Evaluating IRA Options

To spend $100,000 in retirement, some may need to withdraw $140,000+. Others may only need around $105,000. The difference? Not investment returns. The type of accounts they used along the way. This is one of the biggest misconceptions I see with investing. People spend years focusing on picking stocks and chasing return. But often spend very little time thinking about where those investments should actually live. And over time, that decision can create a massive difference in: - Taxes - Flexibility - Withdrawal strategies - Long-term wealth preservation The 4 major account types each behave differently: 1. Traditional IRA / Pre-Tax Accounts These accounts may help reduce taxable income today. That’s why many high earners prioritize them during peak earning years. The tradeoff? Future withdrawals are generally taxed as ordinary income. Which can become important later for people trying to create retirement income efficiently. 2. Roth IRA No upfront deduction. But qualified withdrawals can potentially come out tax-free later. A lot of people underestimate how powerful decades of tax-free growth can become. Especially for younger investors and high earners with long compounding timelines. 3. HSA One of the few accounts with potential triple-tax advantages: 1) Tax deduction going in 2) Tax-free growth 3) Tax-free withdrawals for qualified medical expenses Some people even choose to pay medical expenses out of pocket today, while leaving the HSA invested long term. 4. Taxable Brokerage Accounts No upfront tax break. But a huge amount of flexibility. No early withdrawal penalties. No required distributions. No contribution limits. And in many cases, long-term capital gains rates may be lower than ordinary income tax rates. Which is one reason taxable accounts often become important for people pursuing financial independence before traditional retirement age. Most strong financial plans don’t rely entirely on one account type. They use different accounts strategically together. Because years later, there’s a big difference between: * Needing to withdraw $140,000 to spend $100,000  vs * Needing to withdraw $105,000 to spend $100,000 And that gap often starts long before retirement even begins.

Many financial professionals still believe a SEP IRA is the best retirement account for self-employed people. Let me tell you why this is outdated advice and why a Solo 401(k) is better... >> 1. Higher contributions The solo 401(k) and SEP IRA have a $70k limit in 2025. However, a solo 401(k) allows you to contribute a higher percentage of income. This is becuase you can contribute as the employee (you) and the employer (also you). Example... Let's say you earn $150k as a 1099 contractor or single-member LLC. Here is how much you can contribute: Solo k: $51,300 ($23.5k as the employee + 20% of adjusted earnings as the employer) SEP IRA: $27,800 (SEP IRAs only allow for the employer side contribution) >> 2. Roth options With a solo k, you can make Roth contributions as the "employee" up to $23,500 SEP IRAs do not have a Roth feature. However, this is supposed to be rolling out soon (but it might still be suboptimal because of the tax reporting!) >> 3. Opens the backdoor Roth For higher earners that want to use the backdoor Roth strategy, SEP IRAs are part of the "pro rata" equation. In other words, you can't do the backdoor Roth w/ a SEP. A solo 401(k) can remove any IRAs, so you can cleanly do the backdoor Roth. >> 4. Mega backdoor Roth A solo k can allow for after-tax contributions, allowing you to get up to $70k into a Roth account! A SEP IRA only allows for pre-tax contributions. However, you can do Roth conversions with a SEP IRA. >> 5. Loans With a solo k, you can access the account via loans. This can be huge for self-employed business owners who might need capital in a pinch. It's not a preferable option, but it's there for some flexibility. No loans with a SEP. >> 6. Catch up contributions Once you turn age 50, you can make "catch-up" contributions to a solo 401k. Age 50-59 or 64+: +$7,500 Age 60-63: +$11,250 A SEP IRA does not allow for these additional catch up contributions. >> 7. Maximize your 20% QBI deduction With the flexibility of different contribution types -- pre-tax, Roth, or after-tax, the solo 401k can help you maximize your QBI deduction (depending on your total income). With a SEP IRA, you're stuck with pre-tax contributions, which can limit your QBI deduction. There are very few people that get this one right. It might be one of the biggest perks of the solo 401k. In the end, the most important factor is actually using one of these accounts to invest tax-advantaged. However, in my experience, the solo 401k offers much greater flexibility for solo business owners and 1099 contractors.

