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Do you have a Roth IRA Account? (1 Viewer)
- Thread starter Dentist
- Start date
Doctor Detroit
Please remove your headgear
AAABatteries
Footballguy
No offense Dentist but you obsess WAY too much over money.
Doctor Detroit
Please remove your headgear
I agree but if most people just had a fraction of the money saving will Dentist has, we'd be better off as a society. I'm a pretty good saver, maybe above average, but I worry about family and friends who completely miss the savings boat.
AAABatteries
Footballguy
I agree and I'll be honest - I haven't been a great money manager and saver over the years. But I always get the impression it consumes him. Doesn't seem healthy.
Dentist - I like you man. Even with your weird steamer fetish you are good in my book. Don't take the above as a slam just an observation.
mquinnjr
Footballguy
I'm with DD here completely. It's the mindset, not so much an obsession with having as much money in retirement as possible, that would really benefit the majority of our society. Sure every situation is different and it's hard for everyone to put money away, but having it in the forefront of your monthly budget is the key. Like when you get into a workout habit and start to get upset when you miss your pattern, same line of though should apply to retirement savings (if that makes any sense).
mquinnjr
Footballguy
It doesn't matter who you use, as long as you're buying into proprietary mutual funds/ETF's without the "juice" or trade commissions, that's the key. I use Schwab and invest in their ETF's. Since it's my brokerage, I pay no trade commissions if I buy their ETF's under any scenario. This applies to any brokerage, as different brokerages fit different needs based on personal preference of funds/ETF's and complimentary services offered and desired. They happen to have checking available, so it meets all my needs in one stop shopping. It's whatever works for you personally, fee avoidance being the key.
Doctor Detroit
Please remove your headgear
Direct deposit is your friend. Every time you get a pay raise, take at least some and direct deposit or have the money automatically taken from your account and apply to savings. You have to at least put in the minimum into your 401k to get the match if you have one, that's the #1 priority. After that an emergency fund (which I lack btw), Roth IRA, then everything else. If you are saving for a house, Roth IRA is fine because you can always take the principal if you need it. Then save beyond that if you can.
I have too much tied up into my primary residence, and into my cabin. But I figure that I work for my cabin, it's the worst and best investment I've ever made. So I forgo savings for the cabin, but I religiously put as much as I can into my 401k and a few extra bucks into my Roth. Also I must say, car payments are dumb. I'm getting out of that racket, I'll have my primary car paid off this year and I'm gonna ride that thing to death.
FUBAR
Footballguy
Doc and dentist, curious to see what you would do in my shoes.
I make decent money, max roths, 4 ESAs, plus another $15k or so in my TSP. Five years, give or take, from first retirement (military) and we will buy a house or build on our land, already purchased either for cottage or home, depending on where my next job will be (don't know right now).
We have $30k in the house fund, but i expect that to be less than 10% of the purchase/build price. VA loan will be an option but the rates may not make that a good choice. Would you put more into the house fund or continue to max the ESAs, roths, and put as much into the TSP as possible?
I make decent money, max roths, 4 ESAs, plus another $15k or so in my TSP. Five years, give or take, from first retirement (military) and we will buy a house or build on our land, already purchased either for cottage or home, depending on where my next job will be (don't know right now).
We have $30k in the house fund, but i expect that to be less than 10% of the purchase/build price. VA loan will be an option but the rates may not make that a good choice. Would you put more into the house fund or continue to max the ESAs, roths, and put as much into the TSP as possible?
I set up an IRA for both me and the wife. Use monthly deductions straight in to Target Funds (Vanguard for her, T Rowe Price for me). Very little in the way of fees. The fund adjusts itself as we move closer to retirement. Actively managed funds will absolutely eat up your profits. Enough studies have shown you are ahead going with index funds that an actively managed fund was never an option for me. Same goes with our 401k plans, which we also max via automatic withdrawals.
To anyone not contributing, especially if work offers a matching program, get it done. If they match 5%, contribute your 5%. If you set up automatic withdrawals, you'll never miss the money. You won't see it, you'll get used to living without it and, after awhile, you won't even think about it. The effect of compound interest on money you contribute when young cannot be overstated. Don't miss out, especially on free money.
