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The Personal Finance Podcast
18 IRA Mistakes That Could Cost You Thousands! (Avoid These at All Costs!)
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In this episode of the Personal Finance Podcast, we're going to talk about the common IRA mistakes that can cost you in retirement. From waiting too long to contribute to misunderstanding Roth conversions, we break down the smartest strategies to maximize your tax advantages and long-term wealth. Whether you’re nearing retirement or just starting out, these insights will help you make the most of your IRA.
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Of the personal finance podcast 18 IRA mistakes you need to avoid what's up everybody and welcome to the Personal Finance Podcast. I'm your host Andrew, founder of MasterMoney Co and today on the Personal Finance Podcast we're going to be talking about 18 IRA mistakes you need to avoid. If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.com newsletter and you can join the newsletter there and ask any questions each and every single week. And don't forget to follow us on Spotify, Apple Podcasts, YouTube or your favorite podcast player. Really does help out the show when you follow the podcast and we have tons of great content coming out every single week. And if you're getting value out of this show, consider leaving a five star rating and review on Apple Podcasts, Spotify or your favorite podcast player. Now today we are going to be diving into these 18 IRA mistakes that you need to avoid and I think there's a lot of common misconceptions when it comes to the Roth IRA and the traditional IRA and I want you to avoid these mistakes at all. Cost.
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Why?
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Because some of these could cost you thousands of dollars. And I want you to have the knowledge in place so that you can avoid this all costs. Now, we have tons of stuff to dive into, so I'm not going to waste any more of your time. Let's get into it. All right, so the first one is for my folks who are in their 40s or their 50s or even their 60s, and it is not contributing to an IRA later in life. So most people think that they are way too old to contribute to an ira, but that is no longer true. So because the Secure act, the age limit for IRA contributions has been removed, this allows people to keep on investing, investing for retirement as long as you have earned income. So one big thing that comes up when you have an IRA or a Roth IRA is you need to have earned income. And when you have earned income, you can contribute to an IRA. Now, this is especially valuable for Roth IRAs, which have no required minimum distributions. So as you start to age and as you get closer to retirement age, if you can get money into Roth IRAs, you're not going to be required to pull that money out at any point in time. The IRS does not make you pull that money out because you've already been taxed on those dollars. So it can grow tax free and you can pull it out whenever you want to. This is also a great tool for folks who think about estate planning. And when you're thinking through estate planning, you're like, well, maybe I want to give X amount of dollars down to some of my heirs. And so if you're thinking about that process, then keeping this in a place where you don't have to pull it out and start paying taxes on that money before you pass away is a really, really powerful thing that you can have. Now, that's why I think for a lot of older investors, Roth IRAs are great because you don't have those RMDs. But in addition, making sure you have that tax diversification is going to be really, really important. Number two is waiting until the 11th hour to contribute to an IRA. So many investors out there, and statistics have shown this, wait until the 11th hour to actually finally contribute all their money to their Roth IRA. April 15th is the actual tax deadline. And that's where a lot of people will wait up until close to that day or even that day to get their money into an IRA instead of funding it early every year. But this causes a problem with a number of different reasons. One, there are some brokerages out and I have been a part of a few of them and I've moved my money from there. But there are some brokerages out there that are a lot more difficult to get money into an IRA or a Roth IRA than others. For example, I like to do a backdoor Roth at the beginning of every single year. We'll talk more about the backdoor Roth in a second. And so when I do a backdoor Roth, I need to put money into a traditional ira, then move it to a Roth ira. Well, some brokerages like Vanguard will allow you to move that money seamlessly. It's a click of a button online. You're not filling out all this crazy information, you're just clicking a button and you can move the money over. But other companies out there that rhyme with something like Schmerl Schminch, you have to fill out a really rigorous form to be able to move money from a traditional IRA to a Roth ira. You have to send the form in, you gotta sign it. There is nothing I hate more in this life than filling out forms. And so if I have to fill out some form and then be able to move the money over, that's something I'm going to try to avoid at all costs. I would rather be on the phone with Vanguard for