Suze Answers Your Mega Retirement Plan Strategy Questions

Hi, everybody. Suzy O here now. What is the goal of money? The goal of money is for you to be secure. And there is no better way for you to be secure than having an emergency savings account. It is essential for your financial foundation. So all of you should be participating in the Ultimate Opportunity Savings Account at Alliant Credit Union. Go to myalliant.com to find out more and be secure. Good morning, Susie. Are we recording? Why are you asking me that? Tell them what we just did, KT. We just did the best podcast on earth and she just looked at me and said, KT, you're going to kill me. And I said, don't tell me. She didn't record it. I didn't push the button, baby. Push my button. Push the button. She's pushing my buttons right now. Okay. So today is January 8th, 2026. We just had an extraordinary great week. And the one thing that we did that we haven't done in 14 years was... Wait, did you welcome everybody to the Women in Money podcast? I did not because I welcomed them three times already this morning. So everybody, welcome to the Women of Money podcast and everybody's smart enough to listen, but not every host that's smart enough to push the record button. But anyway, this is the Ask KT and Suzy Anything edition, although I'm not sure she's going to talk to me for a few minutes here. But if you want to write in and ask a question, write in to Ask Suzy, S-U-Z-E podcast at gmail.com. And if you write in, keep it short and KT picks it, oh, we will answer it on the podcast. What were you saying now, girlfriend? So I was telling everyone that we really had a great week despite Suzy messing up the beginning of this podcast. KT, it was only a 45 minute podcast. Oh my goodness. It was so good, everybody. So great. So I'm not going to sing again. I was singing and she cut me out. I didn't cut you out. So tell them what I was singing. You sing it. I'm not going to sing it. You know I don't sing. Yes, you can. Everyone can sing this. They don't even have a clue what we're talking about. We saw a great movie called Song Song Blue. Everybody knows one. Yeah, baby. Okay, we saw the new movie Song Song Blue featuring my big hero, Hugh Jackman, and now Kate Hudson. Kate Hudson, who knew you could sing like that? Wow. She's great. She's up for... You know, she's up for... Both of them should get Oscars, Golden Globes, you name it, they should get them all. They were brilliant. So here's what's interesting, everybody, is that I was telling KT in the previous podcast that never got recorded, right, is that I thought that maybe we should start telling people what we do during the week. Wait, let's ask them. Are you interested? They wrote me and told me that they love the fact that we talked on Sunday, last Sunday, about Landman and what we did on New Year's Eve. And now I've had at least 50 emails that I've read saying, oh my God, I immediately went and I watched Landman. It's on Paramount Plus. And fabulous, fabulous, Susie. I can't wait. It's the best thing I've ever seen. It's really good. Good, good, good series. And here's what's so fascinating is after we went to the movie on Sunday, we went last Sunday, okay? We go to the movie and on Sunday is when the new episodes show of Landman. We come back, we're watching it and they go into this like bar and what happens, KT? Neil Diamond. They were playing Neil Diamond, Sweet Caroline, which was really, really fun since we just watched. Well, we can't give it away. We can't tell anyone about the movie. We're not. By you telling people that they sing Sweet Caroline in a Neil Diamond movie, I don't think is giving anything away, Ms. Travis. But Sweet Caroline, the song plays a big part in that movie. And for us to come back and a few hours later, turn on Landman, which we were so excited to do, so excited we actually watched it twice, believe it or not, and have them sing that song, we went, whoa. All right, Miss Travis, we're going to now do the podcast again, everybody. And really, this podcast is going to be answering the questions that a lot of you had about last Sunday's podcast. Now listen to me. If you didn't listen to last Sunday's podcast, I really want you to listen to it. January 4th, 2026. I don't care when you're listening to this podcast, whether it's today, whether it's five months from now, you have got to go back and listen to the January 4th, 2026 podcast, because what I tell you about in there, you really need to know and understand. Because it is a little complicated. Many of you had questions, so we invited you all to write in your questions. And that's what we're going to answer right now. All of these pertain to last Sunday's podcast. Go for it, girlfriend. Well, I'm starting with Shelby. I love what Shelby has to say to you, Ms. Susie. She said, thank you for all you do. I am one of those who had zero savings, some credit card debt, and no retirement when I was 40. Now at 62, I own my own home. I have $3 million in retirement savings, over $300,000 in emergency savings, and zero debt except for my mortgage. Wait, can I just stop you right there? Sure. She's giving, she just rolled her eyes at me, everybody, again. Anyway, the reason I loved KT that you chose this, by the way, I answered Shelby directly because she just complimented me. So how could I not? No, really, is many of you listen to this podcast and maybe you're younger, you're 25, 30 years of age and you think, I'm never going