The Personal Finance Podcast - How to Become an IRA Millionaire in 2023 (With the New IRS Rules!)

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Starting point is 00:00:56 Find your advisor at IG Private Wealth.com. On this episode of the Personal Finance Podcast, we're going to talk about how to become a 401k or IRA millionaire with the new IRS rules. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew, founder of MasterMoney.com. And today on the Personal Finance Podcast, we're going to talk about how to become a 401k or IRA millionaire with the new IRS rules. guys have any questions, make sure you hit me up on Instagram or TikTok at Master Money Co.

Starting point is 00:01:50 and follow us on Spotify, Apple Podcasts, or whatever podcast player, you love listening to this podcast. Tuneu, if you want to help out the show, leave a five-star rating and review. Now, we have Index Fund Pro launching on January 2nd, 2023, so we are incredibly excited for you guys to be able to check that out. If you want a discount on Index Fund Pro during launch, make sure you're on the Master Money newsletter so that you can get that discount code or you're on the waiting list down below in the show notes. So we are incredibly excited to get into this episode today. There are a bunch of different IRS rules that have come out, specifically when it comes to your IRAs and when it comes to your 401ks. And these are things that

Starting point is 00:02:30 you absolutely want to make sure that you're taking advantage of as you prepare your 2023 financial plan. That's why it's incredibly important to understand this stuff now so that on January 1st or January 2nd, you can start to make these adjustments to your contributions you can make the adjustments to which account you want to fund first so that you're able to actually start the year off on the right foot. Make sure you hit all those max out and target goals. Now, the big thing you want to do in these accounts is you want to make sure you're auto investing in these accounts. You don't want to have to go about utilizing your willpower every single week to actually put the money physically into these accounts. You just want to automate it into these

Starting point is 00:03:10 accounts. And then if you have to go in there and invest those dollars, you can invest those dollars into these accounts. In addition, we're going to talk about some of the new HSA rules as well. The HSA also has had a change. So we're going to talk about how much that has increased, how to adjust your contributions through that as well. Now, some of the stuff we're going to be going through are all of these changes. There's a bunch of different changes that we're going to be going through. In addition, we're going to talk about, well, how much do you need to invest every single month so that you can max out these accounts? We'll go through that, how much you need to invest every single month. And then we're going to go through some of the phase out ranges,

Starting point is 00:03:42 some of the changes on those phase out ranges if you make too much money, if you have an income cap, and what you can do if you are making too much money for some of these accounts, then we're going to go through how much you need to be investing with your dollars so that you can become a millionaire in the IRA or a 401k. And we'll talk about what else qualifies under the IRA, what else qualifies under the 401k as well. I'm going to talk about personally how I invest in these accounts as well. I'm going to talk through which ones I invest in. I'm going to talk about how much I put in there and all that stuff at the very end of this show as well. So make sure you're listening through so you can hear that episode. Now, make sure you're subscribed to this show because the next

Starting point is 00:04:20 episode coming out is going to be talking about a lot of the tax changes. And there's a bunch of different tax changes that have been adjusted that will probably put more money in your pocket. So you want to make sure that you listen to that episode as well because those shifts are going to help you contribute more into these accounts. Now, a lot of these shifts are because of inflation. So if we haven't talked about this or you don't understand why these shifts are happening, it's because inflation is happening. So it's not always the best thing in the world that these shifts happen, but usually the IRS will make these adjustments because of inflation.

Starting point is 00:04:51 So as costs of goods start to rise, you need to be able to put more money into your retirement account so that you can hit those numbers, which means you're adjusting your contribution to inflation. And you always want to be adjusting your contribution to inflation, even if you're investing in something like a taxable brokerage account. Your contribution should be adjusted. That's why I'd rather focus on the things that I can control by adjusting my contribution instead of adjusting my return.

Starting point is 00:05:14 Because if I adjust my return, that's not something I can control. I don't know what inflation is going to do in the future. But if I adjust my contribution every single year based on the inflation rate, I am now controlling what I can control. And what that means is I am putting the same amount of buying power into my portfolio that I had last year, the year before, the year after that. So you want to make sure you're at least keeping up with your buying power. in addition, you always want to be increasing the amounts you're investing every year if you can. If you make more money, put a portion of that into your brokerage account, into your investment account. Now, why do I get excited about 401Ks, IRAs, all those other things?

