs don’t actually earn less in retirement. You’ll also learn how the backdoor Roth IRA works for high-income earners and how to use creative tax strategies to offset Roth conversions.

If you’re rushing to make a last-minute IRA contribution before the tax deadline, this episode could change your decision. Make sure you understand the long-term consequences before chasing a short-term deduction!

You’ll learn:

  • The real difference between a Roth IRA and a Traditional IRA — and why the math isn’t the whole story
  • Why the “you’ll be in a lower tax bracket in retirement” argument often fails for entrepreneurs and investors
  • How paying taxes on the seed vs. the harvest dramatically impacts long-term wealth
  • Why a Roth IRA can be the most powerful asset to leave to your kids
  • How high-income earners can legally use the backdoor Roth IRA strategy
  • When a Traditional IRA might still make sense — and how to use both strategically
  • How to create offsetting tax strategies to fund a Roth without increasing your tax burden
  • Why contributing early (not just before the deadline) can significantly increase long-term returns

Get a comprehensive tax consultation with one of our Main Street tax lawyers that can build a tax strategy plan with an affordable consultation that will leave you speechless!! 

Here’s the link - https://kkoslawyers.com/services/comprehensive-bus-tax-consult/?utm_source=buzzsprout&utm_medium=description-link&utm_campaign=main-street-business-podcast&utm_content=msbp609-traditional-vs-roth-ira

Opening Banter And Big Promise

SPEAKER_00

Your kids can inherit anything from you worth a million bucks. Shouldn't be your house. Shouldn't be your traditional retirement account. The most powerful one is gonna be the Roth IRA.

SPEAKER_01

Advisors that can't get creative, they love this argument because they have nothing else better than that. That's their only dumb idea. So I gotta write off on a hundred grand, but I'm gonna pay tax on a million? I'd rather pay tax on a hundred grand than never pay tax on that million. People are told they're gonna be in a lower tax bracket when they retire. It doesn't work that way. It doesn't happen. Welcome everybody to the Main Street Business Podcast. My name is Mark Kohler. I'm here with the amazing, illustrious, incredible Matt Swanson. Three adjective throwdown right there. That's right.

SPEAKER_00

Go for four on the next one. That's okay. You don't have to be modest.

Why Advisors Push Traditional IRAs

Traditional Vs Roth: Plain-English Basics

SPEAKER_01

Yeah, I don't know. Hold back. Sorry, I won't. I apologize. I was just trying to protect you from, you know, uh yourself. But uh it's dangerous. Uh you know, uh, thanks everybody for listening. This is a big show because you may be getting a call from your advisor or accountant or whoever the hell saying, oh, it's time to put money in traditional IRA. And that's the only strategy they've got. And you're like, I got to put money in my IRA before I file my tax return so I can get a write-off. We want to caution you to think twice. So today's show is about that difference between taking a write-off on your traditional or just sticking to the true course. Anyway, a little subtle uh spoiler alert of the Roth IRA. I don't know. We're gonna debate both.

