Roth IRA Strategies - The Most Powerful Way to Build Wealth | Mark J Kohler

Hi, Mark Kohler here. Let's talk about what I believe to be the most powerful way to build wealth in a tax deferred, tax free way. It's called the Roth. Now, some of you know the Roth strategy backwards and forwards. Some of you are just learning this concept. I want to break down some strategies that will even wow the most seasoned Roth investor. Let's do it. First, what is a Roth? And again, I've got to hit the basics here quickly. A Roth is like an IRA. It's like a 401k. It's a special type of account that you can invest in. You don't get a tax deduction to put money in, but it grows tax free and comes out tax free. In fact, you can pull out your contributions anytime you want. But the growth inside of it has to continue tax free until you're 59 and a half. And then you can pull it out, which is okay. We need more methods to save. We as a society don't save enough. Now, once you open this account and you start building it, you can self direct it. One of my strategies I'm going to blow your mind with. But this Roth account is a powerful way to build wealth for the future. Now let me share a few strategies on how to maximize its value. First, a problem we have to overcome and that our AGI limits, adjusted gross income limits. The government, the irs, whatever, has said that if you make too much money, you can't contribute to a Roth. You, you're too wealthy. Dumb rule, right? Well, that's the general rule. I got ways around it. But keep that in mind because if you go to just open a regular Roth and want to put 5,000 or more into it, you're going to hit a barrier. Well, not with these strategies. Number one strategy is to use the Roth 401K, not the Roth IRA. Because with the Roth 401K, there are no AGI limits. You can make as much money as you want and you can put three times as much money or more into it. Instead of this 5,000 or more limit, you've got 18,000 or more you can put into a Roth 401K. Now if you're an entrepreneur, you can establish a solo 401k. Even if you have employees, set up a group 401k that has the Roth provisions. Now, whenever you put money into a Roth 401K or a Roth IRA for that matter, remember that you pay taxes on the money before it goes in. Or another way to say it is you don't get A deduction. When you put money into a Roth, Roth IRA, Roth 401k, you have to pay taxes on that money and then it goes in or you go in without a write off. So keep that in mind. But the first way around these AGI limits is to use the Roth 401K. Number two, do a conversion. Convert some of the money in your 401k into a Roth account inside the 401k. It's called an in plan conversion. For you entrepreneurs that control your 401k, you can just make it happen. But for employees, talk to your employer and say, hey, can I convert any of my traditional money to Roth? Now remember, when you convert money into a Roth, you got to pay the taxes on it because it's going to grow tax free and come out tax free. So you pay your taxes now, and when you do an in Plan conversion, the 401k administrator, even you entrepreneurs, you have to withhold 20% of what you convert. So that way, when it's tax time next spring, you'll have the money set aside to pay the tax on the converted amount. But guys, here's the point. Don't stress about that. Pay the tax now and you'll never pay it again. You can build that account, continue to let it grow. Like I said at the very beginning, these Roth accounts are amazing. Just pay the tax now, do a little withholding in that in plan conversion, and then when you file your taxes, you'll have the taxes set aside to do it. Amazing. Number three, convert traditional IRA money to a Roth ira. Anybody can do it. If you have an IRA already and you can convert as much as you want and your income level doesn't matter. See, when you contribute money to an IRA every year, there's limits. But when you convert, you can convert a million dollars and you convert as much as you want. Now remember, you got to pay the tax on the amount you convert, which is okay. Again, it's going to grow tax free for the rest of your life anyway. And if you die, it goes into your family's Roth ira, your spouse or your kids. So amazing opportunity to convert as much as you need. The old rule was, is when you convert money to a Roth, when it came to tax time, you could recharacterize, kind of undo some of the conversion because you're like, I don't have enough money to pay the taxes. I want to undo some of my conversion. At the end of 2017, that rule changed. So from now on, when you do your conversion, you can't Recharacterize it later the deadline. Another important note is December 31st. If you're going to convert any money, you got to do it before December 31st for a regular IRA to Roth IRA conversion. And December 31st is important for you 401k owners too, because you've got to be able to take that 401k and make sure it's set up and that the 401k is going to be able to take contributions before December 31st. So you don't want to wait till the last day of December to make a lot of this happen. Get started early, but remember you can't recharacterize it later. Next, chunking. I love the strategy of just doing it in pieces. Convert $1,000 this year, convert 10,000, convert 100,000, you choose the amount. I call it chunking. Because you can just bite at the apple with that regular IRA or regular 401k and just do it in pieces. Then you can pay the taxes of what you can afford out of your own pocket. The Roth 4, 401K or Roth IRA doesn't pay the taxes. You pay the taxes. But you can convert it in pieces and parts until ultimately it's all in a Roth bucket. Now last strategy. The big kahuna here, this is the climax of this video is that you can self direct a Roth. You can self direct any type of retirement account, but self directing a Roth really puts you at a whole new level in your retirement building strategy. Now what self directing means is you can invest in what you know best in small business, in real estate, in notes, in raw land, in super bowl tickets, racehorses, little businesses that you want to help a friend or family member start. You can self direct your retirement account and not feel like you're stuck in Wall Street. I've got other videos on this and our favorite company to use is directed ira. You can get set up with them right away opening an account and start rolling your money into a self directed account. Converting money into a self directed account and then on day two, you choose where you want to invest it. We've been doing this as a law firm for 20 years, helping clients set up even special purpose LLCs to invest multiple accounts into one LLC and then go out and invest into what you make the most money doing. In summary, I know this is a long video, but lots of strategies here. Get a Roth account going right away, a huge part of building wealth and you will not be disappointed with the long term benefits. Thanks so much for watching that video and I want to be your source for tax and legal strategies. It's hard enough to live the American dream without being out on the web on Google, trying to find answers to complex questions and just clicking a mouse, hoping you got it right. My team and I want to be a huge resource to you, the law firm, accounting firm, my education resources on my site. Paul, please continue to follow these strategies. I know they'll save you thousands. Now click here if you want to be a part of my newsletter. It's awesome. Weekly updates and deadlines and strategies and tips. Also, subscribe to my YouTube channel. You'll love it. And make sure to click the bell icon so you get a little ping whenever there's a new video. And finally, check out my site, marcjkuller.com with all sorts of videos, probably 70 plus videos, 30 plus hours of content that'll save you thousands of.