Traditional or Roth IRA?

[Phenomenally Frantastic]

where is the best place to park cash and be somewhat liquid if I want to pull some out for purchases. Roughly 150k

Open a Vanguard Cash Plus account or similar, paying 4.7% currently, FDIC protected. Can transfer in and out to your banking account within 1-2 days.

Vanguard Cash Plus Account | Vanguard

Vanguard Cash Plus Account is a cash management account designed to offer a competitive yield on your short-term savings.

investor.vanguard.com

That 4.7% will be interest income for tax purposes.

 

[StormHawk42]

where is the best place to park cash and be somewhat liquid if I want to pull some out for purchases. Roughly 150k

High yield savings or money market. Most of the big providers have one. Schwab’s money market is paying 5.1% I think.

Just remember that whenever the feds cut rates, those retail rates will be the first thing impacted.

 

[Fijimn]

where is the best place to park cash and be somewhat liquid if I want to pull some out for purchases. Roughly 150k

Pork bellies or frozen concentrate orange juice.

 

[ihhawk]

High yield savings or money market. Most of the big providers have one. Schwab’s money market is paying 5.1% I think.

Just remember that whenever the feds cut rates, those retail rates will be the first thing impacted.

I currently have some of it in the Amex savings.

 

[HawkMachine]

Backdoor Roth's are NOT as simple as many think, including investment "advisors".

 

[Phenomenally Frantastic]

Backdoor Roth's are NOT as simple as many think, including investment "advisors".

How so?

Initial contributions being done on a new account is super easy. Converting a long time held IRA to Roth IRA takes more consideration as you will have a tax liability on the earnings and if you ever took the income tax deduction aspect of an IRA off your income tax liability. Then yes, it gets more complicated, that’s why I said consult a financial professional and also likely your tax preparer or tax consultant.

 

[Hans81]

What is your marginal tax rate? If you are 24% or lower, I would do Roth for 2024 and 2025, then see what the tax rates end up being going forward and make your best decision each year. You don’t have to pick one now and stick with that for 30 years.

Another advantage of a ROTH IRA is that they aren’t subject to RMD’s, i.e., required minimum distributions (for those that have attained that age).

 

[HawkMachine]

How so?

Initial contributions being done on a new account is super easy. Converting a long time held IRA to Roth IRA takes more consideration as you will have a tax liability on the earnings and if you ever took the income tax deduction aspect of an IRA off your income tax liability. Then yes, it gets more complicated, that’s why I said consult a financial professional and also likely your tax preparer or tax consultant.

99% of people have no clue about the pro-rata rules.

Many investment advisors have no clue either.

They think it’s just a simple transaction until they come see me to do their taxes. Then I give them a nice little surprise.