we make inconsistent salaries so we can't always contribute to Roth IRAs do you recommend that we invest throughout the year in traditional IRAs or should we lump some at the end of the year what do you think is what I and Bo I'll let you

we probably need and if Mythos is out there is it inconsistent because there's just not enough money and we won't ever know until the end of the year if we're going to have enough money to fund them or is it because their income gets so

high that they can't that but Mythos that's a great point that's a a key factor here I'm I'm going to answer the question assuming they're on the income threshold some there's some years that are big some years that are not big and

and we have a lot of clients who fall into that I want to say for married filing jointly this year the Roth phase outs are somewhere around like 230 2340 something like that uh and so if your income some years is over that number

and some years is under that number becomes really difficult because if you find yourself putting money in the Roth every single month and then you get to the end of the year and you got a bigger bonus than you thought or you had more income than you thought well then you

got to go unwind them and you got to pull out all those contributions you were ineligible for and then you got to pull out all of the earnings attributable and those earnings that were attributable are going to be taxed and have penalties associated with them so what we tell people as they begin to

approach that threshold is rather than being a uh dollar cost averaging monthly funder you may need to switch to being an annual IRA funder go ahead and get through the end of the year and then once you get to the end of the year and you've

collected all your 1099s and all your W2s you can then know what was my income last year and am I Roth eligible or not if I'm Roth eligible great I'm going to go ahead and dump the 14,000 7,000 for

me 7,000 for my spouse into the Roth IRAs or if I was not Roth eligible is there an opportunity for me to do backdoor Roth can I do a non-deductible traditional IRA contribution and then ultimately convert that to Roth as a way

to get money into the Roth bucket now what you have to do is you have to make sure you stay disciplined throughout the year so that between January 1st and April 15th or whenever you file your tax return you actually have the resources to be able to fund those IRAs so you have

to make the decision okay am I going to park them in cash while I'm doing that am I going to dollar cost average in a low-cost index fund inside of my brokerage account how am I going to navigate that but I always think as people approach

the income thresholds they should switch to being annual funders instead of monthly funders yeah I love cuz look when we're all thinking about how we're saving for retirement um one of the hard things to do with like 401ks 403bs is

that salary referral piece you kind of have to in real time try to choose how much you're going to save out of each paycheck to go towards retirement the good news about for Roth IRAs is that you don't you get to know all the

variables know all the answers and still the government gives you that full three and a half full months it's almost close to four months for you to figure out hey where was my income how does my cash reserves look what can we you know make contributions for the prior year into

that Roth IRA or does it need to be a back door and we can fund the traditional and then you know work through the conversion it's um that that's a magical thing that you actually have that time of that additional time in the following year to make those

contributions I with Bo the the unwinding process is too cumbersome to to get cute with it so if you are close to the funding threshold and you can't fix that by maybe overfunding your 401k into traditional to lower your income

then just be smart Build It Up in C you know in a cash reserves and then fund that once a year it's still dollar cost averaging even if it's a once a year transaction love it

Best Strategies for Inconsistent Income

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The Money Guy Show

Inconsistent Income and IRA Contributions

Question about whether to invest in traditional IRAs throughout the year or lump sum at the end due to inconsistent salaries.

Uncertainty about consistent income to fund IRAs.

Answer assumes inconsistent income, some years higher than others.

Roth IRA phase-out thresholds for married filing jointly are mentioned.

Consequences of overcontributing to Roth IRA and needing to unwind contributions.

Suggestion to switch from monthly to annual IRA funding to determine Roth eligibility.

Contribution strategy if Roth eligible (lump sum contribution).

Backdoor Roth strategy if not Roth eligible (non-deductible traditional IRA contribution and conversion).

Importance of disciplined savings throughout the year to fund IRAs.

Managing cash reserves and investment strategies while waiting to fund IRAs.

Advantages of Annual Funding and Flexibility

Difficulty of real-time salary deferral for 401(k)s and 403(b)s.

Flexibility of Roth IRAs to determine contributions after knowing income.

Extended timeframe (almost four months) to make contributions after tax filing.

Time to decide between Roth IRA contributions or backdoor Roth strategy.

Avoiding Complicated Unwinding and Conclusion

Unwinding process for Roth IRA overcontributions is cumbersome.

Adjusting 401k contributions to lower income and maintain Roth eligibility.

Recommendation to build cash reserves and fund IRAs annually.