How Podcasting Relates to IRAs

As many of you know, I am a HUGE fan of podcasts.

I listen to all kinds - podcasts about science, about the economy, and of course, about the Green Bay Packers. I recently stumbled upon a podcast series called Invisibilia produced by NPR. This podcast explores all of the invisible forces that control human behavior, from ideas, beliefs, assumptions, and even emotions. Suffice to say, it blows my mind.

One of the episodes that most resonated with me was about the effect that expectations - both internal and external - can have on your actions. This particular episode profiled a number of cases that focused on the fact that if you assume that you can't do something based on ungrounded assessments, those limitations start to become realities.

Part of why that episode resonated with me so much is because the exact same lesson is true of retirement.

Take IRAs, for example. You might assume that, if you're already contributing to an employer-provided retirement plan (401ks, 403bs, 457s, etc.), that you can't benefit from also putting your money into an IRA.

That is simply not true.

In fact, with a little help and creativity, you can absolutely put more of your dollars to use.

For example, let's say that you've maxed out your 401k, but have some extra dollars laying around that you'd like to put into a tax-advantaged retirement vehicle. The first thing you could do is make a non-deductible contribution (after-tax contribution) into an IRA. 

Now, if you stopped at just here, eventually you'd have to pay heavy taxes on the earnings of this IRA. However, if you were to immediately convert this IRA into a Roth IRA after making the contribution, you would not be taxed on the earnings of your future distributions. All because you made one little switch.

Tricky, right? The tax code is over 80,000 pages long. There are tons of other tricks that you can (and should) take advantage of.

So the next time you assume you can't do something, think again. And maybe call me and tell me that I can do it, too.