Thanks Big T, I’ve heard a few complaints about the 5498 Form and making sure it’s all accurate, etc. I definitely need to read up on that more and share what I learn. It seems most FIRE enthusiasts are also good record keepers – a necessary skill for early retirees for sure!

We started converting 2 years ago due to income levels, and had the pleasure of learning what the IRS Form 5498 is. It’s important to get this right, because you want proof later in life that the money in your Roth was all after-tax contributions – and have to be filed every year.

We’re with Vanguard and use their Personal Advisor Services to manage our Roths.. The pain in the butt is that they (advisors) cannot automatically convert every month after I made Traditional IRA contributions – so I have to call monthly to do it manually (first world problem).

Thanks for sharing, not a lot of people know about this “back door” method.

Dang, that risk free growth is amazing! Especially for something you didn’t realize was being deducted in the first place. Could have been much worse.

Your income being to high for Roth contributions… Sounds like a first world problem! haha :) When you retire early (I’m assuming you will) and your income drops to $0, you’ll have plenty of years to move money between post and pre tax accounts with low penalties. Cheers for reading Gladys. Have a wicked weekend!

I also wish someone had educated me about pension style funds in addition to contributing to a Roth early in my career. I spent 4.5 years working with a pension benefit not realizing that my contributions were 5-7% of my income. Major drawbacks since I left to pursue a higher potential career path. It left me underprepared and now need to catch up on my retirement contributions because the comparative withholding was so low. Now my income has far exceeded the roth IRA contribution limit and I have to learn tricky back door strategies to roll over from after tax contributions to a maxed out 401k. The cons of not starting to contribute to a Roth have been substantial: i’ve got an underfunded retirement fund and an overfunded taxable brokerage account. Eventually I’ll catch up, but have been kicking myself in the ass ever since.

The one pro of the pension fund – it’s structure will grow at a guaranteed 6% with 0% volatility. I essentially value it as a risk free bond. No rebalancing option… but can’t hate 6% risk-free growth.

Did someone say “risk-adjusted returns?” ;p

Nice! It’s cool to have the flexibility of both pre-tax and post-tax accounts. If your income situation changes, you can always switch back too.

That’s a wicked lesson to learn as a kid – to watch your money grow by itself over time. We need more parents like your Dad! Somebody give him a medal!

At the age of 15 my Dad taught me about compounding interest. He had me buy a gold coin at $ 325 per ounce, and that gold coin is now worth over $ 1,800 – a six fold return on investment.

He also had me put $ 4,000 into Vanguard’s Total Stock Market Index Fund. That $ 4,000 is now worth 8 times as much at $ 32,000!!! So, I love passive (set and forget) investing in broad, low-cost (Vanguard OR Fidelity) index funds.

Cheers Fiona! One of my friends found an old 401k once which had been left for years untouched. She just assumed it was invested in something that would grow… But after researching she learned that the money in the 401k was transferred to an ‘all cash’ money market position when she left her employer. Basically just sitting there not invested in anything or growing at all. Ouch! I encourage everyone to rollover old 401ks. It’s not that hard!