to have money. This doesn't apply to me. So why should I even listen? It's because of people like Shelby and literally tens of thousands of people who have written over the years, just like Shelby, who went from nothing to seriously having a lot of money. So even if you don't need or can't use what I'm telling you about right now in your life, one day if you follow me, I promise you, you will. All right, go on, KT. Okay. So Shelby also goes on to say she has a will, revocable trust, durable power of attorney, and a healthcare proxy. She said it's all down to Susie's expert guidance. So listen up, everyone. Here's her question. I do have a question about the mega Roth conversion and the pro rata rule. If my employer permits in-plan conversions or rollovers, does the pro rata rule still apply? I have a traditional IRA in addition to my employer Roth 401k and catch-up accounts. So that's her question. Does it apply? The reason KT Shelby's asking that question is because there's a backdoor Roth strategy, and then there is the mega backdoor Roth strategy for a 401k. So everybody, just so you know, and you should listen to last Sunday's podcast, then you'll know why I'm telling you this now, to do a Roth IRA, which is an individual retirement account that you fund with after-tax dollars, which in my opinion is the absolute best retirement account bar none. And you can have a Roth IRA and an employer-sponsored Roth plan as well. However, after you make more than the modified adjusted gross income limits, check Sunday and you'll find out what I'm talking about, you no longer qualify for a Roth IRA. But there is a way to go through the back door to get money into a Roth, even if you make too much money. It does not make any sense to do that, KT, if you have a traditional IRA, a pre-tax one, a pre-tax IRA rollover, a simple, a SEP IRA, because there's something known as the pro rata rule, which means you're going to pay taxes on that money that you put into a backdoor Roth So you only do a backdoor Roth IRA if you do not have a traditional IRA IRA rollover or any of those People are starting to think that that applies as well to their employer plan and it does not Individual retirement accounts have nothing to do with an employer account. There are no income limitations for a Roth 401k, 403b, or a TSP? None. So you can put money in pre-tax, you can then convert it, you can do after-tax contributions. The pro rata rule does not apply when putting in money. It does not apply for what we were talking about. Okay. This question from Laura continues on what you just said. She said, Susie, I just listened to your podcast where you mentioned contributing after tax to a 401k using the 415c rule. Is this a potential option for me if I am 33 and not eligible for catch-up contributions? My employer currently only offers a traditional 401k and not a Roth option. I would love to be able to contribute additional money to my 401k after tax in this way. Thank you very much. I've learned so much from you. So what should Laura do? Laura, listen to me. In last Sunday's podcast, everybody, I talked about two things. The 415C after-tax contributions, where you can put up to $72,000 if you're under 50, or $80,000 if you are 50 or older, into your 401k or 403b. I also talked about, however, if you are 50 years of age or older, you work for an employer, and you made more than $150,000 in 2025 on your W-2 form, you then can only put your catch-up contributions into a Roth 401k, a Roth 403b, or a Roth TSP. So Laura, you're mixing up the two. Your age, therefore, has nothing to do, the fact that you're 33 has nothing to do with anything in terms of being able to put extra money into your 401k under the 415c rule. However, listen closely now to me, everybody. If the employer that you work for does not offer a Roth 401k or 403b, now I'm not talking about TSPs here because they do not allow 415c contributions. So forget 415C contributions right now if your plan is a TSP. So for 401Ks and 403Bs, if your employer does not offer a Roth or they do not allow in plan transfers, which means in your 401K or 403B, you can do this by the way, however, in a TSP, where you're allowed to go from pre-tax to after-tax, then guess what? If they do not allow that, then you do not want to do a 415C. You only want to do it if your company allows an in-plan transfer if it's with an after-tax contribution. Otherwise, you are far better off, Laura. If you simply do what? You either open up a Roth IRA. If you make too much money, you do a backdoor Roth IRA. If you don't have a traditional IRA, or you're better off putting extra money in an investment account rather than using 415C in the plan that you currently have. All right. All right. This next question's from Walt and this one too. Wait, I just want to clear up everything. And maybe, do you have a question later on about TSP? I do. All right. So everybody listen in a little bit because then I'll make sure you understand exactly what I was referring to with the TSP. Go on. Okay. This is from Walt. He said, Susie, I'm 77 years old and retired. I'm no longer working. However, I'm getting payments from my 457B plan from Fidelity, right? Yeah. It's on his W-2 form. Right. Of 75,000 for 2025, which comes on my W-2. Can I use this money to cover a contribution to my Roth for 2025 up to 8,000. So here's the scoop, everybody. In order to contribute to an individual retirement account and or even an employer account, you