an hour moving my money from that brokerage and moving it over to Vanguard because this step is easier than to actually fill out a form. And so that is something where I absolutely hate that. And so if you have somewhere that has a complicated process to move your money over, that would be one reason not to wait. But the real biggest reason not to wait for most of us is because compound interest, you want to get your dollars as fast as you possibly can into these accounts. Maybe you make good money and you could do this in January of every single year. Or maybe you're just trying to max out those accounts as much as you possibly. And so you dollar cost average throughout the year. Whatever you do, the key is to make sure that you can get these dollars in these accounts earlier. Don't procrastinate because procrastination is just going to cause chaos. It's going to cause stress around your money. Do it ahead of time. There is no market timing. You don't have a crystal ball. Don't try to time the market within your retirement accounts. Just get those dollars in, get them invested and let's invest for the long run. That's the way we think about it here at the Personal Finance Podcast. We are long term investors and we Think about investing in decades, we don't think about it in days. And so specifically when it comes to those retirement accounts, this can be really powerful. Now how do you do this? Automation will fix this problem. If you just automate your money every single year, or every single month or every single week into these retirement accounts, you don't have to rely on your willpower. That means you will not procrastinate 100% of the time. You will not procrastinate because you're just automating your money into these accounts and then moving those dollars over. If you do a backdoor Roth or if you're just doing the traditional Roth version, then you just put those dollars directly into your Roth. So this is absolutely something to consider is making sure you are automating all of your contributions into these IRA so that you can remove willpower out of the equation. Number three is thinking of IRA contributions as an either or equation. Now, many investors assume they must choose either a Roth IRA or a traditional ira, but you can contribute to both as long as you stay within the annual contribution limits, which is $7,000 per year at the time recording this. Or if you're over the age of 50, it is $8,000 per year, but you still have to keep it within those limits. So say, for example, you want to get some tax diversification between the two. Your company doesn't have a 401k, so you can't get that tax diversification somewhere else. And you want to put 3500 in a traditional IRA and 3500 in a Roth IRA. You can absolutely do that if you want to. Now me personally, I, I like the Roth IRA more because of that tax free growth, especially if you have a really long time horizon. But in addition, it doesn't have those RMD requirements. And so I like the Roth IRA for that long term tax free growth. So that's always going to be earlier on my investing checklist is to have.
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The Roth IRA there ahead of time.
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But if you like tax diversification, you're really worried about your tax situation. That is something that you want to consult with a CPA to see if that is a consideration that you want to have. But yes, you can contribute to both. You cannot put $7,000 per year in both. You can put $7,000 in total in an IRA or Roth IRA between the two. So if you contribute to one or the other, it has to be 7,000 in total between the two of those. Now some people would also do this to hedge against future tax law. Policy changes. They're just trying to diversify their tax situation. But the reasons you do this would be up to you. The fourth problem is assuming Roth IRA contributions are always best. Now yes, I like Roth IRAs because of that tax free growth. But that is not always the best thing for every single situation. Specifically, if you are a really, really high earner and maybe you make a lot of money and you're just trying to get tax benefits as much as you possibly can, that may be a situation where you want to talk to your CPA and get some guidance on do I need to go and primarily focus on a traditional IRA over the Roth IRA so that I can get an upfront tax deduction. That may be something that you want to do and it could be much more valuable for your current situation if your tax rate is high in the current year. So choosing the right type depends on your current situation now versus what's going to happen in the future. You want to think about your current tax bracket first, that future tax bracket. But you also want to just think through, hey, traditional IRAs are going to have those RMD. They are going to require me to pull money out of there so that I can pay that tax. The irs, you got to always remember this, the IRS is always going to want their money. And so when you have not paid taxes or you get a tax deduction, putting it into a traditional ira, when you pull it out, they're going to start forcing you to pull it out at the age of 73 and that changes. That RMD number will change in the future. So just make sure you're looking at the current year. But they're going to want you to start pulling that money out at the age of 73 so that they