Working with an anesthesiologist who made ~$400k in 1099 income in 2025. Expects a similar income in 2026. Lives in Tennesee. Files single. He's received all sorts of conflicting opinions from CPAs on SEP IRAs, solo 401ks, S corp, no S corp, can't contribute to a Roth, can contribute to a Roth, etc so he reached out. Here's a line item of what we've talked about: 1 - LLC and whether to elect to be taxed as an S corp or not. On paper, he's a perfect fit for S corp. AI would tell him yes. Internet advice would tell him yes. But he lives in Tennesee. Any S corp savings he'd get he'd give up in new Tennesee state excise taxes. Here are the #s if he S corp'd his LLC with a $200K reasonable salary. No S corp = $35,115 self-employment tax, $98,594 federal income tax, and $0 state income tax. Total of $133,709 in tax on $400K of sole prop earnings. S corp = $28,678 payroll tax, $99,721 of federal income tax, and $8,818 of state excise tax. Total tax = $137,717 vs. $133,709 as a sole prop. Net loss of $4K and this doesn't include costs of running payroll, paying for a separate business filing fee, and admin burden of being an S corp (accountable plan for home office, vehicle, etc). Lots of lessons to be learned in this 2 - Retirement plan options. Both 2025 and 2026. A SEP IRA could be opened to do a $70K tax deduction on 2025 taxes to save him roughly $24,500 on 2025 taxes but he doesn't love the idea of locking up funds till 59.5. A solo 401k could be used to do this exact same thing ($70K tax deduction on 2025 taxes) but it wouldn't block a backdoor Roth for him moving forward so if this is what he wanted ($70K tax deduction on 2025 taxes) I'd still point him toward a solo 401k over a SEP IRA. Solo 401k reduces QBI deduction less as well but that's a bit more nuanced than this post needs 3 - Assuming he disregards the $70K tax deduction since he doesn't want to lock up funds, he can use his solo 401K plan to get $70K into his Roth IRA for the 2025 tax year. Then use it to get $72K in his Roth IRA for the 2026 tax year. The #s get crazy quick but he loves this path since it gives him full access to his principal contribution ($70K for 2025, $72K for 2026) anytime tax-free and penalty-free and then all gains grow tax-free. Win win and one of the rare cases where tax benefits exist and liquidity exist. 4 - Max out HSA. He already has a high deductible health plan and is doing this so nothing to change here. 5 - Retroactive backdoor Roth for the 2025 tax year and then do a backdoor Roth for 2026. Since he is not doing a SEP IRA, this is another easy win for him. Already taxed dollars go in and then the account grows tax-free. $7K for 2025. $7.5k for 2026 Then we can layer in a handful of other things but some really cool dialogue that he was good with me sharing

If you are one of the many who have changed jobs or left a W2 job to start your own business, you will need to figure out what to do with the savings in your 401(k) or other retirement account. There are four main options: ► Roll them into an IRA ► Roll them into the new employer's plan ► Keep them with your former employer ► Cash them out   Each option has different implications, so it's important you understand them before making a choice.   𝐑𝐨𝐥𝐥𝐨𝐯𝐞𝐫 𝐭𝐨 𝐚𝐧 𝐈𝐑𝐀   There are three types of rollovers you can do: ► A rollover from a traditional 401(k) to a Roth IRA – you’ll owe taxes on the rolled-over amount. ► A rollover from a traditional 401(k) to a traditional IRA – the taxes are deferred. ► A rollover from a Roth 401(k), to a Roth IRA – you won't incur taxes.   With any of these, you need to contact your former employer’s plan administrator, ask for a direct rollover, complete a few forms, and ask for a check or wire of your account balance to be sent to your new account provider.   You can also request the balance be sent directly to you and then deposit it into the new account. With this option, you have to make the deposit within 60 days of receiving the funds and there will likely be withholding on the distribution so you will need to assure you deposit the full amount into the new account.   𝐑𝐨𝐥𝐥𝐢𝐧𝐠 𝐲𝐨𝐮𝐫 𝐨𝐥𝐝 401(𝐤) 𝐨𝐯𝐞𝐫 𝐭𝐨 𝐚 𝐧𝐞𝐰 𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐫 𝐨𝐫 𝐤𝐞𝐞𝐩𝐢𝐧𝐠 𝐲𝐨𝐮𝐫 401(𝐤) 𝐰𝐢𝐭𝐡 𝐲𝐨𝐮𝐫 𝐟𝐨𝐫𝐦𝐞𝐫 𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐫   While there aren’t any tax implications with these options, be sure to evaluate the investment options and account fees when considering them.   𝐂𝐚𝐬𝐡𝐢𝐧𝐠 𝐨𝐮𝐭 𝐲𝐨𝐮𝐫 401(𝐤) If you really need the money, you can take the cash out of your retirement account. This is typically considered an early distribution, subject to a 10% penalty in addition to any income taxes due., unless you meet one of the penalty exceptions.   Are you sitting on old retirement accounts? Now is a great time to consolidate! #taxes #financialliteracy #financialwellness