have to have earned income, meaning you have a job and you get a paycheck, right? Somehow you earn money. He's getting his money from a 457 plan, KT, which is a pre-tax deferred plan. It was from money that he earned, but he never paid taxes on it. But he's not earning it now. It's coming out as income to him, which is why it's on a W-2. It does not count for a contribution to an IRA. Next question. All right. This is from Kelly Susie. If I make over $150,000, do I have to put all my contribution into a Roth? Is that the whole question? Yeah. All right. Here, everybody, this is where you're being confused again. By the way, do you all have out your Suzy notebooks? Well, if you don't, two things. You can listen to this podcast and Sunday's podcast last Sunday over and over again. You can go on the Women and Money Community app by downloading it on Google Play or Apple apps. It's free because on the wall there, I did recap of everything on Sunday's podcast. So you can do any of those things and then understand it even more. But where people are getting confused is this. starting in January of 2026. If you are working for an employer and for that particular employer, you have earned more than $150,000. So you see that on your W-2 for 2025. So last year's W-2, It's what you earned in 2025. You can no longer make catch-up contributions and put it into a pre-tax 401k. You have got to put your catch-up, which is $8,000 if you're 50 or older. So you get to catch up and put that in above the $24,500 that everybody's allowed. And if you're the ages of 60 to 63, it's $11,250 catch up. You have got to put those two catch up amounts, whichever one applies to you into a Roth 401k, 403b, or TSP. So you just have to know that. If your company does not have currently a Roth 401k, 403b, guess what? They have to get one. And if they don't get one, you are not going to be allowed to make a catch-up contribution if you are 50 or older, made $150,000 on last year's W-2, you're not going to be able to make a catch-up. Now, if you make $149,000, none of this applies to you. If you make anything like under $150,000, none of this applies to you. But so many of you are making from your employer $150,000 or more that's on your W-2 and you want to make a catch-up and you are 50 or older, because you can only make catch-ups, everybody, if you're 50 or older. This does not apply to you if you are under 50. it has to go into a Roth. All right, there you go, KT. Suzy, I'm 61. Don't get mad at me, but my employer doesn't have a Roth 401k. I not mad at you I mad at your employer So I max out my traditional 401k plus make the catch up All right. So this person is either 60, 61, 62, or 63. Go on. All right. So ready for this? Now he's freaked out. Yeah. He went to his employer after he heard it on Monday. And this is what the employer said. Listen to this. This is what the employer said. They told me I should just do what I always have done and not worry about it. Is that true, Susie? That's what the employer said. Just do what you've always done, Bob. Don't worry about it. Look at her face, everybody. We got to videotape these podcasts because you should see her face. She is steaming. She has knives coming out. The law is the law. And just because you have an idiot who works in the HR department or wherever you asked and they said that to you, shame on them. In fact, why don't you simply go to them, key up your podcast to this segment right here, this question, and play it for them. Or take it to your CFO or the CEO of your corporation and play it for them. They don't have a choice. if your employer, listen, the past few years, you were able to get by because this law went into effect and they allowed you to slide until January, 2026. And there was no more sliding. Your corporation had no choice, but to either get a 401k Roth or a 403b Roth, TSPs already have them. So that's why I'm not mentioning it here. Or say to the employees, you can no longer make a catch-up contribution. They are wrong, wrong, triple wrong, quadruple wrong. And there you go. All right. The next question's from Marley. I'm not going to look at her right now because she's still a little red steamy. Well, here's the thing, KT. Wait, can we just talk? Yeah, I know. You hate when these people are- It's, listen, the people that you work for, that you put, you make them money, you're great employees, you do everything you can so that you make a salary, but that they do great as well. In fact, many of you put their needs in front of your own needs in many ways. You take care of their money and their products better than your own. Are you kidding me? And then you go to somebody who needs to know the correct answers about your money, that they're lazy enough to not even say, wait, let me find out and I'll get back to you. It's okay, everybody, for somebody to say, I don't know, but I'll find out rather than pretend like they know and it doesn't matter. I hate financial fakers, KT. Go on. All right. Next question's from Marley. Marley said, Suzy, I'm only 47, but I'm one of the lucky ones who've listened to you for over 20 years. I make $180,000. I max out my Roth 403B with $24,500. My employer matches $9,000 a year, but that goes into my traditional 403B. And then I do an in-plan conversion. Oh, you are so smart. Yes. This is what she wants Marley to do. I do an in-plan- Marley a woman? How do you know? We have a boyfriend who's a Marley. This is a Lady Marley. All right, go