can get their tax money. And so you got to make sure that you have that in place and you are setting that up. Or if your company only offers something like a Roth 401K, this is another reason to consider this is if your company only offers a Roth 401K, then maybe a traditional IRA helps you diversify your tax situation in reverse. So that's another thing just to think through. You may be able to diversify your tax situation with a traditional IRA because you get that upfront tax deduction and have the Roth 401K for that tax free growth. Number five is making a non deductible IRA contribution for the long haul. So if you don't know what a non deductible IRA is, it's a traditional IRA where you don't get that upfront tax deduction. And many investors use this when they make too much money and they want to contribute to a Roth ira. So you heard me talk about the backdoor Roth ira. And the way that that works is you open a traditional IRA and you make non deductible IRA contribution. When you make this contribution, then you transfer the money from the traditional IRA to the Roth ira. So if you make too much money, that's just how you get your money into a Roth ira. It's a very simple system. Some brokerages, like I said, make it a lot more complicated than others. And so you got to make sure that you are thinking through this a little more. But the last thing that you want to do is keep your money in that traditional IRA long term. Or having a non deductible IRA contribution sitting in that IRA longer than what it needs to be. You need to make sure that you are transferring it into that Roth IRA for its intended purpose. Otherwise you didn't get the tax deduction. And then in addition you just have it sitting in this account. Because a lot of people will keep it into cash when they put it in this non deductible ira. And so I want you to think through that process and how important that is. You do not want to keep it in there. Instead you want to convert that money as soon as you possibly can so that it is just not sitting there. Idle number six is assuming a backdoor Roth IRA will be tax free. So the backdoor Roth IRA is a strategy for high earners who can't contribute directly to a Roth IRA due to income limits. It involves contributing a non deductible traditional ira. Just like we just talked about, you're contributing money to a non deductible traditional IRA then converting it to the Roth ira. Now many people think that this conversion is tax free, which isn't always the case due to something called the pro rata rule. So if you have other pre tax IRA money, the IRS considers all your IRAs as one pool when calculating the taxable portion of this conversion. So you need to check your existing IRAs first. If you have a large traditional IRA balance, part of your conversion could be taxable, not tax free. So you got to make sure that you understand the pro rata rule and how this works. And if you roll a pre tax IRA to a 401k, this can help. But you want to make sure that when you are doing these contributions, you have a CPA look at your entire situation. Because the last thing you need to be doing when you do these backdoor Roths is making a mistake that can incur a huge, huge taxable event. And so I want you to make sure that you are doing these things properly. This is why we recommend always having a CPA in Corny. You have to have somebody who a understands what you're trying to do, understands financial independence, understands retirement accounts, and you need to ask them those questions. You want to have somebody who is probably much more knowledgeable on the tax side than even you are, because that CPA can help you when you do some of this stuff. But secondly, you want somebody there who can give you information that's going to help you in your current tax situation. Everybody's tax situation is different. Everybody's income is different, their assets are different, the things that they own are different. So you need personalized help when it comes to taxes. Even if you're a W2 employee, having a CPA in your corner is really, really helpful. But having a good one is even more helpful. Let's jump to a break and we'll get to the next one. Number seven is assuming a backdoor Roth IRA is off limits because of substantial traditional IRA assets. So some investors avoid a backdoor Iraq because they have large traditional IRA balances, thinking it's impossible to do due to the pro rata rule. However, there are workarounds that can make this an option even if you have pre tax money. So rolling a traditional IRA into a 401k can solve this. So if your employer's 401k allows rollovers, you can move pre tax IRA funds there, eliminating the pro rata rule issue. But also the pro rata rule can be managed. So even if some of the conversion is taxable, strategic planning can minimize that impact. So having a CPA in your corner that can help you with strategic planning can help minimize that impact. And then you could do Roth conversions over multiple years. So converting small amounts at a time can spread out some of that tax burden as well. So if you don't want a huge tax burden in a specific year, you could roll over small amounts of money over time that can help you through that process. And then doing conversions in a year where you have lower taxable income can also help reduce that taxable hit. So timing really matters in these situations. And if