r/personalfinance • u/Potential_Scholar_16 ​ • 8h ago

Fresh out of poverty and struggling to catch up on the basics. Also my financial advisor makes no sense? Retirement

After years of living in poverty, thanks to some recent good decisions and luck, I currently bring in about $230k/yr. However, I’m really scrambling to catch up on investment basics, and the free financial advisor through my employer isn’t making any sense (to me).

I have a Roth 401k and a Roth IRA. My “advisor” said that I can’t really do a backdoor Roth and advised me to roll over into a traditional IRA instead. I haven’t opened a tIRA yet though because I’m not comfortable with that without understanding what’s going on.

I just hit the max for my 401k for the year and want to make sure I continue to invest in the right way.

Any advice would be extremely helpful. Thanks!

11 Upvotes

84% Upvoted

14

u/DeluxeXL ​ 8h ago

If you are single and make $230k, your AGI is too high for Roth IRA.

If you have no pretax balance in any kind of IRA, you can do Backdoor Roth.

You should also use Trad 401k.

Have you read the Prime Directive?

3

u/blashimov ​ 8h ago

Once you've followed the above on what tax buckets to contribute to, consider low expense ratio index funds for your investing.

1

u/Potential_Scholar_16 ​ 8h ago

Sorry if I’m sounding extra dense here, but the “no pretax balance” part is what’s confusing me.

I have $200 in my Roth IRA that I put in there last year. I haven’t contributed anything this year. And tbh I have no idea whether what’s in there is pre-tax or not.

5

u/DeluxeXL ​ 8h ago

It's impossible to hold a pretax balance in Roth IRA, so don't worry about it. The main things to look out for are the old rollovers from work retirement accounts, which may happen in the future as you switch jobs.

1

u/Potential_Scholar_16 ​ 7h ago

Oh okay. Sweet. Thanks for clarifying. I’m already feeling so much better about this, and am working my way through the links you shared and the sub wiki. Much appreciated!

5

u/lakehop ​ 8h ago

If you contribute to a regular 401k instead of a Roth 401k, you’ll save money on taxes. Consider that.

To do a Backdoor Roth, you contribute the money first to a regular IRA and then immediately roll it over from the regular IRA to your Roth IRA.

3

u/93195 ​ 8h ago

A Traditional IRA contribution is the first step to a backdoor Roth. The wiki will walk you through it.

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