Starting point is 00:05:49 Well, Ramsey's solutions, Dave Ramsey's company, Ramsey Solutions did a study, and they surveyed 10,000 millionaires. And of those 10,000 millionaires, 90% of them, almost 90% of them, I think it was 88% was the exact number. 88% of those millionaires became millionaires inside of their 401. So a lot of people say the 401k is dead. You're going to hear people like on TikTok or Instagram, for example, who are folks who like to sell you life insurance. And they're going to tell you things like the 401k is a terrible place to put your money. It's just the government taking your money.

Starting point is 00:06:20 There's a lot of things out there that are going to be saying that. But guess what? The facts are facts that as of the last few decades, the majority of millionaires have become millionaires through their 401Ks. And there's other studies that have looked through this as well, that the 401k is just something where it's a tax advantage account. You can look at anybody within the financial independence movement, and they're taking advantage of their 401ks, their IRAs,

Starting point is 00:06:40 they're also taking advantage of real estate. And all of these folks are optimizers. Optimizers, if you're within the fire movement, optimization is the name of the game. And folks who optimize do their research, they look into what the best options are. And you can see this. The 401K, the IRA, the Roths,

Starting point is 00:06:57 all of these different things are something where you definitely want to have your dollar, so you're not paying as much taxes, and we'll get into how much less taxes you could be paying over time. So we're excited for some of these to rise, even though it is because it's inflation adjusted. And this is going to be something where you definitely want to be taking advantage of these for 2,023, so that you can be able to max out these accounts because the more dollars you get in there,

Starting point is 00:07:18 the more dollars are going to be compounding, and you can achieve financial independence that much faster. So if this is something you're into, let's get into it. All right, so the majority of this episode is going to be talking about IRAs. We're going to talk about 401ks, and we're going to be talking about HSAs. Now, what qualifies under the IRA limits? The Roth IRA, for example, is one of the things that's going to fall under IRA. So the traditional IRA and the Roth IRA will follow under those examples. What about 401Ks?

Starting point is 00:07:46 Well, you got your Roth 401K, you got your traditional 401K, you got your 403Bs, and everything else that falls into line there forward. So that is what we're talking about when we're talking about some of these accounts. Now, to recap, if you don't know what an IRA is or if you don't know what a Roth IRA is, there are two different accounts. So the way that this works is that the traditional IRA is an account that you can put money in. And when you put that money in, you get a tax deduction on the amount of money that you put in. And the money grows.

Starting point is 00:08:12 And when you pull the money out, you are going to be taxed on that money. The Roth IRA is where you put your money in that's already been tax, meaning money that came from your paycheck. The money grows tax free. And you can pull the money out tax free. That part of the Roth IRA, the growth tax free and pulling the money out tax free is extremely powerful. for a number of reasons. So anything with Roth in it grows tax-free and you can pull the money out tax-free. The same thing for the Roth 401K. That money grows tax-free and you can pull the money out tax-free. Now, we're going to be adjusting the stairway to wealth because a lot of people

Starting point is 00:08:48 say, well, should I invest in the Roth IRA or should I invest in the Roth 401K? So we're going to make that adjustment. But, spoiler alert, I like the Roth 401K much more because you can get more dollars in. Now, can you have both? Yes, you can have both. and there are a lot of options that you can utilize there, but I like getting as much money into Roth's first as I can. Why do I like Roth so much? There's a number of reasons, but one of which is that tax-free growth is massive.

Starting point is 00:09:13 And we're going to talk about how massive that is in a second. But in addition, you don't know what future tax rates are going to be. So paying taxes right now is something that is incredibly powerful. Now, if you're a really high earner and you need some deductions, you don't want to be paying so much tax this year, than a traditional 401K may be the best option for you. It depends on what tax bracket you fall in and what your marginal tax rate is.

Starting point is 00:09:33 But if you're someone who does not know what future taxes are going to be, and historically they've gone up, right now they're pretty low, and I'm expecting in the near future 30 years down the line, the tax rates are going to be much higher than they are today. So I like to just pay my taxes, get it out of the way, then it grows tax-free and you can pull the money out tax-free. Now, a 401K is similar to an IRA. And a 401K is an employer-sponsored plan,

Starting point is 00:09:56 meaning where you work usually will be who sponsors your 401K, and a lot of times it comes with a match. So you always want to take advantage of that match. It's extremely important to do that because it's a 100% rate of return. But in addition in a 401k, you can get more dollars in there. The money that goes in with a 401k is money that comes out of your paycheck, but it does not get taxed. And then the money grows, and then you pull the money out. And when you pull the money out, your money gets taxed then.