you do some of those conversions and roll them over, that can really, really help help. Now, one thing about the backdoor Roth is even if it's not fully tax free, the long term benefits of Roth compounding outweigh the short term tax costs in a lot of situations, especially if you're doing some smaller conversions that can really outweigh some of those conversions that you're doing. Because long term you still get that tax free growth. And the majority of your account, especially if you have a long term time horizon, is going to be that tax free growth. And so you want to make sure that you, you do the math when it comes to that. Number eight is ignoring the pro rata rule when doing a backdoor Roth ira. So the pro rata rule is an IRS rule that affects how much of your backdoor Roth IRA conversion is taxable. And it considers all of your traditional IRA accounts as one when determining taxes. If you ignore this, you might end up owing more in taxes than you expect. So you need to make sure that you understand the pro rata rule. So the IRS calculates the taxable portion of your Roth conversion based on the ratio of pre tax versus after tax tax money across all of your IRAs. It's not just about the contribution though. Even if you put new after tax money into a non deductible ira, existing pre tax IRA money affects this calculation. And so you need to make sure that you understand how this pro rata rule works. You need to make sure that your CPA understands how this works. I have talked to CPAs in the past who do not understand the pro rata rule and it's pretty shocking. And so you got to make sure when you are interviewing a CPA or ask your specific cpa, hey, can you tell me about the pro rata rule, how this works and see what they say back to you. And then when they give you that information, make sure you go in fact check. Because a lot of times you can get information coming in and they may sound like they know what they're talking about, but you also need to verify. And that's something for any advisor in your life. Whether it's a financial advisor, whether it is a cpa, whether it is anybody in your life. Make sure you check. Now if you have a financial advisor, you can also ask them these questions to see what information comes back based on your personal financial situation. So always do the calculations. Also before converting, think through the pro rata rule, make sure you understand all of this. But again, rolling pre tax IRAs into 401ks can dramatically help because this removes them from the pro rata question, making the backdoor Roth a lot cleaner. And so if you have that option, great option to have number nine is not using a 401k rollover to make a backdoor Roth IRA possible. So many people don't realize that if they have a large traditional IRA balance, they can move that money into a 401k before doing a backdoor Roth IRA. Now this helps bypass the pro rata rule and makes this conversion tax free. Now why does this work? This works because 401k accounts aren't included in the pro rata rule calculation. So moving pre tax IRA money there removes it from the equation. Now the thing to note is that not all 401k plans allow rollovers. You need to check with your employer to see if your 401k allows incoming rollovers from an IRA. Now the thing to note though is that timing matters. See, rolling an IRA into a 401k before contributing to a backdoor Roth IRA is critical for avoiding these pro rata rule issues. And it's ideal for high income earners. This is a strategy that is ideal for high income earners. If you make too much money to contribute to a Roth IRA directly, this strategy will open the doors to tax free growth. And that's what I want most of you to think through. If you are not above the income limits, this does not apply to you. Now if you're self employed, you can also roll money into a solo 401k and this can provide the same exact benefit. And so that's just another key to note. As you think through this number 10 is underestimating the power of tax diversification in retirement. So many people only save in pre tax retirement accounts assuming they'll be in a lower tax bracket in retirement. But having a mix of pre tax, Roth and taxable accounts gives you much more control of how much you pay in taxes in retirement. So you probably heard people talking about, you know, having different tax buckets when it comes to retirement. And here's why tax diversification matters. Different accounts are taxed differently and having a mix allows for strategic withdrawals in retirement. You want to have a strategy when you retire of which ones to withdraw first. And that's a really huge key. Now each has a different tax treatment and using them together lowers lifetime taxes. Now pulling from Roth accounts when income is high and pre tax account when it's low helps optimize this tax efficiency. And if you have too much in pre tax accounts, you're going to have a huge RMD impact, meaning your required minimum distributions that you have to pull out of these accounts could be really high. And you don't want to have too high of an RMD impact. So this diversification also helps with that. It also helps protect you against future tax increases because if tax rates rise, Roth accounts become more valuable since withdrawals remain tax free. And Roth IRAs are a great way to pass well to tax free to heirs. And so that is another thing why I love