on. I do an in-plan conversion and pay taxes on it. I've been putting about $45,000 a year in an investment account at Robinhood where I have over $200,000, thanks to the stocks you told me to buy, Susie. Some of them aren't doing so well right now, but anyway. What is the max after-tax contributions I can deposit via the 415C rule in the traditional 403B? So Marley is so smart because she's already doing in-plan conversions of the $9,000 match that her employer gives her. You know, when an employer gives a match, although many of them starting to change this KT. A match is you put in a dollar, they give you 50 cents or a dollar up to about 6% of your base pay, whatever it is. They all have different calculations there. It's in a pre-tax one, which is how they usually fund it so they can take it off as a tax write-off, right? Then what happens is Marley takes that money and does an in-plan, it's still there, and puts it into the Roth account. Now she has to pay taxes on it, but she's willing to pay taxes on it now. So it grows all those years tax free. But here's the thing. Marley puts $45,000 a year away. Listen to me, everybody now into an investment account with Robin Hood, because it's in the investment account. Obviously, if she buys something, she sells something, she owes taxes on it. It grows, maybe tax deferred. She's not paying taxes on until she sells it. But they're always going to have to pay capital gains tax or income tax on the money there. If Marley was able to take that money and rather than put it in Robinhood and she likes the investments, right, in her 403B, what she could do is now employ the 415C. How much can Marley put in? Ready? This Marley is how you would figure it out. You're already putting in $24,500 a year. To that figure, you have to add the $9,000 of your employer's match. If you had profit sharing, if they put any other money in there, you would have to add that as well. So everything that goes into your 403B, you have to add up. In your particular situation, it's only $24,500 plus $9,000. That's a total of $33,500. You take that amount and you subtract it from the max of $72,000. And that will tell you how much you are allowed to put in with after-tax contributions under 415C, which in your case is $38,500. That is a whole lot of money. Think about it. Marley is going to be able to put $38,500 more, eventually it's going to go right away because she'll do an in-plan conversion, into her Roth 403B a year versus putting that money in a taxable investment account. So she'll still be able to do $7,000 or whatever in Robin Hood. But now, most of that's going to be tax free with tax free growth. All right, KT. That's a plan. That's a mega plan. But wait, do you understand now why they're calling it the mega back door? That's a mega amount of money. A lot of money. Marley's about to get, you know, 30 some odd thousand dollars into her 403B Roth, which is far more than if she did a backdoor Roth IRA. It would only be $7,500. Now she could do both. But do you see what I'm saying? All right, anyway, go on. All right. So next question's from George. George said, Suzy, I think you made a mistake. I love these questions. Wait, stop. George, you better be right on this. No, no, no, wait. You better be right that I made a mistake. Because listen, I do make mistakes. Not that often. And a lot of you write in and you say, Susie, I don't think you're right, da, da, da, and I, whatever. And it turns out you are right. And I admit it when you're right. Well, ready for this one? Wait, should we bet? Is he right or wrong? I think he's so wrong. All right, go on. George said, Susie, I think you made a mistake. I read the limit was $145,000 at the end of 2025 for a Roth ketchup, not $150,000 like you said. Well, who's right? He probably is somebody who went on to either chat GPT or one of those things. And listen, everybody, you have to be very, very careful when you are using any artificial intelligence to answer a question. Most of them, because I test it all the time, most of them are using figures from last year two years ago They not up to date George you are 100 wrong The original amount was indexed for inflation if we going to be accurate about this George But then they decided oh why should we index it for inflation? That's too complicated. Let's just make it $150,000. So starting right now, January, 2026. It is absolutely $150,000 of 2025 wages. If you are 50 or older, you are only allowed to do a Roth catch up. Next KT. This one's really kind of fun. Susie Charlotte wrote, can I really put in after tax money on top of my regular contributions. My brother, who is a financial guy, said he did not think any employer's retirement account allows it. Oh, I have a good idea for her brother. He should go work for the company that that guy or that woman, whoever it was, went to their employer who said, don't worry, just put in the $11,200 or whatever they put in. Okay. Are you kidding me? That's it. next question. I'm not even going to insult my integrity by answering that question. Next question is from Tommy and it's important. He said, I have a Roth TSP. I hear they're about to allow in-plan conversion. I want to do a 415C so I can eventually do a mega backdoor Roth. Katie, just so you know, you can say 415. It's all right. I didn't know. It's all right. No problem. Is that what everyone says? 415 or 415? Oh, I think everybody does it however they want. 415 is easier to remember. All right. So 