Starting point is 00:10:22 And then we have the HSA. So the HSA is the third account we're going to be talking about today. The HSA actually stands for health savings account. And what a health savings account is, it has triple tax benefits. It's an incredible account that most people do not take advantage of. Here's how it works. The money goes in tax-free, the money grows tax-free, and you can pull the money out tax-free as long as you have a qualified medical expense.

Starting point is 00:10:45 What is it qualified medical expense? There's a bunch of them. In fact, the IRS has an entire list of qualified medical expenses. And there is no rule that says your qualified medical expense has to be within any time frame. So you could have a qualified medical expense from when you're 21 years old. and at the age of 65, you can pull that money out of your HSA completely tax-free. So this is a really cool thing about the HSA. It has triple tax benefits, and it's an amazing account to start funding for your retirement.

Starting point is 00:11:12 So we're going to get into those limits today as well. So that's the quick recap of what each of these accounts are. If you want to deep dive into some of these accounts, we have episodes on all of these accounts. We have multiple episodes on these accounts on how powerful they are and what they can do for you. The HSA one specifically, if you're looking for that one, it has a different name. It doesn't have the name HSA in it. It's called the Super Retirement Account. So make sure you check out that episode as well.

Starting point is 00:11:37 We have How to Become a Roth IRA Millionaire, How to Become a 401k Millionaire. All of those episodes are out there. So make sure you check those out if you're interested in learning more about those specific accounts and you want to deep dive into those. So let's get into the changes now. So for 2020-23, there are a bunch of different changes for these accounts on how much you can put inside of these accounts. So for example, we're going to start with the IRA. The IRA is the first one. So with the IRA in 2022, you can put $6,000 a year into an IRA. This has now been raised to $6,500

Starting point is 00:12:11 per year for 2023, which is an 8.3% increase, which is a great thing because it's helping adjust for inflation as time goes on. So you can put an additional $500 into your IRA or your Roth IRA. Now let's look at the HSA. So the HSA has two levels, an individual person or if you're on a family health plan. So for an individual person, you could put $3,650 in 2002 into an HSA. It is now increased to $3,850. So it's increased by 5.5% on the amount that you can put in there. For a family, it's $7,300 that you can put in in 2022. And for 2023, you could put $7,700,000. You could put $7,700, $150, a 6.2% increase. So these are for the IRA, these are the two levels of the HSA, that is the changes. And these are great changes, that's amounts that it should be done. Some of them I actually

Starting point is 00:13:10 think should be higher, but it's great that we actually have some of these increases for 2023 so that you can make these adjustments. We'll talk about in a second how much you need to invest to actually hit those limits so that you can max these out. The next one is the 401k. So the 401k, if you're under the age of 50, you can contribute $20,500 in 2020. For 2023, the limit goes up to $22,500. This is a $2,000 increase. This is the largest increase in history. The absolute largest increase on the 401K in history is for next year.

Starting point is 00:13:43 So making sure you're taking advantage of that is powerful because you can put an extra 9.8% into your 401K. Now, there's also a 401K catch-up content. And the 401K catch-up contribution is for folks who are age 50 and over. The IRS states if you're over the age of 50, you can put even more money in your 401k so that you can catch up for retirement. That's why it's called a catch-up contribution. So the 2,022 limit was $6,500.

Starting point is 00:14:09 It goes up $1,000. You can put an additional $7,500. So if you're over the age of 50, you can get $30,000 into that 401K in 2020. That's a 15.4% increase. amazing for most people. And then in addition, the 401k annual additions, this is for folks who have businesses, maybe you have a solo 401K set by IRA,

Starting point is 00:14:29 some of these different things. If you look at the 401k annual additions, $61,000 is 2020 limit. And for 2003, it goes up to $66,000. So 8.2% increase there. In addition, one thing I forgot to mention was the IRA catch-up contribution also. So an IRA also has a ketchup contribution

Starting point is 00:14:48 if you're over the age of 50. you can get $7,500 in 2002, into your IRA. So that's the total amount, $7,500, so you get that additional $1,500 catch-up contribution for the next year. So those are some of the changes. Take note of these changes.