having this tax diversification. And it also helps you create a withdrawal strategy that makes a lot of sense when you hit retirement. So having all three buckets, if you can have, you know, a traditional brokerage account, if you can have, you know, pre tax accounts like your 401k or your traditional IRA, and if you can have a Roth IRA, that is a great system to have in addition to the HSA also because you get the triple tax benefits. But having those four is a great thing to have because you can actually pull from different accounts when you need to and when it's most optimal. And so this is for the huge big optimizers, if you like that kind of stuff. Having all these tax buckets can be really important. Now number 12 is not considering a Roth conversion in low income years. So a Roth conversion moves money from a traditional IRA again to a Roth IRA paying taxes now. So future withdrawals are tax free. But many people miss the opportunity to convert during years when their income is lower, reducing taxes long term term. Okay, so here's why low income years are ideal for conversions. If you are temporarily in a lower tax brick and maybe you just made less money this year or you took a sabbatical or who knows what you actually did, then you can convert at a lower tax rate than in the future. And it's perfect for early retirement gap years. So before Social Security and RMDs kick in, retirees have very low taxable income, making this an ideal time to start converting. Now market downturns can also create opportunities with this. So when investments drop in value, you can convert more shares for the same tax cost. All right, number 13. Now this is a big one and this is one I think most people don't understand enough when it comes to the way that they can set this up. But it's spousal IRAs and if you overlook spousal IRAs, I really don't want you to continue to do that. Because a spousal IRA allows non working spouses to contribute to an IRA based on the working spouses income. Many couples miss out on doubling their tax advantage contributions simply because one spouse is an employee. So if you didn't know this before, if you have one spouse who is employed and they are making money, then the Non working spouse, maybe you're staying at home with the kids or you just don't work because there's other responsibilities that you have. You can still open a spousal ira. This allows you to get more money in some of these tax advantage accounts. So even if one of you doesn't work work, you can contribute up to $7,000 per year or $8,000 per year if you're over the age of 50. And what this does is it doubles your retirement savings potential. So we have done the numbers on this in past episodes as well, where if somebody is contributing to a Roth IRA over the course of 30 years, you know they will have over $1 million in that account and about 800,000 will be completely tax free. Well, imagine if you could double that and you know you have $1.6 million, that could be completely tax free and those two Roth IRAs end up being a couple million dollars. That is the power that you are missing out on by not taking advantage of these spousal IRAs. Now, it can be a traditional IRA or it can be a Roth IRA. You could do either one, but it depends on the couple's tax situation. And you can choose between pre tax or tax free growth. So this is fantastic for if you're a stay at home parent. This is a wonderful thing that you could take advantage of and still build retirement savings through something like a spousal ira. The income limits will still apply. So if the couple earns too much, they may not qualify for a deductible traditional IRA or a direct Roth ira. So you got to make sure that you understand which one you qualify for. And that is going to be something where if one spouse is making $500,000 per year just to use a really, really, really high income, then that is something where you just got to make sure you look at which ones you qualify for. But it also requires a joint tax return. So spousal IRAs contributions can only be made if the couple files taxes jointly. And so you got to make sure you're filing taxes jointly to be able to take advantage of that as well. And so spousal IRAs, if you do not already take advantage of that, that is a wonderful way to get more money into traditional or Roth IRAs. Let's take a break and we'll jump into the next one.
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That's policygenius.com all right, so number 14 is assuming Roth 401s are the best choice without evaluating taxes. So a Roth 401K offers tax free withdrawals in retirement, but it is not always the best option. If you're in a high tax bracket now and expect a lower tax bracket in retirement, a traditional 401k may be better because of the immediate tax savings. So if you're in a situation where you're just making great money and you are really really crushing it, you want to think through which one to open. Sometimes it's a traditional IRA because you get the pre tax benefits of putting your money in a traditional IRA and you get that tax break this year. Sometimes it is the Roth 401k where when you put money into a Roth 401k the money has already been taxed, came out of your paycheck, you already were taxed on those dollars, but the money grows tax free and you can pull the money out tax free. The beautiful thing about a Roth 401k is that tax free growth.