Early Access Rules That Favor Roth

SPEAKER_00

Yeah, and let me explain just for everybody here. Let's set the stage of what is the difference between traditional and Roth pros and cons. On a traditional account, remember this is traditional IRA or traditional 401k. I put the contribution in, I get a tax deduction. Let's say I contributed 10 grand into my traditional 401k. I get, and I'm in a 30% federal and a 5% state tax bracket. That 10 grand contribution that reduces my taxable income by 10 grand, which means I will pay 35% less in tax on the 10 grand, 3,500 bucks. So I got a$3,500 tax savings because I put in$10,000 into a traditional account. And that's the primary incentive of a traditional account. Now, when you invest the money, you don't pay tax, it grows. But the snag on the traditional account, which is the baggage, is you pay taxes as you draw the money out. The money you put in and all the earnings and growth, you're paying taxes you pull it out. Now the Roth is the exact opposite. You put 10 grand into your Roth 401k or$7,500 into your Roth IRA, zero tax deduction. The IRS is like, good for you. Yeah, no tax deduction. Now I invest that money, I don't pay taxes, it grows. But the key of the Roth account and why we love it is it's tax-free on the way out. Once I hit 59 and a half, every penny I pull out, all the investment growth, the money I put in, zero tax on the way out. Now I've got another reason I like the Roth IRA over the traditional. Okay, all right. Okay, when you put money in a Roth IRA, and this doesn't apply to the backdoor Roth IRA, but when you put money in a Roth IRA, let's say you put the$7,500 annual contribution in. Let's say you did that for 10 years for$75,000 of contributions. Now, with all the investment growth, let's say the whole account is worth$125,000. Let's say you're 45 years old at this point. Well, what if I want to access this money early? I want to start a business. I have some emergency in my life or whatever. How do I get that money out? Oh, you ought to pay a penalty. That's what they say. If you had a traditional IRA, that's what you'd have to do. And you pay taxes by pulling it out. But in a Roth IRA, the contributions you put in, that 10 years of$7,500,$75,000, I can pull out whenever I want, zero tax, zero penalty, no exception required. I could use the money and go on a trip to Vegas or go bet it on the Super Bowl. It doesn't matter. That money is yours. You can pull out at any time. It's only the investment returns and growth that you're waiting until you're 59 and a half. So I have better access to the money in the Roth IRA than I do a traditional.

SPEAKER_01

Yeah. Now the debate begins. And this is where typical advisors, especially those that started practicing in 1980 or 1990, will say, Oh, but if you look at the math, you know, it's going to end up being the same and returns and da-da-da. We're going to get into that. And there's pros and cons of both. And we want to break all that down. And excited to be here with you on this because this is this is a big topic.

SPEAKER_00

And this was and this was inspired by a show question that came in from Margate on the Main Share Business Podcast site. So this we're going to actually read that question to set up the table here. But that was this is where it's coming from. It's coming from you guys.

SPEAKER_01

Yeah, and and I want to that just reminded me, I want to say this too before we get into it. Some of you high income earners, we're going, guys, it's moot because I make too much money. Oh, we're going to talk about the backdoor Roth IRA near the end of this show, too, I'm sure. As we kind of point out that whether you're high income, low income, have a 401k, don't have a 401k, doesn't matter. All of you can do a Roth IRA, no matter what income level you're at, and if you have a 401k or not, or your spouse, all those, it's a lot of myths and misconceptions out there. So keep that in mind as we dive into this.

The Lower Bracket Myth In Retirement

SPEAKER_00

So, Matt, tell us about that question. All right, well, let's hit the first question here. I got one from Margate5. Says, Mark and Matt, huge fans of both of your shows. We do have a directed IRA podcast as well. It seems that the assumption, recommendation with all accounts we have, whether to be invested with an IRA or 401k, is that it be via a Roth. My question is, why so emphatically Roth? I understand the analogy of it being a tax-free ATM one day in the future. However, the biggest and valid pro-traditional argument is that presumably most of us, when we reach retirement age and can withdraw from these accounts, will be in a lower tax bracket than when not working compared to our high income years. I hope you're not in the workforce. Yeah, exactly. Yes, it is unpredictable. Okay, let's just stop there, actually. Okay. This is actually a really good point. And I'll tell you, I if you take the tax rate being the exact same from when you contribute to a Roth or traditional to when you start pulling the money out at retirement, it is a wash. There is no benefit between the two. It is really hard to argue that one is better than the other. And because let's think of the traditional. Let me just argue the traditional. You've heard us talk about the Roth here and the tax-free ATM. I get no deduction when I put the money in, but it grows and comes out totally tax-free in retirement, right? That's the Roth argument that we are usually on the Roth train on. We love Roth. The traditional argument is all right, if I've got 10 grand to put into a retirement account, but I but I'm in a 30% tax bracket, that might save me$3,000 in taxes. And if I take that$3,000 and invest it, I actually have more investable money to grow because it helps me today by having more money to set aside to invest. The problem is the problem is I'm on the way out, I'm gonna pay tax on that. And if you think of it, let me say this. If you think of that additional$3,000, let's say, that you put that you invested, that's we're assuming you're maxing out your retirement account. So I've already put in my$7,500 to my IRA. This is another$3,000 outside the IRA. Run with me here in the numbers. Let's say it's two grand, whatever, okay. But that's in a taxable account as well. But I've but I've ran the calculators on this. And everybody's got a not I said everybody. There's a lot of calculators you can run the pros and cons on this. Here's what I've seen to people get surprised by. And this is this is where it gets into the 10,000 hours and the 20 years of experience. Most people that are really good savers and contribute, particularly our business owner clients and entrepreneurs, have more income in retirement. They think that they're not, but they are. They have more investment income, which is still taxable, it affects your tax rate. They've got business income still coming through. They might not be working every day, but they still may own the business. They may have a stream of payout from selling the business, affecting their tax rate. And so my experience has been a lot of our clients, their actually tax rate is not going down in retirement because they actually have more income than they thought. Now, I will say, maybe you're someone in a career where you are not putting money into rental real estate that could have cash flow or other assets, and you and you're gonna just like stop and retire. I can see the traditional argument there where you will be in a lower tax bracket and it will be less painful on the traditional distributions on the way out. Okay, okay.