💡 Roth IRA vs. Traditional IRA: What's the Difference? 💡 When it comes to saving for retirement, IRAs (Individual Retirement Accounts) are a powerful tool. But if you're deciding between a Roth IRA and a Traditional IRA, it’s important to understand the key differences—and how each option impacts your taxes and future retirement savings. 🏦 Here’s a quick breakdown: A. Traditional IRA: - Tax Benefits: Contributions are tax-deductible in the year you make them, which can lower your taxable income. - Tax on Withdrawals: When you withdraw in retirement, your money is taxed as ordinary income. - Required Minimum Distributions (RMDs): You must begin taking RMDs at age 73. - Eligibility: Contributions are limited by income, but you can contribute at any age as long as you have earned income. B. Roth IRA: - Tax Benefits: Contributions are made with after-tax dollars (no immediate tax deduction). - Tax-Free Withdrawals: Qualified withdrawals in retirement are tax-free (including earnings). - No RMDs: You are not required to take RMDs during your lifetime. Eligibility: Contributions are limited by income; higher earners may not be eligible to contribute directly. Key Decision Factors: 1) Tax Strategy: If you expect to be in a higher tax bracket in retirement, a Roth IRA might be beneficial for tax-free withdrawals. On the other hand, if you want to reduce your taxable income now, a Traditional IRA might be the way to go. 2) Withdrawal Flexibility: A Roth IRA provides tax-free access to your contributions anytime (subject to conditions), making it more flexible if you need funds before retirement. **The due date to fund an IRA for 2024 is April 15th, so don't delay!** 💡 Tip: Consider talking to a financial advisor to determine which IRA is best suited for your long-term financial goals! #RetirementPlanning #RothIRA #TraditionalIRA #TaxPlanning #Investing #FinancialTips

You're pulling in a high income and living below your means. 👍 Maxing out your 401(k). Maybe you max your HSA as well. 𝗕𝘂𝘁 𝗰𝗮𝘀𝗵 𝗶𝘀 𝘀𝘁𝗶𝗹𝗹 𝗽𝗶𝗹𝗶𝗻𝗴 𝘂𝗽. 💵 Can't contribute to a Roth IRA because income is too high. Where should you point your firehose of cash? What other accounts can you invest in? Here's a few options 👇 ✅ 𝙈𝙚𝙜𝙖 𝘽𝙖𝙘𝙠𝙙𝙤𝙤𝙧 𝙍𝙤𝙩𝙝 -- You can get up to $69,000 (+$7,500 if over age 50) into your 401(k) and all of it is tax-advantaged. -- If your 401(k) plan allows after-tax contributions and in-plan Roth conversions, you're in luck! ✅ 𝘽𝙖𝙘𝙠𝙙𝙤𝙤𝙧 𝙍𝙤𝙩𝙝 -- Limit is $7,000 (+$1,000 if over age 50). -- This involves making a non-deductible contribution to an IRA and immediately converting it to Roth. -- Ideally, you roll any existing pretax IRA balances into your 401(k) before executing this strategy. -- This is often reported incorrectly on tax returns, so make sure your CPA is aware. ✅ 𝙏𝙖𝙭𝙖𝙗𝙡𝙚 (𝙣𝙤𝙣-𝙦𝙪𝙖𝙡𝙞𝙛𝙞𝙚𝙙) 𝙖𝙘𝙘𝙤𝙪𝙣𝙩 -- Not tax-advantaged like retirement accounts, but still favorable rates on qualified dividends and long-term capital gains. -- No contribution limits. -- Can withdraw gains at 0% in the 12% tax bracket. -- Ultimate flexibility: No penalty for withdrawing before age 59.5. -- Ability to tax-loss harvest and borrow against your portfolio. -- Heirs get a step-up in basis and can cash out tax-free. ------------ 𝗔𝗿𝗲 𝘆𝗼𝘂 𝘁𝗮𝗸𝗶𝗻𝗴 𝗮𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲 𝗼𝗳 𝘁𝗵𝗲𝘀𝗲 𝗼𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝗶𝗲𝘀? Talk to your money person to see if these strategies are a good fit for your situation and goals! ------------ I'm Allen Mueller, a financial advisor who helps Aerospace & Defense professionals build wealth, win the tax game, and make work optional. If you want your money to work as hard as you do → Visit my website to book a complimentary meeting! **This post is general education, not financial advice.**