Starting point is 00:15:09 You need to know these for next year so that you can make adjustments. Now let's get into how much per month you need to be investing so that you can max these accounts out. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how stressful this can be. That's where Indeed comes in.

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Starting point is 00:18:29 We just cover those on the top of the show here. So we need to understand how much we need to be putting in these accounts so that we can max these out and maximize the dollars that we are investing every single month. So first we are going to be looking at the HSA. So for the HSA, for the individual, you can put $3,850, into the HSA for 2,023. So if you want to max that out, if you want to figure out,

Starting point is 00:18:53 how much do I just need to put in every single month? That's all I care about. I want to set up my automation so I can just send it to my HSA and max that bad boy out. So that would be $3.83 per month for the individual. Now, if you're on the family plan, you have to put $7,750 per year to max out.

Starting point is 00:19:10 So monthly, that's $645 every single month to max that out. The HSA is a fantastic plan. which is why we put it at the top of some of our investment plans, specifically on the stairway to wealth, which is the order to invest your dollars. If you're looking for an order to invest your dollars, make sure you check out our episode or our free printable called the stairway to wealth so that you can get those resources. If you want to find those resources, it's at mastermoney.com slash resources. So you can get those resources for the stairway to wealth and see what order we talk about here. Now, let's look at the 401K. How much every single month should you max out for the 401K? So now 401K has much higher limits for a lot of people.

Starting point is 00:19:46 Not everyone can max out a 401K because these limits are so high. So if you're making good money, you want to try to make sure that you're maxing out these 401K so that you can get some of those tax advantages. If you're not making as good money, maybe focus on the IRAs first, maxing those out, get that 401K match, then focus on your IRAs so that you can max those out. So for the 401K, if you're under the age of 50 for 2023, it is $22,500 per year that you can put into that 401K. if you're under the age of 50, that means it's $1,875 every single month that you can put into

Starting point is 00:20:23 a 401k. And if you're over the age of 50, you can put $30,000 per year into a 401k, which means that you can put $2,500 per month into your 401k in addition to having that catch-up contribution there. So that is a powerful thing to have available to you. So making sure that if you are a high earner, getting those dollars into that 401k is going to be incredibly, incredibly beneficial for you. And a lot of people who achieve financial independence, you can see that they are really packing into that 401k and trying to get as many dollars tax deferred as they possibly can. Now, let's look at the IRA, the Roth IRA. And with that 401K, this also includes the Roth 401K. So this is something that's really powerful. If your company offers a 401k or a Roth 401k, a lot of

Starting point is 00:21:07 times what they will do is they will allow you to elect how much you want to put into Roth and how much you want to put into the traditional 401K. So like you could put 75,000, percent into a Roth and 25 percent into a traditional. So I love the Roth 401k. The income limits are not there like they are in the Roth IRA. There's a bunch of other things that you can add in and it grows like a Roth IRA. So the Roth 401K is amazing if you can take advantage of that if your company offers. And a lot of companies do offer it now and they don't talk about it as much as what I'm noticing because a lot of people do not realize that their company offers it. So if you have access to a Roth 401k, I absolutely love that account, probably more than almost any of these accounts outside of

Starting point is 00:21:45 potentially the HSA, but the HSA has its limitations for having some of those qualified expenses. So making sure that you think through some of that. Now, let's look at the IRA and the Roth IRA. So for the IRA and the Roth IRA for 2003, you can put $6,500 if you're under the age of 50, and you could put $7,500 if you're over the age of 50. So if you're under the age of 50, you could put $541 in 66 per month into your Roth IRA. So this is somewhat of a jump because last year was $500. So now you're putting in a $1,000. an extra $4166 per month. So as you do this, you just want to raise those contributions so that you can max this out.

Starting point is 00:22:21 And if you're over the age of 50, you can put $7,500 per year. So that's $625 per month into an IRA or a Roth IRA. Now, there are income limits to the IRA. And we're going to talk about the phasing out those income limits in a second here. But if you make too much money, this is what I do. You can do a backdoor Roth IRA contribution. So meaning you put money into your IRA. Your money is in the IRA.

Starting point is 00:22:44 then you convert that money into a Roth IRA because Roth IRAs have income limits. You cannot make too much money and put money directly into a Roth IRA. You have to do the backdoor option. So the backdoor option is what I use. It's what a lot of folks out there will use if they do not have access to a Roth IRA because of their income limits. So let's talk about some of the income limits here and some of the phase out ranges because the IRS has released new phase outranges for making contributions to the traditional IRA and the ROP IRA. So this is how this kind of works.

Starting point is 00:23:15 So if the taxpayer or their spouse is covered by a workplace retirement plan during the year, the maximum they can contribute to a traditional IRA may be reduced, i.e. phased out to zero, depending on the filing status and the income. So if the taxpayer or your spouse does not have access to a retirement plan at work, then the phase out rule does not apply to you. So if you don't have access to a 401K, maybe you're working on a small company, they don't have a 401k or an IRA, then this does not apply to you. it does apply to you if you have a spouse or you individually have access to one of these plans

Starting point is 00:23:48 at the place that you work. So for single taxpayers covered by a workplace retirement plan, the phase out range begins at $73,000 and ends at $83,000. So it's up from $68,000 and $78,000 in 2022. And for married couples filing jointly, the range is $116,000 to $136,000, which is up from 2022, which was $109,000 and $129,000. So those are some of the phase-out ranges that are adjusted. There are a number of other ones here. I'll link them up down below in the IRS, depending on your filing status,

Starting point is 00:24:22 because I want to make sure that you can see these. Now, for the Roth IRA, it's a little bit different. That's for the traditional IRA. For the Roth IRA, the phase-out ranges for single head of households, is between $138,000 to $153,000. That's up from $129,000 to $144,000. in 2020. So it has gone up. That's great for high earners because maybe if you're not going to make more money next year, you might fall in the range where you're not getting phased out. And then for

Starting point is 00:24:50 married couples filing jointly, it's $218,000 to $228,000 per year, which is up from $204,000 to $214,000 to $214,000. So your phase out is increased by another $14,000 potentially just because of these increases. That's fantastic for folks who may not make more money. Maybe you're on the cusp right on the line. Well, now you fall into play to be able to contribute to your Roth IRA. So those Roth IRA phase out ranges are much higher than the traditional IRA for a number of reasons, but one of which is so that you can get some of those dollars in there. And then there's a couple of others as well. So we'll link up to the IRS website depending on if you file, you know, married couples filing

Starting point is 00:25:27 jointly or if you're a head of household or how you file your taxes. So we'll leave those in there as well. So now in the next section, let's get into how long it would take you to become a millionaire by maxing out these accounts with the new rules. All right, let's figure out how long it would take to become a millionaire by investing and maxing out a couple of these accounts. So we're going to talk about the IRA and the Roth IRA. Then we're going to talk about the 401K and the Roth 401K.

Starting point is 00:25:53 So how long would it take you to become a millionaire by maxing these out? Well, obviously, in the IRA and the Roth IRA, you could put $6,500 if you're under the age of 50 for $2,023, and an extra rack, $1,000, if you, you're, you are over the age of 50 for $7,500 to max that out. So we did an 8% rate of return and we did a 10% rate of return to make everybody happy. So if we utilize that 10% rate of return, there are the people who really like to run their numbers at 8% rate of return. There's nothing wrong with that. I'd rather be much more conservative with my retirement planning. So if you're trying to think

Starting point is 00:26:26 through, should I put 10%, should I put 8%, should I put 7%. I'm hearing all these conflicting things. Do the lowest one you think it should be. The reason for that is it just helps you plan. And if it's higher than it needs to be, then guess what? You're getting there faster. But you're planning for the worst to happen. So making sure, because we don't know what's going to happen in the future, nobody has a crystal ball, nobody can predict what's going in the future. Historical performance is not indicate what's going to happen in the future. So you got to make sure that you understand that. So we did an 8% rate of return, did a 10% rate of return. So let's look at the Roth in the IRA first. So if you max this thing out, and we did only under the age of 50, we did not add

Starting point is 00:27:01 catch up contributions to this. So if you're going to hit catch up contributions within this age range, then you will get there even faster. So at an 8% rate of return, it would take you 33 and a half years to become a millionaire. So that means you're putting $6,500 every single year into your IRA or your Roth IRA. And at a 10% rate of return, it would take you 29 years to become a millionaire. So four and a half year difference just based on that 2% rate of return adjustment. This is why the rate of return is really important. And why I say you can use the low. rate of return just to be safe because you don't want to overestimate and then you got to work another four and a half years. Four and a half years doesn't seem like a lot now if you're 30 years away from

