<p>Our FA advisor got a small stake in the limited partenershipn in the 80. Paperwork it generated alone was a huge pain. What fancy paper they used! Gold-plated BS. I doubt we made any money. If we did, it still wasn’t worth it. Made me think we have too many MBAs.</p>
<p>A variation on #4; I am in the similar situation. What do you think of getting a cash-out mortgage to pay for the tax? </p>
<p>Let me point out several things:</p>
<ol>
<li><p>I wasn’t offered anything - I had a free consultation with everything discussed coming from my questions. The guy didn’t even ask me if I wanted another meeting nor anything about my financial situation.</p></li>
<li><p>As some here know, I never buy anything that I don’t understand and I always have a way out of a bad investment. I never look at how much I can make first, it’s always how much can I lose.</p></li>
</ol>
<p>I didn’t mean to say you are not a sophisticated investor. Sorry if I sounded that way. Quite the contrary. I just remembered my brief encounter with “tax instruments”.</p>
<p>What do you think of getting a mortgage to pay the tax? If nothing else, you get to spread out the payment.</p>
<p>@DocT, I hope that nothing I said came off as disparaging. My rule about not investing in anything I don’t understand came from Warren Buffett. He and Bill Gates are great friends, are long-time bridge partners, etc. Warren was asked why he didn’t invest in Microsoft, and he said that he didn’t understand the technology business. Warren Buffett, whose understanding easily trumps (bridge pun, if you’re keeping score at home) the understanding of most of Microsoft’s investors said that. And that’s when I realized I should stick to vanilla index funds. </p>
<p>Ps. Except that I own some Berkshire Hathaway, which has gone up so much I’m reluctant to sell it 
No other individual stock other than employer RSUs. </p>
<p>@iglooo, you would be paying taxes, voluntarily, in the hopes that you will save on future taxes. It is not a foregone conclusion that you’ll come out ahead, since none of us can predict future tax policy, inflation, GDP growth, lifespan, etc.</p>
<p>It might be a good bet or a bad bet, but I would not place the bet with money I got from mortgaging a house. </p>
<p>ETA: full disclosure – I eat my own cooking. We have done no Roth conversions. We do a back-door Roth annually, but I don’t think that’s in the same category. </p>
<p>Ixnay, I have been one of those following your back door method. I think I should be doing that too. </p>
<p>shhhush 64</p>
<p>
In essence this strategy increases the tax you are paying on the conversion, so it reduces the chance of coming out ahead tax-wise.</p>
<p>If you get a 15 year mortgage and take all 15 years to pay it off, you will pay about 25% of the original balance in interest. For a 30 year, about 75%.</p>
<p>I wish I could do a backdoor Roth, but for me it makes no sense.</p>
<p>@bookworm, do it while the door is open. It’s legal, and I guess it encourages saving so the government likes it, but they might close it some day. </p>
<p>@notrichenough, do you have a traditional IRA? That’s usually the objection to a backdoor Roth, and there are sometimes ways around it (migrate the tIRA to an employer’s 401k, for example). Or, if you have other more pressing needs for the money, that’s always a reason that’s hard to argue :)</p>
<p>@IxnayBob, yes, we have significant assets in tIRAs.</p>
<p>While much of it was accumulated via rollovers from 401ks and could potentially be rolled into my current 401k (although I am not sure if they allow it), a lot of it wasn’t, and there has probably been some commingling of rollover and non-rollover money as I have moved stuff around over the years, especially in the years before Roths started. It never seemed important to make sure I kept them separate, and I didn’t really track it.</p>
<p>@notrichenough, that’s why I don’t bother with a spousal backdoor Roth. It’s an easy low-hanging fruit deal if you don’t have a tIRA, but too much hassle otherwise. </p>
<p>Do any of you encourage your recently graduated and employed children to try to max out ($17.5k for 2014, $18k for 2015) their ROTH 401k, if offered?</p>
<p>Yes, absolutely. My son is a senior in college and he already has a job lined up. I gave him an EXCEL spreadsheet showing him what his 401k would look like over several years. He couldn’t believe it. It was so priceless watching his eyes get big. I’m so glad I can pass on everything I’ve learned to my children. No one taught me. 
</p>
<p>My oldest has had an IRA since he was a toddler when he got his first W-2 (and converted it to a ROTH IRA in 1998), the other didn’t get her first job until age 16 and started contributing to her ROTH then.</p>
<p>Madison, S1 and DIL are both maxing out their 401(k)s. They are fortunate to be in a position to do so. They asked us for advice and we shared our experiences.</p>
<p>I was a 401(k) administrator for many years, and my advice to folks is to 1) contribute enough from your paycheck so that you get the maximum employer matching contribution and 2) DON’T cash out the funds when you leave the job. Roll it into an IRA or your new employer’s plan. And be aware that you have more control over investment options and fund expenses in an IRA. Your employer may be burying lots of plan expenses within your net investment return. Read the fine print.</p>
<p>My younger S, who is not going to be in as lucrative an industry, will get the same advice – put in enough to max the match.</p>
<p>Handling 401(k) plans was just part of the (ongoing) conversation. They have also asked us about medical insurance, flexible spending accounts, payroll withholding for two incomes, paying bills online, managing student loans, determining the need/options for insurance of various flavors, etc. S2 started asking about this stuff in HS, but hearing about it when you’re 17 (or 21) is one thing – dealing with the choices as a newly-employed adult is another.</p>
<p>DH and I didn’t get this kind of advice, so I am happy we can pass on something that proves useful to our kids. One caveat: we offer to be a sounding board, answer questions/review plan documents, etc. – but will discuss this stuff only if <em>they</em> ask us for advice. I never wanted my parents to know DH’s and my salaries and financial situation, and I totally get that my sons and DIL may also want boundaries. </p>
<p>“Do any of you encourage your recently graduated and employed children to try to max out ($17.5k for 2014, $18k for 2015) their ROTH 401k, if offered?”</p>
<p>Yes, my son has been contributing to the Roth, particularly since this could be the last year he’ll be eligible to do so. However, he might be able to do the backdoor method anyways. He said he was going to max out his 401K, but hasn’t gotten around to opening it yet, despite my nagging. Grrr. He seemed to think he could open it and just deposit the entire amount in one day, but I’m certain that it has to be via payroll deduction. This is the only tax break he has, so it annoys me immensely that he isn’t getting to it.</p>
<p>DS#2 maxed out his 401K at his previous employers but found out the hard way that he left (after 2 years) before he was vested (3 years) and the company gave him ZERO of the initial matching contributions. They also didnt give him the referral bonus he’d earned for an employee they hired because the employee has to be there a year before he would see a penny of the referral money. Company benefits are far nicer at his current employer.</p>
<p>Both s’s have been putting into their Roths and maxing their 401Ks , but its understandbile that not all are able to do that, especially if their finances are spread thin and they are repaying student loans. But letting ones money grow for them is an excellent goal.</p>
<p>Yes, we have encouraged both of our children to max out all available retirement account. For S, he is planning to max out all those available at his current place of work, as well his sole proprietorship. If he doesn’t have enough, we will fund the amount he needs to max it out as a gift. To us, this leveraged giving or income shifting is one of the best gifts we can give our kids.</p>
<p>We started Roth IRAs for both kids when they started work, contributing the amount the W-4 indicated they earned the first year they had a part time job at school. S has a nice chunk saved for the 3.5 years he’s been working plus the part time work he did while he was a student.</p>
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<p>And also saving for things like houses and cars.</p>