Behavior Matters More Than Math

The Best Inheritance: Roth Accounts

SPEAKER_01

There's a lot there. There was good. That was good, and you brought up so many great points. And I want to every take a breath for a minute. That there's a lot to consume there. Let me give you an example from another uh uh area of planning. Dave Ramsey. Dave Ramsay teaches the debt snowball, which we do as well. If you're in debt with a bunch of credit cards, student loans, la la la la la, you build a debt snowball. The debt snowball is taking the uh smallest accounts first to the largest balances, putting them in a progressive order, and setting aside just a few extra hundred dollars, and then keep making your minimum payments, but then you're gonna allocate that extra money to the first one. As soon as you pay that off, you roll everything into the next one, create that snowball, and boom, boom, boom, you get out of debt 80% faster. The debt snowball. Okay, it's awesome. Well, there's also called the debt avalanche. It's a whole other concept where you actually don't put them in order of lowest to highest balances, you put them in order of the worst interest rate to the best interest rate, and you pay off the worst interest rates first. Now, technically, the debt avalanche saves you money, and you actually get out of debt faster, too. The problem is human nature, you don't create that momentum of some quick wins of paying off those lower debts first and getting that those celebrations. Go on to the Dave Ramsey social media channel, their website, people are like, Oh, I paid off a card, oh, I paid off a card, and then I'm debt-free. And those that that's energy, that's exciting, and people feel that and they make progress. So technically, like Matt said, if you can you're in the same tax bracket, I'll come back to that assumption as well. But if you let's just say you are and you do the math, it's a break-even. The problem is human nature, people don't take that extra tax savings and make good decisions with it and reinvest the tax savings to at the same rate and blah, blah, blah, blah, blah. Technically, they would end up maybe in even a better spot, but people don't. The Roth IRA is like that human nature safety net that I know I'm never gonna pay tax on it again. And it works, it just is easier than this damn math. Your thoughts.

SPEAKER_00

And if you have a Roth IRA and you're doing a retirement account strategy, that is the last account you draw from. And this is the account and the assets you want your kids to inherit. I'm just telling you, if your kids could inherit anything from you worth a million bucks, shouldn't be your house, shouldn't be your traditional retirement account, shouldn't be your brokerage account. The most powerful one is gonna be the Roth IRA or Roth 401k. Even though I get step up and basis on the house or the brokerage account, fine, those are good. But the Roth account, they get another 10 years to draw and pull this out tax-free. Whereas if you did traditional and your kids inherit that, they're in their working years, they're trying to draw this out over a 10-year window, they're paying tax on that. So I think if we think of different phases and where you're drawing down the money too, I think the Roth wins there. But I love the mindset thing. Okay, because that that's how I that's what I think about it. I just love knowing that this nest egg is mine, no matter what. I get every penny out of that thing, I can rely on it.

