Everyone should own a....

[mi_nombre_es]

Roth IRA or Roth 401k, if you don't please committ yourself to an insane asylum, because your obviously crazy :bowrofl:

Espically if you are under 30, YOU NEED TO have at least 1 (2 if your married, gotta love spousal IRAs). It should be a law to get one of these.

[Hob684]

I've never understood these.. i'm 23, married and i'm just starting out on my career. Why do i need one and what does it do for me?

[Manon]

I should own the Irish Republican Army?

[mi_nombre_es]

I've never understood these.. i'm 23, married and i'm just starting out on my career. Why do i need one and what does it do for me?


IRAs and 401K are retirement plans, the sooner you start, the sooner you can retire if you are investing right. Now I will assume you are investing in Mutual funds thru a job 401K or an independent IRA (Individual Retirement Account).

regular IRAs and 401Ks contributions are made with AFTER TAX dollars and the interest earned on the accounts are tax-deductible (can't spell sry). Meaning you can write off the taxes every year BUT when you touch the money at 59 1/2 (can't touch it any sooner without a 10% additional pentaly, there are some expections tho..) the money is fully taxable. Also, in regulars, you MUST start withdraws or distributions by 70 1/2 or you will face a similar penatly!!


Now ROTH IRAs and 401K, they are like the Holy grail. They are retirement accounts that are funded by AFTER-TAX dollars! Like regulars, you can't touch the money until 59 1/2. You do not have the 70 1/2 rule with ROTH IRAs tho. The coolest thing about ROTH IRAs is that after 5 years, the money grows tax-free. So if you retire at 62, and your earning $100,000/yr income off the interest your ROTH IRA is drawing, you don't have to report a dime! it is pure profit. for the long term investors, ROTH is the only way to go.

[mi_nombre_es]

There another very common type of investment that I didn't cover. It is called a 403(b) plan. You find these plans with State workers, Hospital employees and the like.

a 403(b) plan is a tax-sheletered investment made with BEFORE-TAX dollars, where the money goes tax-deferred until you make the withdraws at 59 1/2. Once you start withdrawing, you are taxed on the money and the interest as you draw it out.

[TheCapitalist]

What if i need the tax break now? (not ignoring the benefits of tax-free growth).

[Remington]

I have deferred comp, which is the state's investment thing for employees. I'm putting in money every month before taxes and it's going into a couple of high risk/high yield mutual funds. I'm just kicking myself for not starting it when I first started work. I waited about 7 years before I did. I will be able to retire at 48 years old, but if I had been putting that money in when I first started, then I'd be retiring with a bigger smile on my face and enough money to do a lot of traveling with.

[countrygirl]

Max you Roth out every year...Taxes kill you after you retire on the regular 401k. If you save wisely, you may be earning more after you retire than when you were working therefore putting you in a higher tax bracket. I wish Roth's had been around when I was young.

[petalgirl00]

We have the TSP and a couple of IRA's floating around.

[pooker]

I am imposing a meet mi_nombre_es is a nice guy, I can't wait to learn more.

[Ted]

I have deferred comp, which is the state's investment thing for employees. I'm putting in money every month before taxes and it's going into a couple of high risk/high yield mutual funds. I'm just kicking myself for not starting it when I first started work. I waited about 7 years before I did. I will be able to retire at 48 years old, but if I had been putting that money in when I first started, then I'd be retiring with a bigger smile on my face and enough money to do a lot of traveling with.
One thing to consider and factor in - around age 50 most folks are gonna need medical insurance and that'll cost ya at least $1000 a month.
Talk with a couple of people who are self employed and have to provide their own medical insurance.

[countrygirl]

I pay about $350 every month now and it usually goes up every year. That's just for me. It will go down when I reach 65, but I figure by then it will be up so much that I will still be paying about the same then...

[RGDoherty]

What if say a person were oh, let's just say 42.... with 8% going in pretax with a 7% company match and 10% going in after tax into a 401K, and a pension plan.......This person, might, let's just say leave at age 50 when his medical benefits would follow him......should that person lump sum out the pension or take the annuity? The 401K wouldn't be touched until 59 and a half as required by law.....

[countrygirl]

TAKE THE LUMP SUM and roll it over. Hubby was able to do that. You draw a portion of the earnings from your 401k and pension combined. If you are seriously saving, what is left will go to your kids or wherever you want it to go. I will say this again, if you can contribute to a Roth now, it would be a good idea. Roth's were not around when hubby and I were younger and all of our money went in to a traditional IRA. Our income now is actually more now than before we retired which puts us in a higher tax bracket....plus it makes more of the social security taxable.

[ynotme297]

If you buy nothing else in your working life, buy LONG TERM DISABILITY INSURANCE if they offer it. It has payed off well for me when i had to retire 10 years early due to heart problems. Been drawing it now for 7 years.

[carsalesguy]

everyone should have a nissan.

end of story

[countrygirl]

everyone should have a nissan.

end of story
sorry, but I just got a REAL good deal on a used Honda. A once in a lifetime buy...

[pooker]

everyone should have a nissan.

end of story

Skyline ?

[mi_nombre_es]

What if say a person were oh, let's just say 42.... with 8% going in pretax with a 7% company match and 10% going in after tax into a 401K, and a pension plan.......This person, might, let's just say leave at age 50 when his medical benefits would follow him......should that person lump sum out the pension or take the annuity? The 401K wouldn't be touched until 59 and a half as required by law.....


Depends on the annuity, and how soon you want to be drawing off that money. If it is a fixed annuity, tell them no and move on. A fixed annuity has no backup .v. loss of purchasing power. It is like a savings account.

Take this for example:

$10,000 investment into a 4% fixed
+$400 interest in a year
-$100 in Taxes (assuming your in a 25% tax bracket)
-$320 in adjusting for an inflation rate around the 3.2 avg mark

Total Purchasing power is $9980 in a year time


If your making alot of money and need a tax break, invest the money in a variable annunity. The money grows tax deferred, so the interest is taxed after you start withdraws, you want to make the annunity investment with after-tax dollars (non-qualified). If you don't need the tax break, look into a good growth mutual fund and roll in the lump sum.

The 8% pretax, what kind of work do you do? I can't tell if you have a PURS or 403(b) retirement plan.


To be all honest, if you have regular 401K, and a 403(b) plan and then annunity the pension, you'll be facing some nice taxes, unless the income generated puts you in a lower tax bracket than you are currently in but that is very unlikely. You might want to look into stopping the paying into the 401K (let it grow like it is) and open a Roth IRA or Roth 401K, because you need to have it at least 5 years before it will become tax-free distrubtions. Plus, you need that to balance out some of the taxed investments you have. It will give a nice balance, since you are working with tax-deferred investments at the moment, you can probably handle an investment that you pay taxes on now (this is all pure specualtion because I havn't sat down with you and seen all the stuff for myself to tell you how all this needs to work, but this is just for some general ideas).


Edit: at 50, you can get into the catchup period of both ROTH and regular IRAs/401Ks. This is a period where you can put in around 6000 a year starting 2008...because they are raising the limit from 4000 to 5000 for regular investors and investors over 50, can get into the catchup period by getting the ability to put another 1000 a year into their IRAs. Note that is per person. So a married couple (even if only one works) can invest in 2 ROTH or regular IRAs at 10K a year or 12K a year if they are in the catch up period.