In this post we will look into how Roth IRA can be turned into real wealth that lasts for generations. Few days ago I came across a book which caught my attention. I will give this credit to the book’s title – Parlay your IRA into a Family Fortune by Ed Slott.
Although it was written more than a decade ago but the strategy might work even today. So, I decided to do a quick review of this book and also share some of my notes with my readers.
But first I want to share a new strategy which I tested with this book and so far I am quiet happy about it.
How to read a book quick?
Recently I had been reading a book called ‘Why the Rich are getting Richer by Robert T. Kiyosaki’. It is a good book though but in lots of sections author has repeated the same or similar stuff. You can read my review about the book here.
So after reading that book, I realized I spent way more time to finish the book than was necessary. That’s why I came up with a strategy to read books faster. The strategy is simple and involves me to go through the book’s index first. Prioritize the chapters which I feel more interested in and start reading the first chapter in that priority list. Over the time, if I find there’s some information which I am missing because author have wrote about it in previous chapters, then I read those chapters too. As happened with this book, if I like the book, then I will go back and finish reading rest of the chapters too.
This strategy helped me in filtering any redundant content and stay focused on the key points which I want to learn from the book. Moreover, I can finish the book in less than 50% of time compared usual.
I applied this strategy for the first time with Ed’s book on IRA and skipped first 5 chapters initially because they seemed to be building baseline for new readers but since I had been studying about personal finances for a long time, so I can skip.
This totally worked for me as I was able to finish important chapters of the book in less than 2 days. Since I found this book very interesting I read remaining chapters too just to ensure of not missing any critical information.
I will suggest you to try it next time and let me know how did it go in your case?
My sincere feedback about Parlay Your IRA into a Family Fortune
I started reading this book from chapter 5 since I thought I already know some of the stuff author have covered in previous chapters.
Ed has done really great job in compiling this book. In my humble opinion, I think this book should be holy bible of how someone should plan their IRA.
This book has all the knowledge you might need to setup your IRA accounts for the wealth building.
There’s nothing that I didn’t like about this book apart from the fact that it was originally written in 2005 and it’s 2020. So, some of the tax laws might have changed between now and then.
This is something you should keep in mind and always work with an experienced IRA expert like author suggested, to set up your IRA account for success.
Ed has explained in very details about various tax laws to benefit from while setting up your IRA accounts as family asset which could last for generations.
I really liked the detailed examples he has put together throughout the book to simplify the complex tax code for regular readers. For this, I will call upon kudos to the author, just for the amount of efforts he has put into this book.
Having said that, I really enjoyed this book and wish that author updates the book for latest tax laws. I highly recommend you to read this book even though it’s old since most of the strategies might still be valid and they are so simple to implement as well.
What I learned in this book
- Roth IRA compounds money tax free for you and your beneficiaries.
- The ultimate goal is to move your 401k funds (tax deferred account) into Roth IRA account (tax free account) as soon as possible.
- 401k funds can’t be moved to Roth IRA directly.
- Rather move 401k funds to IRA and then to Roth IRA to enjoy tax free withdrawal in future.
- You can move 401k funds to IRA when you switch employers or leave a job.
- Always have a primary beneficiary and a contingent beneficiary added to your retirement accounts.
- In case 401k account holder dies before converting to IRA, the primary beneficiary can roll over the funds to his/her own IRA and then convert to Roth IRA later.
- Roth IRA is always preferred over traditional IRA since Roth offers tax free withdrawals.
- While setting up Roth IRA, look for providers offering stretch option on the plan. What it means is that your beneficiary can continue your Roth IRA account when you die and all the money growth and withdrawals will be tax free for the beneficiary as well.
- To maximize the benefits from Roth stretch IRA plan, add your grandchildren as beneficiaries. This allows money to compound over many extra decades yielding huge wealth created over this time – tax free.
- It’s super important is to call your Roth IRA provider and confirm if they offer Roth stretch IRA on your account before opening the account. If they don’t, then find some other provider who does.
- Unlike traditional IRA, with Roth IRA you don’t need to take required minimum distribution at age of 70.5. You can withdraw at your will.
- With Roth IRA, even your spouse doesn’t need to take RMD (required minimum distribution).
- You non-spouse beneficiaries will need to take RMD.
- Its better to split the Roth IRA yourself between beneficiaries if you plan to leave it to multiple beneficiaries.
- If not split by you, then the default life expectancy factor will be calculated based on the oldest beneficiary in your Roth IRA. This leads to huge compounding loss to the youngest beneficiary in your account.
- In case one of the beneficiary is an entity such as charity and others are your kids or spouse. It’s important to split and create separate accounts for each so your kids and spouse can benefit by stretching the money through their life expectancy. Entities don’t have life expectancies so the money needs to be withdrawal immediately.
- If planning to use Estate or Trust for holding your Roth IRA accounts or as beneficiaries, then ALWAYS work with an experienced IRA expert. A simple mistake can lead to wealth destruction due to huge tax penalties.
- Retitle inherited IRA – As soon as IRA is inherited; the successor must keep the name of the person whom IRA was inherited from and keep successor SSN on the account to maintain the stretch.
- When moving funds from one custodian to another, make sure to use trustee to trustee transfer otherwise it could lead to huge tax bill.
- Hire an experienced IRA expert to set your IRA account for building wealth. In the book, Ed has given 11 questions to ask an IRA expert before hiring him. I think it’s important as you don’t want to hire someone who doesn’t keep himself up to date with tax laws changes.
These are my notes from the book and I strongly feel if you are interested in setting your IRA for success, then do not try to do it on your own. I would consult with an IRA advisor who is experienced and expert in this area before risking my retirement money with someone unexperienced or doing it myself just to save few bucks. It’s not worth it, I guess.
Ed has done great job in simplifying the tax rules around Roth IRA in his book. I highly recommend you to read this book if interested in building wealth for retirement and generations. In my opinion, Parlay your IRA to Family Wealth is a must read.
I hope this post serves you well and helps you plan your retirement better.