Optionality And Strategic Investing

High Returns Make Roth A No-Brainer

SPEAKER_01

I love it. And and I want to add to this too, you alluded to it a little earlier that your kids you want to inherit a Roth, and it's the best thing to inherit to your kids. But we didn't explain why. I wanted just to add to that. Is that if I'm a child uh and my uh I am a child, I have an incredible mom and dad. Just want to get that out there if you were wondering. Okay. Uh I have a belly. I came into this world, but I have a belly button, you know. So, you know. Um, okay, so if my mom, uh bless God rest her soul, she passed away um two years ago, but if she left me a traditional IRA, um and I was which I did inherit from my mom, she left us all us three kids a little bit of a traditional IRA that she had left. I have to, when I take that, it's called an inherited IRA. And when I take the money out, I pay tax on it. I pay tax on my mom's traditional IRA because she died and she never paid tax on it. The IRS is like, whoa, someone's paying tax on this. Who inherited it? Okay, you did. I'm gonna give you 1099R and pay tax on it. But if I inherit a Roth IRA from my mom, I don't pay tax at all. And that inherited IRA, it's got a special little check mark next to it because I can invest it for 10 more years, however the hell I want. I can self-direct it by crypto, buy real estate, build. I can go do any type of deal that's passive that I want, uh, or active, I guess, with the cattle ranching or an operational business. I might have a U-bit, another story. But anyway, the point is I can invest that Roth for up to 10 years, make pay no tax on the growth in that as long as I drain it by the ninth year, 364th day, done, tax-free. So an inherited Roth is like the and I don't have to wait till I'm 59 and a half. I can inherit it at age 30 and play with it for 10 years and pull all the money out by age 40 at any pace or rate I want, as long as I drain it within 10 years from when I inherited it. That's incredible. And I can do that with a Roth IRA, but not traditional. Boom, love it. But here's another major point you made in there. People are told they're gonna be in a lower tax bracket when they retire. Is that what you want, people? Is that what you're working towards? It's not what I'm working towards. Just think about this. Like people that say I'm ready to retire, but I'm gonna make less. What do they do? They keep working, they keep their business, they sell this, buy that. People don't want to, I'm gonna live in a lifestyle of X dollars, and then when I retire, somehow mysteriously be okay living on less dollars. It doesn't work that way. You keep working your ass off, and we kind of keep spending what we make generally. Most people do that. And so to have the mindset that I'm working so that I can live on less, it doesn't work that way. It doesn't happen. And so it just drives me insane. This is where I'm gonna make my little rant here is that advisors that can't get creative, they love this argument because they have nothing else better than, well, you can put money in your traditional IRA this year and get a write-off because that's all they got. That's their only dumb idea. And when I'm like, I got 10 other ideas better than that, let's use the Roth. But if you say we're gonna go Roth, they're like, Well, uh uh, they have no other strategies. And so they love to harp on the well, you're gonna be in a lower tax bracket, and you know, you can, you know, technically assist that and another, and they get you know, pigeonholed into that argument and they can't get out of it. I would challenge you that when these advisors are trying to sell you on that traditional is better concept, say, give me another idea. Let's see how quickly they can come up with another one. Because I think the Roth IRA is going to give you the momentum, the energy, and the excitement that you got this tax-free ATM down the road, and that right off right now might be good, but are you gonna be that self-disciplined with it? I don't think so.