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You can get so much More in.
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There now, future tax rates are going to matter. So if you expect your taxes to rise Significantly, a Roth 401k could make more sense over the course of the future. But you got to think through, hey, hey, where am I now? How much am I making now and what's going to happen in the future? You can be making a ton of money now and then you get into retirement age and you're making a lot less money. Well, maybe the traditional 401k is the option, or maybe you think, hey, I'm going to make a lot more money in the future, I need to get money into tax free vehicles now. Then maybe the Roth 401k is an option for you. So just thinking through that is really, really important. But you have both of those options. You got to check with your employer to see if they even offer the Roth 401K. Not all of them do yet. It is a newer 401k product that has become more and more popular every year. And I see more and more employers offering it now. But it is something that is newer. Number 15 is failing to adjust IRA contributions based on income phase out rules. So many people contribute to an IRA without realizing their income makes them ineligible for deductions or direct Roth contributions. And phase out limits determine who can take full advantage of these accounts. And failing to adjust can lead to tax efficiencies. And so it is really important to understand this portion of it as well. Again, guys, if this stuff feels like we're like digging into the weeds, we are. And if we are digging in the weeds and you're saying to yourself, man, this is just one of those things that I really wish I knew more about. This is stuff that you can definitely know more about. But also just having people in your corner like your CPA is going to be really, really helpful. So Roth IRAs, if you didn't know they have these income limits, so for single filers, it must be under 150,000. If you're married filing jointly, it be under $236,000. And so you need to know some of these phase out rules so that you understand what you need to be doing going forward. Now, traditional IRA deductions phase out if you have a 401k. So if your workplace plan covers you, your IRA deduction gets reduced as your income increases. And non deductible IRAs are less attractive if you contribute but you don't get a deduction. Your withdrawals are taxed as ordinary income instead of lower capital gains tax rates. Rates and then backdoor Roth IRAs are a solution for high earners. Obviously we've talked about that a ton here. And then many people accidentally over contribute. So if you over contribute to something like a Roth ira, when you're ineligible, you must withdraw the excess or you pay a penalty. And so there is a form that you fill out in order to make sure that you can withdraw that excess. You can either talk to your CPA about it or you can contact either, you know, whoever your brokerage is, Fidelity Vanguard, they can help you get that form. And if you're fully phased out, investing in a taxable brokerage account with a tax efficient funds may be smarter than a non deductible IRA for some people. But you just got to think through your situation. Specifically number 16. Oh, this is a big one. And this is one we've done an entire episode on, but missing out on, a mega backdoor Roth ira. So a mega backdoor Roth IRA is an advanced strategy that allows high earners to contribute well beyond the standard Roth IRA limits by making after tax contributions to a 401k and converting them to a Roth IRA or a Roth 401k. Now many people don't realize this strategy exists, leaving tax free growth on the table. But what makes it mega? That's probably the big question that you're asking. In a standard Roth IRA contributions cap at $7,000 or $8,000 if you were over the age of 50. But a mega backdoor Roth IRA you could put 70,000 if you're under the age of 50 or 77,500 if you're over the age of 50 at the time I'm recording this into the Roth IRA. So your employer 401k must allow for after tax contributions. That's number one. This strategy only works if your 401k plan allows for those after tax non Roth contributions. And in service rollovers or conversions, that's the first thing that you must check with. And not everybody is going to have this amazing option. But if you do have this amazing option is a great way to think about this. Now there's two ways to execute this. You could roll after tax contributions into a Roth IRA or convert them to a Roth 401k within the plan. And then what happens is there's tax free growth on a larger scale here. So unlike taxable investments, once in a Roth all growth is tax free forever. So this is really ideal for high earners who want to max out their regular contributions. But the IRS rules are complex and contributions and growth are taxed differently when rolling over. So you have to work with a CPA if you're going to do a mega backdoor Roth ira. To avoid misunderstanding mistakes, the last thing I want you to do is make a mistake on these. You need to make sure you're working with a professional for all this. Now not all employers offer this, but if yours