415, see everybody. All right. So what should Tommy do? First of all, can he do it? Tommy, first of all, you need to know that in most cases. The Thrift Savings Plan, which by the way, everybody, is usually for federal workers, military, all military. And what's so great is Katie and I so love the armed forces, don't we? Yeah, we visited so many bases. We love the military. And for those of you that don't know, Susie was for many, many years, the official personal finance educator for the armed forces and for the Army Reserve. However, so I do know their plans inside and out. However, for a TSP, they do not allow 415 mega backdoor, just so you know. They do not allow it. They do allow you, however, starting January 28th to do in-plan conversions, which they never allowed before. So if you happen to have money in a pre-tax TSP and you now want to convert it to a Roth TSP in-plan there, you now are allowed to do so. However, you just need to know you will pay ordinary income tax on it. However, there is a caveat to this. And there are many people in the armed forces that are still employed in the combat zone. And when you have somebody who's working in the combat zone, their pay is actually tax exempt. I think the right initials for that is CZTE, right? So combat zone tax exempt. For them, they are allowed, ready for this? They are allowed after their normal contributions, 24, 5, whatever it is, the catch up, the whole thing, they are allowed to put in extra money up to the 415C limits of $72,000 or $80,000 if they're 50 or older. It's not called a 415, but it is combat zone tax exempt. So what would happen is they would put it in to their traditional TSP. And then after January 28th, they could do an in-plan conversion to what? Their after-tax TSP. If in fact they just leave it in their regular pre-tax TSP, their original contribution will always remain tax-free when they take it out, but then the growth on that money will be taxable. So if they could just get it over to the in-plan Roth TSP and also have a Roth IRA on the outside that later on in life when they're no longer in the armed forces, they could then take the money, transfer it to their Roth IRA and 100% of it would be tax-free. Or if they leave it in the TSP and it's been in there for at least five years and they're 59 and a half, they will be able to take all of it then at that point out tax-free. That's great. So they should just know that. So KT, did that help you at all? Susie, I only have one last question. And I guess I was a little bit confused because we didn't really address it. How long can you do this? I don't think it applies to me. Now, listen, if you're still working for a corporation, maybe you're a solo employer, meaning you have your own 401k, your, you know, a husband and a spouse. Spouses can do this. Everybody can do this. You can get a fortune if you're making a lot of money into these accounts. However, once you're no longer working, you don't have income or you're taking your required minimum distributions, which is things like that, you probably wouldn't be doing this anymore. All right. However, the majority of people, believe it or not, that listen to this, even if they're in their 60s, 70s, they are still working. They have extra money, especially if you're out there and you are 30, 40, 50, you have extra money and you can do this. I'm telling you. Do it. Do it. But you have to make sure, again, who you work for has a Roth 401k or 403b and they allow in plan conversions. All right, everybody. Okay, Katie, take us out, girlfriend. There's only one thing I want you to remember besides that in plan conversion. I thought you were going to say something else. You know what, how I thought you were going to say, there's only one thing I want you to remember and it's this, push the button to make sure that we're recording before we do an entire podcast. And on that note, everyone remember this, people first, then money, then things. Now you stay safe. Bye-bye. and everything it takes. We are strong. We are wise. Together we will rise. Hi, everybody. Suzy Oh here. And I have to tell all of you, there is one benefit that I know all of you need and your corporations need to offer. And it comes from a company that I helped co-found over five years ago by the name of SecureSave. So whether you're an employee or an employer, I want you to go to securesave.com slash Suzy, S-U-Z-E, and take a look at what I have for you there. I promise you, you're gonna like it. All right, now. Neither Suzy Orman Media nor Suzy Orman is acting as a certified financial planner, advisor, a certified financial analyst, an economist, CPA, accountant, or lawyer. Neither Suzy Orman Media nor Suzy Orman make any recommendations as to any specific securities or investments. All content contained in this podcast is for informational and general purposes only and does not constitute financial accounting or legal advice. You should consult your own tax, legal, and financial advisors regarding your particular situation. Neither Suzy Orman Media nor Suzy Orman accepts any responsibility for any losses which may arise from accessing or reliance on information in this podcast. And to the fullest extent permitted by law, we exclude all liability for loss, damages, direct or indirect arising from the use of this information. The must-have documents discussed in this podcast are legal documents created by a lawyer and distributed by Hay House. Thanks for listening.