How to Turn Your 401(k) Into a "Super Roth IRA"

A few weeks ago, I discussed Roth IRAs and specifically, the Back Door Roth IRA, as a tactic for high earners to take advantage of the tax-free growth afforded to Roth IRAs. With Retirement Season in full swing, hardly a day goes by that I’m not asked about how to save more while minimizing taxes.

For the next few weeks, I will offer several ways investors may take advantage of lesser known tactics to fatten up those retirement account balances and maybe save some tax money in the process. This week, we’ll start with the Super Roth IRA.

The Flu and Recent Market Volatility

I came down with the flu this week. It started on Monday with some tightness in my chest, and has progressed to fever, chills, cough, aches, and extreme fatigue. It has been a long time since I have been sick like this. I had forgotten how miserable this can be, and honestly didn’t take it as seriously as I should have when my wife recently suggested I get a flu shot. I’m now paying the price for complacency.

After a period of relative calm in the markets, perhaps investors got a little complacent too. While the increase in volatility in the stock market has resulted in renewed anxiety for many, it can be helpful to remember that no matter how uncomfortable a selloff can feel, like the flu, it will eventually pass.

Another Groundhog Day, Another Market High?

Last year was an amazing time to be invested in stocks. The S&P 500 Index recorded 62 new closing highs in a year that only had one down month (April). 2018 has felt a little like Groundhog Day, well not THE Groundhog Day (today), but more like the 1993 Bill Murray movie. In the film, Murray's character awoke each morning to relive the same day. So far, the S&P 500 has recreated setting a new record high 15 times before peaking last Friday. 

With market records seemingly being set every day, I’m increasingly asked if the winning streak means negative returns for stocks are on the horizon? Maybe so, but if you had gone to cash every time the market hit a new high last year, you would have left a lot of meat on the bone.

When addressing this question, it can be helpful to keep the following in mind: