521 | Mailbag: Backdoor Roth IRA, 4% Rule, and 401(k) Strategies

Business owners face a ticking deadline that could cost them $500 per day—yet many have never heard of it. The Beneficial Ownership Information form, due December 31st, is just one of the under-the-radar compliance issues that can derail even the most careful financial plans. In this mailbag episode, Brad Barrett and certified financial planner Rachael Camp tackle this and a stack of listener questions on retirement accounts, asset allocation, backdoor Roth IRAs, and real estate investing—covering what to do when your employer doesn't offer a 401k and how to protect yourself from sequence of returns risk in early retirement.

Chapters

• Introduction [00:00:00]
• Public Service Announcement [00:01:21]
• Mailbag Questions [00:03:43]
• Asset Allocation Discussion [00:24:07]
• Real Estate Investing [00:56:01]
• Conclusion [01:07:10]

Key Topics

How to Invest Without a 401k: Options include traditional IRAs and Health Savings Accounts (HSAs), while noting contribution limits. [00:03:43], [00:04:12]

Company Matches in Retirement Accounts: Highlighted as a crucial opportunity to maximize savings [00:09:12]

Backdoor Roth IRA: A legal way for high earners to sidestep income limits for Roth IRA contributions [00:15:09]

Asset Allocation: Discussion on the complexities of asset allocation, particularly as one approaches retirement, and the impact of sequence of returns risk [00:24:07]

Real Estate Investing: Key considerations and the risks associated with real estate investments [00:56:01]

Key Quotes

"Avoid reverse dollar cost averaging by holding onto equities during market downturns." [00:39:28]

"Company matches in retirement accounts offer unmatched returns—don't miss out!" [00:09:12]

"Explore diverse account types for effective financial management." [00:10:00]

Action Items

• Look up the beneficial ownership information form if you own a legal entity [00:02:04]
• Review and potentially set up a traditional IRA if your employer doesn't offer a 401k [00:04:12]
• Maximize your retirement account contributions to include any employer matches [00:09:12]
• Consider maintaining a cash buffer for the first few years of retirement to mitigate risks [00:26:36]
• Consider your asset allocation strategy as you approach retirement [00:27:30]

Resources

• IRS Publication 590-A [00:12:12]
• BiggerPockets [00:01:55]
• Risk Parity Radio Podcast [00:28:10]

Related Episodes

• Episode 513: Make Your Own Dividend [00:57:00]
• Episode 176: The 3.5% or 4% Rule [00:22:27]
• Episode 475: Accessing Retirement Accounts Early [00:51:17]

Terminology

Backdoor Roth IRA: A method for high-income earners to fund a Roth IRA by first contributing to a traditional IRA and then converting it. [00:15:09]

Sequence of Returns Risk: The risk of receiving lower or negative investment returns early in retirement, which can adversely affect the portfolio's longevity. [00:26:36]

401k: A tax-advantaged retirement savings plan sponsored by an employer that allows employees to save and invest for retirement. [00:04:12]

▶ Listen Next: Ep. 522 — Back to Basics: Finding Balance in Financial Independence | Essential Listening

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