To anyone not contributing, especially if work offers a matching program, get it done. If they match 5%, contribute your 5%. If you set up automatic withdrawals, you'll never miss the money. You won't see it, you'll get used to living without it and, after awhile, you won't even think about it. The effect of compound interest on money you contribute when young cannot be overstated. Don't miss out, especially on free money.
Why not take the money you put in to your house fund and invest it in non-retirement mutual funds? You'll crush the rate you get from a savings account, and the money will be there available for withdrawal without penalty when you are ready to buy or build. Mutual funds don't have to be for retirement. You can invest whenever in whichever you want.
May sound cheesy, but just buy Money Magazine's top 70 mutual funds issue when it comes out and pick a few. Then set up automated monthly contributions using the house fund money. Done.
derek245583
Footballguy
What is that number? Out of curiosity as its never been mentioned to me so I have a feeling I am not close...
FUBAR
Footballguy
derek245583
Footballguy
Balco
Footballguy
I have a self managed Roth IRA with Vanguard. About 75 % allocated to Vanguard Total Bond Market Index, and 25 % to Vanguard Total Stock Index. (total asset allocation across taxable and non taxable accounts is 75 % stocks, 25 % bonds).
I think a Roth is an important part to a diversified retirement portfolio. I also contribute the max to my 457 plan, own a rental property as part of an LLC (currently nets me about $60 a month, lol), and have recently started contributing to a taxable account with the sole purpose to be used for retirement (probably about 1,500 to 2,000 is the goal this year). I work for the state, so I also have a small pension coming to me when I retire (about 20 % of my current salary), although my goal is to retire long before the standard retirement age (62).
I think a Roth is an important part to a diversified retirement portfolio. I also contribute the max to my 457 plan, own a rental property as part of an LLC (currently nets me about $60 a month, lol), and have recently started contributing to a taxable account with the sole purpose to be used for retirement (probably about 1,500 to 2,000 is the goal this year). I work for the state, so I also have a small pension coming to me when I retire (about 20 % of my current salary), although my goal is to retire long before the standard retirement age (62).
The Bandit
Footballguy
Opened one in my early 20's shortly after paying off all my credit card debt from college and have contributed the max every year. I self manage which got me into trouble when the market cratered in 07-08 time frame and taught me some valuable if expensive lessons. Got back to even with the rebound and am considerably plus now.
Don't think I saw it mentioned but your initial contributions can be withdrawn at any time tax & penalty free. Makes it the perfect vehicle for both investing for retirement and can be used as an emergency fund. Now I wouldn't withdraw it for say a car repair or something, but if you had major medical bills or something it's nice piece of mind you can draw on that.
Don't think I saw it mentioned but your initial contributions can be withdrawn at any time tax & penalty free. Makes it the perfect vehicle for both investing for retirement and can be used as an emergency fund. Now I wouldn't withdraw it for say a car repair or something, but if you had major medical bills or something it's nice piece of mind you can draw on that.
Mr. Pickles
Footballguy
It's worse than that. This is little more than a look at me thread.
We get it. You save. Great.
RE: Roth vs. 529
[speaking in generalities here, as different states have different rules re: 529]
[speaking in generalities here, as different states have different rules re: 529]
- Overarchingly - the theory is that you can always take out loans for college, but you can't take out loans for retirement
- Roth gives you so many advantages: (1) Can take out the principal at anytime w/o a penalty, which is you can actually treat like an emergency account if you really wanted to (2) Withdraw the $ tax free after 59.5 (3) Withdraws don't count towards income which is huge for medicare distributions so I hear (4) You literally never have to withdraw if you don't want to, so the earnings can all grow tax free forever and then you can transfer these accounts to your kids when you pass
- If your kids don't go to college for whatever reason, you're stuck transferring the 529 to a family member
James Daulton
Footballguy
Should you max out your 401k contributions before putting anything into a Roth? I always thought the the pre-tax benefit of the 401k outweighed the after tax benefit of the Roth if your income went down significantly when you retire? Say for example you make $100k now, if that goes down to $40k when you retire, which would be the better option?