What should I do with my extra income if I don’t have access to a 401K? I recently came across a great question from a 25 year old graduate student who’s taking smart steps toward their financial future. They’ve been maxing out their Roth IRA, but are wondering, "what should I do with my extra income if I don’t have access to a 401K?" Here are the details: 1. Income and Graduate School Status: Currently earning $40K a year as a graduate student. Income should rise to at least $90K within 2 to 3 years once they complete their degree. As a student, they don’t have access to a 401K plan. 2. Current Retirement Savings: Maxed out their Roth IRA for the past two years and have invested in a target retirement fund. They contribute to their Roth IRA at the beginning of each year with a lump sum due to how they are paid. 3. Emergency Fund Situation: They have $34,000 set aside in their emergency fund. They’re unsure if they should keep it as is, considering they’ll likely need a new car, face relocation costs after graduation, want to travel, and eventually plan to purchase a home. 4. Financial Future: They expect to be the primary breadwinner in their household and want to ensure they are making smart financial decisions now that will prepare them for future life events. Here’s how I’d approach it: 1.     Consider a Brokerage Account for Flexibility A brokerage account offers flexibility, allowing you to invest in a variety of assets and build wealth outside of retirement accounts. It can be a great tool for medium- to long-term goals like buying a home or other major expenses after graduation. 2.     Explore Traditional IRA Options You could also consider opening a Traditional IRA. This would allow you to contribute pre-tax dollars and grow your retirement savings while benefiting from tax-deferred growth. It’s a good way to reduce taxable income during years even when you may not be in your highest tax bracket. 3.     Annuities as a Tax Shelter An annuity could be an interesting option if you find a low-cost, no-surrender-schedule product with minimal fees. These can serve as a tax-deferred growth vehicle, sheltering income and allowing investments to compound without being taxed annually. If structured well, it could be another efficient long-term savings tool. 4.     Reassess Your Emergency Fund Having $34K in your emergency fund shows discipline, but it may be more than you need. You might consider scaling it back to 3 to 6 months of essential expenses and putting the rest toward investments or saving for other financial goals like travel or a new car.   Flexibility is key, balancing a mix of tax-advantaged accounts, flexible investments, and future planning can position you well for both short- and long-term success. #FinancialPlanning #WealthBuilding #YoungInvestors #TaxStrategies

If you can no longer contribute to a Roth IRA, don't worry—you still have options. Here are a few strategies to consider: - Backdoor Roth IRA: Make a non-deductible contribution to a traditional IRA and then convert it to a Roth IRA. This is a great way to get around income limits. - Roth 401(k): If your employer offers a Roth 401(k) (vast majority do), consider contributing to it. There's no income limit for contributions, and it offers the same tax-free growth and withdrawals as a Roth IRA - Mega Backdoor Roth 401(k): Contribute to your after-tax 401(k) and then convert the funds to Roth. This strategy allows you to contribute significantly more to your Roth accounts - Taxable Brokerage Account: If you've maxed out your tax-advantaged options, consider investing in a taxable brokerage account. While you won't get the same tax benefits, you can get long term capital gains These options can help you continue building your retirement savings and take advantage of tax-efficient strategies

A surviving spouse has more retirement account options than any other beneficiary. Depending on the circumstances, a spouse may keep the account inherited, move the assets to their own retirement account, use the 10-year rule, or take life-expectancy distributions. SECURE 2.0 added another possibility, and the proposed regulations explain how it would work: The spouse may retain beneficiary status while using the Uniform Lifetime Table to calculate RMDs. Each option can produce different results for RMDs, taxes, access before age 59½, and successor beneficiaries. That is why advisors must understand not only which options are available, but also which option best fits the client. Before making a recommendation, confirm what the governing document permits and how the plan administrator or IRA custodian is applying the new rules. #SavvyIRA #RetirementPlanning #InheritedIRA #RMDs #SECUREAct #TheIRAWhisperer

$45,000,000,000,000 (yes, trillion) is locked in retirement accounts designed to keep you hands-off until 59½. For most people, that means decades of autopilot: Limited choices. Default allocations. Very little say in how capital is actually deployed. What many don’t realize is that a job change can create flexibility long before retirement age. If you’ve left an employer, you may be able to roll an old 401(k) into a Self-Directed IRA. That doesn’t mean cashing out. It means changing where and how the money is invested. A Self-Directed IRA can allow retirement capital to be allocated into: • Real estate • Private companies • Private credit • Select alternative assets Instead of being confined to mutual funds and target-date strategies. The benefit isn’t about taking more risk. It’s about intentionality. More visibility into what you own. More alignment with strategies you understand. More diversification beyond public markets. I personally focus on real estate — that’s my lane. But the takeaway is broader than any one asset class. If you’ve changed jobs, your retirement account may offer more flexibility than you’ve been told. DM me “401k” and I’ll share the questions I use to evaluate rollover and Self-Directed IRA options.