Starting point is 00:27:43 retirement, but it's going to feel like a lot when you're in the end of your working years and you don't want to be working anymore. So making sure that you make that adjustment just so you know. And then if you get there faster, how awesome would that be to get to your retirement plan faster and you just make that small little adjustment there? This is why I love the Roth IRA because I want you to see this. When you're contributing this amount of money month over month for this, long period of time, the majority of that money is going to be growth. It's not going to be the amount of money that you contributed. And let me show you the example here. So say for example, you used a Roth IRA and the growth was completely tax-free and you use the 10% rate of return. We're going to use that

Starting point is 00:28:19 example in this one. So with a 10% rate of return, you would have $820,000 in tax-free money. That's the growth of your money. So you get to a million dollars in $820,000 of that million dollars is tax-free money because it's the growth of your money. Absolutely amazing. This is why we love the Roth because we love not having to pay Uncle Sam in the future, especially when we have no idea what future tax rates are going to be. So that's why I prefer the Roth over the traditional IRA for my personal self. Now, let's look at the 401K because this is going to happen much faster because you can contribute more money to these accounts. So with the 401k now in 2020, you can get $22,500 into that account. If you're over 50, you can get an extra $7,500 in that account to max up to $30,000 per year.

Starting point is 00:29:08 So we ran this with $22,500 per year. We did not put the catch-up contribution in the 401k or the Roth 401k. So let's see how long it would take you to become a millionaire. At an 8% rate of return, it would take you 19 and a half years to become a millionaire, much faster than the IRA because you can get more money in there. In fact, it is well over a decade. It's 14 years faster. no public math here, it's 14 years faster to max out your 401k or Roth 401k than it is to put those dollars into an IRA. 14 years is a lot of time to have a freedom. So looking at these accounts, it's very powerful, especially if you have that Roth 401k and you'll see why here in a second. And then at a 10% rate of return, it'll only take you 17 to half years. So you're going to shave off

Starting point is 00:29:51 two years by getting that 10% rate of return, 17 and a half years to become a millionaire. Now, let's see if you kept this up over a 30 year career, because a lot of people don't want to retire with a million dollars. With a million dollars, you can only draw down 4% of that portfolio, so you can only draw down $40,000 a year. You don't want to live on $40,000 a year in retirement in 30 years, especially at the rate of inflation as of late. So let's see what would happen if you just keep investing those dollars over the course of a 30-year career. So at an 8% rate of return after 30 years, you'd have $2.6 million. And at a 10% rate of return after 30 years, you'd have $3.8 million. That is where the rate of return really makes

Starting point is 00:30:29 and adjustment. And why you want to have the lower amount? Because you may not have as much money at the end as you possibly could if you don't use the lower amount as a safety net. It's just an extra safety net that you can have. And like you know, we always talk about here, having those safety nets in place is incredibly powerful with your money because you want to be indestructible with your money, specifically with your money plan as well. So making sure that you do this in this way is incredibly powerful. But if you got that 10% rate of return, $3.8 million would be absolutely amazing. That means you're spending somewhere in the line of $140,000 per year in retirement, $150, somewhere in that range. So this is pretty wild stuff. And you can build a tremendous amount of wealth in 30 years just by

Starting point is 00:31:08 maxing out some of these accounts. And this is the crazy thing about that. Now we're going to talk about how I invest my money in some of these accounts. All right. So let's talk about some of the ways that I'm going to invest my dollars based on these new rules as well. So with our companies, we have our own 401K plans with the companies that we own here. And so we have a 401 plan set up. So I am very interested in contributing to my Roth 401k first because, as you know, I absolutely love Roths. So the first plan is to make sure that I max out that Roth at the $22,500.