As others have mentioned here before, a ROTH IRA isn't always a better fit for people when compared to a Traditional IRA (such as if you are older, make good money, and plan on being in a lower tax bracket in your retirement years.)
But.....ROTH IRAs are great if you are young and have a ton time before retirement.
But.....ROTH IRAs are great if you are young and have a ton time before retirement.
Yes, for the most part.
Get your maximum match first from the 401k....then look at the other factors (years to retirement, projected retirement income vs. current income, etc )
Dentist
***Official FBG Dentist***
most pundits would say:
401k if there is a match - and contribute to the match
then Roth IRA until the max
then 401k until the max
reason being is that unless your 401k work plan is especially good, you are probably going to end up being invested in funds that have much higher fees that you can get in the open market.
My plan at work makes my expense ratios nearly 1% of assets
With my Roth IRA i have my own brokerage account, nearly unlimited good options in which to invest, and my fees are around 0.2%
when it comes to investing, you generally get what you don't pay for
IvanKaramazov
Footballguy
There's nothing difficult about managing a retirement fund, especially not if you're young or young-ish. Just put every cent into a no-load index fund and forget about it. There's truly almost no skill involved in long-term investing.
The Bandit
Footballguy
The other main reasons you want to use both are that it gives you flexibility when you retire to draw from both. You can draw from the taxable account up to a certain tax bracket level and then draw from the non tax vehicle above that to save on taxes.
Plus most people expect tax rates to be higher in the future than they are today so an after tax vehicle should in theory be a better choice.
snogger
Footballguy
Semi-true..
If your kid doesn't go to college, the money earned, not what you paid in, either needs to be transferred to another kid, or take a penalty on the withdraw.. At least that is how it works here in Wisconsin.
I was concerned about this when I started my daughters 529 as I didn't want to invest $5000 if it meant taking a penalty if she didn't use it for college.
My initial $5000, as well as the Monthly money I put in is "ours" to do with what we want if she doesn't go to college. It is only the gains I made in the account that are under the College rule.
ETA to add this:
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eaganwildcats
Footballguy
What are the main reasons for rolling over a 401K from an ex-employer to a different account? I assume tracking/potentially lower fees? I have a pretty nice low expense ratio fund that I am invested in - don't see the reason to roll it over unless I am missing something?
I don't see a reason if you're not getting eaten up with fees. Diversity is a good thing. I have a 401(k) from a job before law school and 2 Simple IRAs from my former law firm.
I left my government 401k (TSP) where it was when I left because there fees are next to nil. I didn't roll it over to my new employer.
Doctor Detroit
Please remove your headgear
Gotcha....like I mentioned, the 529 rules differ per state...but I would assume most of what you said remains true for mostSemi-true..
If your kid doesn't go to college, the money earned, not what you paid in, either needs to be transferred to another kid, or take a penalty on the withdraw.. At least that is how it works here in Wisconsin.
I was concerned about this when I started my daughters 529 as I didn't want to invest $5000 if it meant taking a penalty if she didn't use it for college.
My initial $5000, as well as the Monthly money I put in is "ours" to do with what we want if she doesn't go to college. It is only the gains I made in the account that are under the College rule.
ETA to add this:
Dentist
***Official FBG Dentist***
go back to writing great bachelor blogs and destroying us all in chess, it's better schtick than worrying about my horrible financial threads and obsessions
Doctor Detroit
Please remove your headgear
Compounding: maybe the most powerful entity in investing. You have to weigh the pros and cons based on fees and how long you think you might be at the new job, but breaking up your money into numerous accounts is going to prevent you from building a large chunk at the same place. It does reduce risk theoretically but that would assume that you actively manage the different accounts.
If you have similar investments in account A and account B, you are better off combining the two and accumulating shares in down periods, and gains in up periods IMO. Also if you leave your money behind, it is stagnent to some degree and you are still paying for fees on that money in many cases.