A Balanced Bucket Strategy

SPEAKER_00

I'm not. Yeah, and I think what let's just hit some more reasons here because Margie Ask like makes a lot of other points here. It's unpredictable what the tax rate will be in five, 10, 20 years from now, or whenever we retire. And if taxes increase, it will have made sense to be contributing to Roth the whole time. But I don't think that is the reason you guys are on the Roth train. And it's true. I think it's more likely that tax rates will be higher in the future than they are today, but that's not why I like the Roth account. Here's another thing why I like the Roth account. It gives you optionality. If I think of like our biggest investors, our most successful clients, and they have an investment in front of them that might take$300,000, but they know they can make$100,000 in six months. When they look at their where they can invest that money from, where do you think they're gonna do that? Six months they can get an incredible return. They're gonna go do it from the Roth account because they want to build that. They don't want to bit they don't want to drop that deal into a traditional IRA, which is gonna get taxed on the way out later, nor do they want to do it with their taxable money. So they can be strategic with it. And I think when you have these different pots of money, your taxable money, that you know, just all your other wealth you're doing, right? The money you're making, the equity in your home, your business, maybe you have a brokerage account or savings, other stuff that's taxable, and you have your Roth account, it gives you so much flexibility in retirement to where you're drawing on that wealth and you don't have to worry about the taxes on the Roth side. So I think that it gives you this optionality by having the Roth account. If I just have a traditional account, IRA, and I have my regular taxable funds, I'm stuck in tax land no matter which one I pull. But if I got the Roth one, I got some other strategies and some options.

Convert To Roth And Offset Taxes

SPEAKER_01

I freaking love it. And you gave me another idea here that I love to harp on. Okay, let's say you got a hundred grand. Okay, now just for easy math, I could put the hundred grand in a 401k IRA traditional combination or whatever, and I could get a write-off for 100 grand today if I put it in a traditional account. And I know I'm gonna pay tax down the road with whatever I create. Well, once you take the power of self-directing, please check out our other podcast, uh, check out our other podcast, the Directed IRA podcast, where we talk about consistently clients getting 15, 20, 25% returns or more on some big deals on occasion. Think about that. If I take that traditional account and I go out and 5x it over, or I may turn it into a million dollars. I turn it into a million dollars and I get a far better return than a Wall Street 8 and 10% deal. I'm gonna be paying tax on a million dollars, 900 grand to be exact, to get to get that out. Where if I had a Roth account, I'd never pay that tax on a million. So I gotta write off on a hundred grand, but I'm gonna pay tax on a million. I I'd rather pay the tax on a hundred grand and then never pay tax on that million. And so when you compare them apples to apples with the end with the actual rate of return and your tax rate being constant, you the higher your return, the more the Roth is attractive to me. Because if you're you're gonna self-direct, the Roth blows it out of the water.

SPEAKER_00

Yeah, absolutely, because the value of the deduction is so little. And if I compared to the investment returns and growths, I'd rather give up that little deduction on that small amount of contribution when over time that earnings and growth could be 10x that just from the compounding of this over time, even if you're an average investor, just in the SP 500 fund. So that's why we like it. I know, and I'm gonna admit this. You go run a calculator on it, and you really think and you go discipline with like, well, if I take the tax savings from the contribution and I invest that and I run it out, and I average and I look at what how this is gonna look in retirement with tax rates being the same, and I'm drawing it out. I know it's break-even. I will concede that. Yet still, for all these reasons. One out of a thousand people do it. Yeah, uh what for all these reasons we've talked about, that's why we like the Roth train. And I'll say one other thing that's another kind of hybrid approach that I like is having a little bit of everything. I actually don't think you have to go 100% Roth. I think for me that should be the biggest account. I have a little bit of traditional dollars left, and I like that. Let's say I'm gonna be in a lower tax bracket in retirement than I am during my working years. Or let's just say 70s, you know. Yeah, you have a low year, you're the random year. Yeah, and I hit that, and that's not my plan, but let's say that that happens, and I'm 70, and I'm like, well, I want to take some money out, and I and I've got a hundred grand in a traditional account that year. Maybe I draw that out because I have no income that year from anywhere else. Well, then I'm in a low tax bracket, but I'm not gonna draw from the Roth. So by having a couple of buckets, it does give you the flexibility where you don't know what it's gonna look like in your 70s or 80s. But I'm just telling you, the one that you can never go wrong with is the Roth. You will never lose because you did the Roth. You can lose if you do the traditional because your income is more in retirement. So that's another thing, probably way to think about it. Yep, I got another one here. Now, I was thought we were done on this. Oh, yeah, yeah, yeah.

