Individual Economics in the Age of COVID-19

He has less than $100k in the account. I didn’t ask for a specific number. He puts in $12k a year.

It’s egregious what was happening. Adviser belongs in prison.

:vince:

Yup and that really sucks because 20% savings rate is pretty damn good for most Americans. If they shoveled on that other $5k it becomes a 28% savings rate!

This is completely standard for Edward Jones. It’s truly criminal and should absolutely be illegal.

When I was considering being an lol lawyer I worked for a firm that had a guy whose whole practice was going after trainees who bailed from being financial advisors for the cost of their “training.” The firms sued them for the alleged cost of the classes, like $50k or something, so scummy. The lawyer made high 6 figs doing this

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Thankfully he’s only 30. So plenty of time but still that’s like 100k in future cash.

How was he winning these? If I understand you correctly here’s how it went down.

  1. Edward Jones says you need to pay 50K for these courses. No refunds
  2. Dude says OK, sure and pays 50K and signs contract
  3. Dude bails out of classes
  4. Dude wants his 50K back

No one thinks Edward Jones is shittier than I do, but I don’t see the win for the dude here.

He gets a judgment that never gets paid, but he is paid hourly by EJ. The point is to discourage trainees from quitting, not to recover from quitters.

Ahh, I misunderstood. I thought he was representing the trainees.

Lol that job sounds radicalizing as fuck. This is really where the ‘you’ll get more conservative as you get older’ bullshit fell apart for millennials. The capitalism we’ve spent our lives with was significantly later stage than the capitalism they grew up with.

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I’m imaging the advisor was really quick to point out the recession and how everyone is down this year when he got this call. but not so quick to point out that everybody with a pulse was printing money when he returned 15% or whatever for his client last year

Jesus Christ. He should sue the advisor. Seriously.

So, humble brag I guess, this will probably be the first time I am over the income limit for a Roth contribution. Assuming I don’t go on a downswing the rest of the year, I’m pretty sure the math is going to keep me over it.

I know the backdoor Roth conversation comes up in here quite often, but I’ve always kind of skimmed past it. Does someone have a link to a good article/guide on it, or some good posts ITT on it?

If not, my questions are…

Should I be looking into that now? My understanding is I’d just tell my broker what I want to do, and they’d move the money, then I’d tell my accountant and I’d pay taxes on the amount of money in the SEP-IRA into the Roth, after which point everything is tax free?

I have a SEP-IRA with like $49K in it, and this would likely be at either a 24% or 32% tax bracket. So, I assume I’d move the whole $49K then pay $12K on my taxes, drawn off a regular account? Or am I limited to $6K a year?

As far as the EV of it, if we’re assuming 10% growth per year, it seems like this is +EV as long as you’re at least a few years out from distributions from the IRA, right? Like, you’re going to have to pay taxes on it at some point anyway, so the only loss is the difference in marginal tax rates now vs. in retirement, stacked up against the growth being tax free.

And then going forward, I can do this every year if I keep making too much to contribute to a Roth? Just fund my SEP-IRA and/or a traditional IRA, then roll it over the next year?

Before you get too far down the rabbit hole do some research on the pro rata rule for Roth conversions.

Backdoor roths are clean and easy when you don’t have any other IRAs. But if you do, then things can potentially get messy.

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Save your backdoor Roth for a year you do badly. There’s really no hurry. You’re gonna run bad enough between now and 60 to get it all in there.

Yeah my understanding on the backdoor Roth is that you use it in a year where your income is low, therefore converting taxable investments to non-taxable investments by paying taxes on them when your bracket is low.

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He’s only talking about the $6000 annual contribution. It sounds like he’s been making annual Roth contributions, and this year he’s going to be over the income limit so he’ll need to backdoor it. It’s really simple if he has no other money in traditional IRAs tight now (see Melkerson’s warning of the pro rata rule). You just contribute $6000 to a traditional IRA, and then immediately execute a Roth conversion on that $6000. And then just make sure you note those transactions properly when filing taxes for that year.

I always leave the traditional IRA open with a $0 balance after the conversion so that I don’t have to open a new one every year.

Edit: Lol, I didn’t read the multiple paragraphs about the SEP IRA. I don’t know if that brings the pro rata rule into effect or not. We had a rollover IRA that we had to convert before we started annually doing backdoors. (I mean technically, we didn’t have to. We chose to and it was small so no biggie.)

But yeah, this validates zimmer’s point about waiting for a lower income year to do the conversions. If Cuse converts both the $49k and the new $6k he’ll have to pay taxes on $55k. Probably not the best idea to do that this year if his regular annual income typically has him in lower brackets.

I don’t know if or how the SEP rules differ, but here’s one article:

I think it’s not a coincidence that poker games got really good right after the eidl/ppp money was being handed out. A lot of the scumbags who you would normally see at 1/3 were dropping 5-6 figures on the Texas/LA livestreams

Does that include health insurance? Because that seems low.