does, then you need to maybe make this consideration if you are a high earner. So that's for high earners to think through as they go through this. Because for a lot of you you're like getting seventy plus thousand dollars into a Roth IRA. I don't even make $70,000 a year. Then this wouldn't be for you. It's for the high earners out there who have this option. So it's not for for everybody. And by the way, if you want a really great article on mega backdoor Roth IRAs, the mad scientist wrote a fantastic article on this that helps people, I think understand it really easily. I always direct people to that article when I'm thinking through this. Number 17, assuming Roth conversions aren't worth it due to taxes. So many people avoid Roth conversions because they don't want to pay taxes up front. However, paying some taxes now can lead to major tax savings later. Especially if you expect tax rates to rise or you have large pre tax retirement accounts. So you can have this short term tax pain but long term tax savings. Because again I've said this a billion times in this episode, but that tax free growth in the Roth IRA is so incredibly valuable. Just run the numbers to see how much tax free growth you'd have based on whatever rate of return you can like look at an investment calculator for example and run those numbers and figure that piece out. And then number 18, the last one is overlooking RMDs when planning for retirement withdrawals. So many retirees don't plan for required minimum distributions which start at age 73 for traditional IRAs and 401ks. Now these are mandatory withdrawals that increase taxable income and sometimes push retirees into a higher tax bracket unexpectedly. And so you gotta plan for these because these are mandatory withdrawals that the IRS makes makes you pull out for any pre tax accounts. Again, the IRS always wants their money and so you gotta make sure that you are planning for these. Now these can hurt because large balances can lead to big withdrawals, increasing taxable income and possibly pushing you into a higher tax bracket. This can also impact things like Social Security. And so you got to make sure that you Understand how much is there? Now, Roth IRAs have no RMDs, which again, is why I love the Roth IRA so much. Now, if you want to keep your tax situation lower, you can do something called qualified charitable contributions, or Q, C, D S. And what these are. These allow you to donate RMDs tax free if you give them directly to a charity. So say, for example, you're charitably inclined. You've heard me talk about this a lot where I am very charitably inclined. And so this is probably something that I would do, is take some of those RMDs and give them directly to charities through qualified charitable distributions. That would allow you to not have to pay taxes upfront and deal with some of the other extra mess that comes along with that. Now, delaying Social Security can also help because if you delay Social Security till later, you can reduce the total taxable income when RMDs begin. I am less likely to ever do that because I. If you've ever heard my stance on Social Security, I want you to take it as early as possible. Because life is short and we have no idea what's going to happen. And we want to make sure that as we get into our golden years and in our later years, we are taking money when we can. That's the number one thing. The last thing you want to do is just leave it in Social Security. Life is short. Use the money when you can travel, use the money when you can do things that you want to do in life and have that money available. That's my philosophy. Not everybody's going to agree with that. If you want to optimize it or you want to take it at 68 or whatever you want to do, that's more power to you. Nothing wrong with that. And then spreading out Roth conversion. So converting small amounts from a traditional IRA to a Roth before RMD starts can also reduce future required withdrawals and then failing to withdraw on time as penalties. I want everybody to kind of note this is missing an RMD can lead to a 50% penalty on the withdrawal. All right, so that is all 18 IRA mistakes you need to avoid. I know we got into the weeds on this one a little bit, but I think for a lot of you advanced personal finance folks, you're gonna like this one. And I think for most people, we need to make sure that we understand the rules around Roth IRAs and traditional IRAs. Obviously, making sure that you have a CPA in your corner, even if you have an advisor in your corner as well. Well, those are two great people to have in your corner for these types of things. As you start to get advanced in your personal finance situation, I think that is just really, really important for a lot of people. So this is one where if you know somebody who is thinking through this stuff, share this episode with a friend. If you're getting value out of this podcast, I really appreciate if you follow the podcast. It means the world to us that you are here. We cannot thank you guys enough for investing in yourself here by learning about this stuff. And so we truly, truly appreciate each and every single one of you. And I will see you you on the next episode.