Rob Moore, MQFP® and Omen Quelvog CFP®, MQFP® welcome former fighter pilot and financial planner Brian O’Neill, CFP®, EA, MQFP® to explain how high-income earners can continue funding a Roth IRA. They also discuss higher mortgage rates, home affordability, and why financial decisions should reflect your family’s goals rather than headlines.

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🇺🇸 Background: The Star-Spangled Banner

• During the 1814 bombardment of Fort McHenry, Francis Scott Key watched through the night to see whether the American flag remained.

🏠 Intel Update: Mortgage Rates and Buying Power

• A $2,000 monthly principal-and-interest budget supports roughly a $475,000 mortgage at 3%, but only about $300,000 at 7%.
• Higher rates affect home prices, inventory, rents, and buyer competition.

🚪 Backdoor Roth IRA Basics

1. Confirm that you have no balance in any pre-tax traditional, rollover, SEP, or SIMPLE IRA.
2. Make a nondeductible cash contribution to a traditional IRA.
3. Convert the contribution to a Roth IRA, generally without tax withholding.
4. Report the transaction correctly, including on IRS Form 8606.

⚠️ The Pro Rata Rule

• The IRS generally views your pre-tax IRAs as one combined balance.
• If pre-tax and after-tax dollars are mixed, a conversion will include a proportional share of each, potentially creating a tax bill.

📅 Timing and Common Mistakes

• Completing the process early in the year can maximize time in the market.
• Contributions must be made in cash, not by transferring fund shares.
• Do not leave nondeductible contributions sitting unnecessarily in a traditional IRA.

🎯 Commander’s Intent

• Run the numbers before deciding higher mortgage rates have priced you out.
• Consider the backdoor Roth process if your income prevents a direct Roth IRA contribution.
• Verify IRA balances, understand the pro rata rule, and ensure the transaction is reported correctly. When in doubt, work with a qualified tax or financial professional.

🔗 Resources

• Winged Wealth Management and Financial Planning
• Military Financial Advisors Association
• https://getchipdrop.com/

In this crossover episode, Rob Moore, MQFP® joins the Military Money Manual to explain how a Roth conversion ladder can create supplemental income between military retirement and age 59½.

Contact The Fiscal Foxhole

• Email The Fiscal Foxhole at fiscalfoxhole@gmail.com
• Book a meeting with Rob
• Book a meeting with Omen

🪜 Roth Conversion Ladder Basics

• A Roth conversion ladder moves money from a traditional IRA to a Roth IRA over several years, creating potential bridge income before age 59½.
• The converted amount becomes taxable income in the year of conversion, but the conversion itself does not trigger an early-withdrawal penalty.
• Taxes should be paid with money outside the converted balance.

⏱️ Contributions, Conversions, and the Five-Year Rule

• Roth IRA contributions can generally be withdrawn tax- and penalty-free at any time, although investment gains remain subject to separate rules.
• Each annual Roth conversion receives its own five-year waiting period, beginning January 1 of the conversion year.

🎖️ Military Planning Considerations

• The ladder discussed here operates within traditional and Roth IRAs, not directly inside the TSP.
• Starting conversions while still serving may mean recognizing additional income during peak earning years.
• Estimate the annual retirement-income gap first, then evaluate whether projected conversions, taxes, and timing realistically support it.
• Consult a qualified tax professional before executing the strategy.

🔀 Alternatives for Early-Retirement Income

• Rule 72(t)/SEPP: Provides early access but imposes a rigid withdrawal schedule.
• Rule of 55: May allow penalty-free TSP access when separation occurs during or after the year the participant turns 55.
• Taxable brokerage account: Offers flexibility over contribution amounts, withdrawals, and tax management without retirement-account age restrictions.

📊 Flexibility Can Be a Tax Advantage

Rob Moore’s illustrative retiring O-5 analysis found that a brokerage-based bridge produced roughly $13,000 less aggregate tax than the Roth conversion approach after accounting for the original traditional-account deduction. The broader lesson is to compare lifetime taxes, access rules, and optionality instead of assuming “taxable” automatically means tax-inefficient.

🔗 Links and Resources

• How Tax-Advantaged Is Tax-Deferred?
• Check out the Military Money Manual.
• The Fiscal Foxhole and Everman financial education resources

Rob Moore, MQFP® and Omen Quelvog CFP®, MQFP® explain how the three-bucket strategy can make investing and retirement income decisions easier to manage. They also explore state tax benefits for 529 plans, the enduring legacy of the Cobra attack helicopter, and why financial resilience is more important than predicting the market.

Contact The Fiscal Foxhole

• Email The Fiscal Foxhole at fiscalfoxhole@gmail.com
• Book a meeting with Rob
• Book a meeting with Omen

🚁 Background: The Cobra Takes Flight

• The Bell Model 209 first flew in September 1965 and became the foundation for the AH-1 Cobra attack helicopter.

🎓 Intel Update: Understanding 529 Tax Benefits

• 529 contributions grow tax-free, and qualified education withdrawals avoid federal capital-gains taxes.
• State deductions and credits vary considerably. Start by checking the rules of the state where you pay income tax, especially after a PCS or domicile change.

🪣 Execution: The Three-Bucket Strategy

🛡️ Bucket One: Short-Term Stability

• Before retirement, this is typically an emergency fund.
• In retirement, consider holding approximately three years of the spending gap.
• Favor liquid, stable options such as high-yield savings, money-market funds, or the TSP G Fund.

🌉 Bucket Two: Midterm Goals

• This bucket can support goals roughly four to 10 years away.
• A taxable brokerage account may provide useful access and moderate growth.

📈 Bucket Three: Long-Term Growth

• This is the portfolio’s growth engine, typically emphasizing equities held in accounts such as the TSP, IRAs, or a brokerage account.
• Its job is to outpace inflation and support spending later in retirement.

🔄 Putting the Buckets to Work

• During strong markets, withdrawals or gains from the growth bucket can refill short-term reserves.
• During downturns, spend from the stable bucket and give long-term investments time to recover.

🎯 Commander’s Intent

1. Evaluate 529 benefits based on the state where you actually pay income tax.
2. Match each account and investment to the timeline for using the money.
3. Review the next 12 months of cash needs every year to reduce the risk of selling long-term investments at the wrong time.

🔗 Links and Resources

• Understanding Your Federal and State 529 Tax Benefits
• Military Financial Advisors Association