Deadlines, Discipline, And Momentum

SPEAKER_01

There's more, there's more. Because I here's you I was a little aggressive when I said you're maybe your advisor right now, this is the only you know, trick they can pull out of their hat, is you know, it's April 14th, and they call you up and go, well, let's put money in your IRA. You know, that's it. Here, so and I said, What else you got? And I call them out. Well, let's call out Mark Kohler. What what would I say? I would say, whoa, whoa, whoa, whoa, whoa. I want you to put that money in Roth. And in fact, I want you to convert some traditional money over to Roth. Mark, what are you crazy? You just told me not to take it right off and to convert some money into Roth? Yeah, we're gonna chunk at it and get rid of all your traditional. What are you smoking? You want me to send more money to the IRS right now. Yeah, I but I'm gonna offset it. I love offsetting strategies. This is a class I teach in our workshops and all that. Is if I got a big gain, maybe from an exit, sell a business, I just sold a piece of real estate, I got a bonus at work, whatever. You uh you love. times you can't save tax on that transaction but I can go create an offsetting transaction and make it tax neutral so oh this may be the year to take a little bit of money and buy that short-term rental property go do a little Airbnb rip out some bonus depreciation maybe there's a piece of equipment another piece of personal property I want to rent out I want to rent out my RV that's been sitting next to the house doing nothing so I can depreciate that all in one shot by putting it on outdoorsy maybe I want to go invest in some oil and gas get an oil and gas write off I want to invest in uh an opportunity zone or I want to get go over and create a write-off somewhere else an opportunity zone is deferral I apologize I'm getting ahead of myself but if I can create a write-off somewhere else to offset my reason why I'm doing a Roth now you're even further ahead now I'm not taking that hit to begin with so let's get creative let's put some kids on payroll you weren't doing that before let's go create an accelerated write-off in another area let's get creative I love it I love it because that's how you can have your cake and eat it too right that's how we can have the Roth account and also get our theory like I want to look at my cake but I want to eat it so you've had to explain this one to me because I always thought that analogy was so dumb. Yeah. What good is cake if you can't eat it so I don't know you know people want to look at it I guess it's a wedding cake concept you know okay that makes sense you know I gotta go put it in the freezer did you ever eat your frozen wedding cake five years later no no no I did not eat it didn't even taste good the first time you've got all that like crazy stuff in this frosting pretty good I was I was actually pretty pretty satisfied.

SPEAKER_00

Okay there you go yeah all right uh uh well that's the Roth versus traditional debate um we tend to be Roth guys as was exposed here in the answer there's good arguments again on the traditional side um we just think that there's more Roth winning arguments out there when you think about um paying tax on the seed versus the harvest when you think about letting your kids inherit that Roth account versus a traditional account you think about it's more likely tax rates are going to be higher in the future than later. For many of you on the Main Street business podcast your mainstream business owners trying to grow and build wealth find different streams of income it's likely your income will not be less when you hit your 60s and 70s. It may actually be more the list goes on and on I don't have to re you know create the whole thing but no no I love it.

SPEAKER_01

Hey I want to get your thoughts on this too here's another another point that I want to make too is maybe after this podcast you guys are like okay fair enough the Roth's better I'm not gonna chase that deduction before April 15th okay no April 15th is your deadline for last year's contribution to your Roth as well. And so you're gonna hear this podcast and maybe which is this is what I don't want to happen is you listen to this podcast and you're like yeah screw it I'm not gonna do that last minute deduction into my traditional like I do every year. It's not worth it. These guys were right the Roth's better so when your accountant calls you're like no I'm gonna skip that this year and you do nothing. No that's not what we're saying. I'm saying go still contribute before April 15th but into a Roth account. And if you have to tone down the amount you put into it because you're like well I got to pay a little more in taxes because I'm not doing the traditional thing this year then fine. But instead of putting eight grand in your Roth put five grand or six grand or something but do something. This is the key to building wealth is that you now put in that money for the Roth skip the traditional tell your accountant off if you want to make a change but then turn around and make your contribution for this year at the same time and Matt you are such an advocate for this.