Starting point is 00:31:40 But in addition, we always plan on doing some of those 401k annual additions. And so the 2023 limit allows us to get a lot more money into these 401ks so that we can get as many dollars as possible into these 401K so that they can grow and we could defer taxes or they grow tax-free. Now, I'm doing this every single year. So because we can take advantage of some of these 401k additions, our goal is to get $66,000 into the 401k for myself for next year. In addition, we're going to max out my wife's as well. So making sure that we do both of those is going to be incredibly important to part of my investing plan for 2020. So for my personal 401ks, we're planning on getting $66,000 into them because of those annual additions that you can get

Starting point is 00:32:25 They went up from 61,000 last year to 66,000 in 2002. In addition for the IRAs, the plan for the IRAs is obviously every year now, we do the backdoor Roth IRA. So how we do this is we have an IRA set up, and then we have the Roth IRA set up. And we contribute our money to the IRA, and then we transfer it over to the Roth IRA. And that is what we utilize to make sure that we can still get money into a Roth IRA, so we do the backdoor Roth IRA to make that happen. This is an incredibly powerful strategy. It's for folks, if you do not meet those income limits and you want to get that money into the Roth IRA but utilizing the backdoor.

Starting point is 00:33:02 If you're under those income limits, you can just go straight into the Roth IRA. You don't have to do the backdoor Roth IRA. Now remember, and this question comes up a lot, is the Roth IRA is not the investment. The investment is the index funds or the stocks that you buy once the money's in the Roth IRA. The Roth IRA or the 401K is the account. The investments are what you buy inside of the account. that is how it works. So a lot of people think that they are investing their dollars

Starting point is 00:33:27 when they just put it in the account. And I've seen way too many people where their money is in their Roth IRA and it's just sitting there in cash, not growing at all for years and years and they didn't know it. So make sure you look and know that you need to either be investing in like target date retirement funds or index funds or ETFs or whatever else you want to be investing in. You can talk to some professionals, see what they invest in. But what I would do is look into this.

Starting point is 00:33:48 Now, in index fund pro, we teach you how to invest your dollars in these accounts. We teach you how to get your money working for you inside of these accounts. So if you don't know, check out an index fund pro, which launches on January 2nd, 2000, 23. It's going to be the Investing 101 course that we are launching. So we're so excited for that as well. And if you're on the master money newsletter, you'll be able to get a discount code on that when it launches.

Starting point is 00:34:12 So those are the two things I'm doing there. In addition, we have the HSA. So we have a high deductible health plan, which is what you have to have to have an HSA. And so with that, we are going to plan on maxing out. that HSA as well on the family plan. So getting that money into an HSA on the family plan is going to be incredibly powerful for us. So getting that $7,750 is what we will be doing on the HSA as well. So these are what we're using for our retirement accounts. We're getting these dollars in first. Once I have this money in these accounts, then I can look at starting to add more to my real estate portfolio or my

Starting point is 00:34:45 taxable brokerage account, which has money in there for liquidity. I want to have some liquidity available. So I do have a taxable account that I contribute to monthly as well. And then making sure that we get those dollars to start growing for us so that we can continue to build wealth and reach our goals. So making sure that we can hit those goals as fast as possible is what we want to do. And if you want to talk about my goals or what we're looking to do, I'd be happy to talk about that as well. Just let me know on Instagram, TikTok, whatever, if you want me to talk more about some of those goals and why we do what we do. So that's what we're doing with our accounts. That's our plan for 2023. Let me know what your plan is and what questions you have on Instagram or TikTok. Let me know

Starting point is 00:35:21 so that we can talk through some of this stuff as well because I love hearing what you guys are doing in your accounts. And so many folks have opened a Roth IRA or a 401k from listening to this podcast. And I'm so incredibly excited for you guys to start building wealth. You have become a wealth builder now. And wealth builders are people who listen to this show. It's part of our community and it's folks who are interested in building wealth over time. They know that building wealth is a slow and steady game. but at the same time, you can get there in 10 years if you want to based on utilizing your money, having a high savings rate, saving those dollars, investing those dollars, and allowing those dollars to grow as fast as possible.

Starting point is 00:35:55 So we are all about that here. My goal is to teach as many of you as possible how to build wealth. So we are so incredibly excited for everybody who is looking to start these accounts. And if you're looking to start them in 2022, the year is not over yet. You can open one up now and you can actually max it out now with the 2022 rules. And then you can max out again for next year in 2020. So incredibly excited for you to be able to do that. And if you guys have any questions again, make sure you reach out.

Starting point is 00:36:20 Thank you so much. I hope you learned a ton for the 2023 year. And on the next episode, we're going to talk about some of the tax changes as well so that you can hear about that and how your paycheck may be rising because of some of these tax changes. So thank you guys so much for listening. And we will see you on the next episode.

The Personal Finance Podcast - How to Become an IRA Millionaire in 2023 (With the New IRS Rules!)

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