Why You Should Do a Roth (Part 1)

Public Safety Employees can take distributions from their government sponsored retirement plans at age 50 WITHOUT the 10% penalty!

Did you know that? I did not and I can’t believe I missed this! Many thanks to a subscriber who pointed this out to me today.

This law was signed by Obama in 2015, yet here it is 2018 and I was only made aware of it. Crazy.

Two morals of the story here:

1. If you are a government Public Safety Employee you’d be CRAZY to rollover your retirement $ to an IRA. (Even double if you’re ANY government employee living in MD or RI).

2. No one knows everything. You need to be open to other ideas and suggestions as someone WILL know something you do not.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

https://www.investmentnews.com/article/20150918/FREE/150919904/law-expands-10-penalty-exception-for-public-safety-workers
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In part 1 of our five part series on “Why You SHOULD Do a Roth” we introduce Bob and Jane Youtube.

They are both 50 years old. They each make $50 a year. Defer $10k of their salaries to their 401k, their company matches 8% of their salaries.

They expect to get a 7% Rate of Return from now until they reach the age of 60 when they will stop working. They also expect to get a 7% rate of return from 60 -70 when they have to start taking required minimum distributions and then will cut back their “risk” and expect to get 5% returns from there on out.

By deferring into the traditional 401k they save around $2500 a year in taxes which they can invest in a side account, also growing at 7% a year.

Is that the best solution though?

We’ll go over this in depth in this series. So stay tuned!

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