Automate Contributions And Backdoor Roth

SPEAKER_00

Yeah I mean this is kind of I think some people get caught up by like the deadline like this is your homework assignment in high school like we don't just turn this in on the deadline like let's get it in early there is value in turning this in early and getting your money in early because we are going to invest it there's lots of studies out there Fidelity did a study on what are the attributes of people that have million dollar IRA accounts and in 401ks what is the at one of the common attributes they contribute as soon as possible. When January of 2026 hits they're making 2026 contributions they're not doing 25 contributions those have been sitting in there invested and gaining money for a year. When you think about investing over 20 years and you think about waiting a year you've given up 20 years of compounding those dollars. Wow and it really adds up at the end of the day so I would just think when we're sitting here in February of 2026 right now if you haven't contributed for 25 get on it you haven't 15th on your IRA but also like Mark said get your 2026 contribution in. I know we get caught up in the tax strategy and the tax deadline and these Roth IRAs traditional IRAs even Roth and traditional 41Ks they're tax advantaged accounts but they are investment accounts you win by letting those money those dollars be invested growing a compound over time.

SPEAKER_01

Yeah and if you is again I said this at the very beginning of the show I have been the benefactor of so many of you our listeners having conversations with you in one-on-ones or at an event or somewhere calls into the show and another um common characteristic of our clients that do retirement account uh contributions is it's on autopilot. Yeah it's on autopilot get one of those apps there's 50 of them out there that will just suck it right out of your account every week every month just a little bit and then it's out of sight out of mind. Now yes if you've got a 401 at work that's going to come right out of your paycheck blah blah blah but these Roth accounts that are IRAs you can do that on top of your 401 at work. Everybody can have a Roth IRA on top of your 401k well I make too much money mark no no no no you can still do what's called the backdoor Roth so throughout the year you're contributing to a traditional IRA not getting a write-off because you make too much money and then at the end of the year you turn it into a Roth tax free.

Wrap-Up And Audience Invitation

SPEAKER_00

Yeah and I will say if you are a high income earner which means you would then have to do the backdoor Roth IRA just do the$7500 all at once in January. Like why are you messing around? You have a high enough income where you're forced to do that. And that and and converting each one of those separately would be a pain in the ass. And you don't want to invest so those traditional so I agree for the regular Roth IRA and traditional IRA if you want automate it maybe it's 500 bucks a month or whatever you know 700 however that adds up to the 7500 now that's the 2026 number but uh if you have the funds and the wherewithal and this is most of the clients at directed IRA they're dropping 7500 bucks in all at once as an annual contribution. And for those of you backdoor Roth IRA your high income you should be doing that.

SPEAKER_01

Yeah please Google backdoor Roth IRA Matt Sorensen. Don't Google backdoor Matt Sorensen just do backdoor Roth IRA I highly recommend that. I just want to forewarn you that that's that's an adult it it's it was it was scarring. I'm just gonna say that's leave it at that but anyway so hey views or views you know whatever it takes to get some views. I mean Matt's reaching for those views you know but yeah it's it's it's working you know you've been climbing you got your congratulations by the way you got your YouTube silver play button silver play button yeah uh you know the backdoor Roth Area helped on that one let's just be clear this is a joke okay don't be searching the dark web for anything Matt's got quite a presence on the back totally for just laughs guys okay oh my gosh what a great show i this is a debate we hear every year with clients uh calling up going my accountant said this and and we have to really look explore the pros and cons. So hopefully you can make a a more educated decision this year. Thank you so much for listening. Please send this podcast around to your friends and family and uh I hope you enjoyed it and thank you so much. We'll see you at our next podcast. We're doing more this year uh sometimes two a week making sure we have more open forums we got a new website out make sure you get over to mainstreet businesspodcast.com submit questions we've got a lot of resources there we are freaking going next level and appreciate your viewership and your listenership is that those things yeah and uh thanks everybody see you next week

Head Shot

Mark J. Kohler

Host
Head Shot

Mat Sorensen

Host

Podcasts we love

Check out these other fine podcasts recommended by us, not an algorithm.

Directed IRA Podcast Artwork

Directed IRA Podcast

Mat Sorensen and Mark Kohler