If you can do a direct trustee to trustee rollover, I think you do it unless you are committed to actively managing the old account. Cashing it out and having to pay the 20 percent taxes, then moving it to a new 401k but then recouping it on your taxes, is a hassle. One other thing to consider is whether your old company offered stock options, and if stock holdings are part of your portfolio. Other options are available in this case, but I'm not smart enough to explain this. There are others here who are however, I'll leave it to them.
eaganwildcats
Footballguy
Yeah, no 401K at the new employer so I would be rolling it into some sort of IRA. Doesn't seem worth it unless I am going to get hit with additional maintenance fees as an ex-employee. And, to be clear, it is 
so I am more curious than anything.
so I am more curious than anything.
Doctor Detroit
Please remove your headgear
Not sure age has anything to to with it, but maybe you can explain why that may be the case. The main benefit of the traditional IRA is the tax deductions you get in the year you are contributing. So if you are in higher tax brackets and still eligible to contribute to a Roth, it seems funding a Roth is still advisable, but may be secondary to contributing to a traditional for the tax break. You can of course defer those tax benefits annually and take traditional IRA contributions in retirement tax free, but the money is treated as income while Roth distributions never are.
Mr. Pickles
Footballguy
This isn't shtick. You're insufferable on this topic and wasting investable dollars typing a defensive reply.
NutterButter
Footballguy
I'm up to 3 401ks now. I've left the first two at the previous jobs, but at some point, it could get ridiculous. I could conceivably see myself with 8-10 401k accounts before I'm retired which might be a pain to keep track of. I definitely won't be rolling over until my kids go to college b/c there are tax implications when doing a backdoor ira when you have money in a tax deferred ira.
Rohn Jambo
Footballguy
Can someone please teach me how to back door a Roth IRA? Thank you.
Dentist
***Official FBG Dentist***
NutterButter
Footballguy
This is super important to get the taxes right. If you don't report the conversion, the IRS is going to think that you took a withdrawal from your IRA of whatever is that your converting and they'll expect you to pay taxes on that. When you do the conversion, all the IRS gets told from your brokerage is that you took a withdrawal. It doesn't say whether its a tax deferred withdrawal or a roth withdrawal. So the IRS just assumes a tax deferred withdrawal and they'll eventually send you a nice letter expecting you to pay them a large sum of money. I learned the hard way when I forgot to report this through turbotax.
Doctor Detroit
Please remove your headgear
You're in good shape my friend.
Couple of questions. Are you in an MOS that gets TSP matching? How much would you like to put down on your cottage/home that you'll build?
Given that you will receive a military retirement, find a post-military job, and have specific goals I think putting less into the TSP and more into the house fund may be in order. I say this because if you run the numbers and include military retirement, Roths, what you already have in the TSP and then what you'll save or contribute to a post military career retirement plan, you are going to be set.
If you are able to pay down a good portion of that house upfront, that gives you a lot of flexibility later when you'll need it. That TSP money is essentially locked away until retirement, and with your other streams I think that money is going to be money that will be a complete luxury to you later. That's great and all, but that house would be my focus from now until you hang up the uniform.
And you're right about the VA loan, might not be best for you. VA loans are great when you don't have principal to put down, and also because you don't have to pay PMI. You could however use that VA loan later for a vacation property or a second home, so you may still be able to use that earned benefit. If you are paying a really good chunk on that primary home, then that's more options you have later IMO.
Rohn Jambo
Footballguy
I have a traditional IRA account which is managed by the same financial company that administers the 401K plan I have for work. My contributions to the IRA account have been all pre-tax so far. I understand I can roll the entire IRA balance into my 401K plan, but I don't see why I want to do this other than consolidation into a single account.Do I have to start making after-tax contributions to a new IRA account before I convert the money into a Roth IRA? Can I do both steps within the same year?
I already made new pre-tax contribution for 2014 into the Traditional IRA but can I undo it to start the back door this year?
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fred_1_15301
Footballguy
I have some money in it but haven't invested in years. My wife and I both contribute the max to our 401K and my employer has a decent match. We've done a great job with our savings that I'm not overly concerned if I don't invest anymore in an IRA.
Doctor Detroit
Please remove your headgear
southeastjerome
Footballguy
Traditional IRA rolled into a Roth, aka the backdoor Roth.
Roth you get taxed now, not when you take it out. Non-Roth, you get taxed when you take it out, your contribution now is pre-tax. That's it in a nutshell.
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