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I'm Considering opening a roth ira.....

P

Philippine Mango

Diamond Member
Tell me what I should know? I've read a bit on it but I still want more info as the stupid technical lawyer bullshit makes things difficult to see.
 
goto vanguard.com, have $3000-$4000 ready to transfer, sign up for a target retirement fund. forget about it until next year, then contribute upto $5000. repeat.
 
Originally posted by: ElFenix
good if you think your tax rate will be going up
Click to expand...

Well with the way the govt. is run, who wouldn't open a roth ira? Taxes are always going up, it's just a matter of time until they hit every tax bracket and then some.. right?
 
Good if you want to pay taxes on $5,000 now instead of on $125,000 later.

Traditional IRA = save taxes now, pay taxes later on the full amount of your account including all of the growth in your investments.

Roth IRA = pay taxes now, but NO taxes later, the decades of growth in value are tax-free.

Vanguard.com is one good place to set up your account since they have some of the best stock index mutual funds. Their VFINX S&P 500 fund is one good fund, they also have total market and international index funds.

I don't like the target funds myself, since they make you put money into bonds instead of just stocks, but if you're very very conservative (instead of just conservative) they're a good choice.
 
Originally posted by: Philippine Mango
Tell me what I should know? I've read a bit on it but I still want more info as the stupid technical lawyer bullshit makes things difficult to see.
Click to expand...

How old are you? I'm 23 and I'm thinking of opening one up with Vanguard. But I still have school debts which maybe I should pay off first....
 
Originally posted by: chuckywang
Originally posted by: Philippine Mango
Tell me what I should know? I've read a bit on it but I still want more info as the stupid technical lawyer bullshit makes things difficult to see.
Click to expand...

How old are you? I'm 23 and I'm thinking of opening one up with Vanguard. But I still have school debts which maybe I should pay off first....
Click to expand...

I've got tons of school debts, but I max out my Roth each year. Compounding interest FTW (or FTL sometimes 😀)
 
Originally posted by: DaveSimmons
Good if you want to pay taxes on $5,000 now instead of on $125,000 later.

Traditional IRA = save taxes now, pay taxes later on the full amount of your account including all of the growth in your investments.

Roth IRA = pay taxes now, but NO taxes later, the decades of growth in value are tax-free.
.
Click to expand...

Thats the way I see it, basically speaking Traditional IRAs are only good for people who live paycheque to paycheque... Isn't there something about a taxible income for something of the sort I have to have? If I don't have any real 'income' yet I manage to get 'money', wouldn't I not be allowed to have an IRA/Roth ira?

Edit: I also heard you could make a roth ira/ira account at any age, what do they mean 'any age'? Is it literally any age? So if I was 2 years old, could I have made one?
 
Originally posted by: spacelord
Is it better to max out the contributions to a 401k before concentrating on a Roth?
Click to expand...
If your employer has any type of matching, then yes.

The 401K is similar to the Simple IRA in that you are not paying tax on the money now, but will do when you withdraw it.


 
Originally posted by: Philippine Mango
Originally posted by: ElFenix
good if you think your tax rate will be going up
Click to expand...

Well with the way the govt. is run, who wouldn't open a roth ira? Taxes are always going up, it's just a matter of time until they hit every tax bracket and then some.. right?
Click to expand...

Bingo. Two major upcoming problems: Social Security and Medicine/Medicare.

People's fix to not having enough money--cut back expenses. Government's fix is to tax more.

People should take this into serious consideration when they save in their 401k; that their money may be worth even less thanks to politicians and their spending (of your money).


Back to the OP:
Take this test to see if a roth is right for you: Roth vs. Traditional IRA

I use fidelity and love their website and ease of use try it out you might like it: Fidelity. I have my 401k, roth ira, and investment/savings through them (all opened in the last 5 months).

As someone else said "sign up for a target retirement fund. forget about it until next year, then contribute upto $5000. repeat." Fidelity has those, but I do not use them--I research other mutual funds that I feel will do better. Target funds diversify (spl.) based on retirement date (ie. younger people=more risk but higher potential gain, and older people=less risk but lower potential growth). They are the best for people that just want to keep it simple and let the pros handle their money.
 
Originally posted by: Philippine Mango

Thats the way I see it, basically speaking Traditional IRAs are only good for people who live paycheque to paycheque... Isn't there something about a taxible income for something of the sort I have to have? If I don't have any real 'income' yet I manage to get 'money', wouldn't I not be allowed to have an IRA/Roth ira?

Edit: I also heard you could make a roth ira/ira account at any age, what do they mean 'any age'? Is it literally any age? So if I was 2 years old, could I have made one?
Click to expand...

Traditional IRA's can also be the only option for people with the opposite problem of living from paycheck-to-paycheck. If your income is over a certain limit you can only invest in a traditional IRA and it can't be deducted on your taxes either.
 
Originally posted by: EagleKeeper
Originally posted by: spacelord
Is it better to max out the contributions to a 401k before concentrating on a Roth?
Click to expand...
If your employer has any type of matching, then yes.

The 401K is similar to the Simple IRA in that you are not paying tax on the money now, but will do when you withdraw it.
Click to expand...

What if your employer offers no match?
 
Originally posted by: DaveSimmons
Traditional IRA = save taxes now, pay taxes later on the full amount of your account including all of the growth in your investments.

Roth IRA = pay taxes now, but NO taxes later, the decades of growth in value are tax-free.
Click to expand...
You can do both or no?
 
Both can be done, but the combined total can not exceed the limits for each year.
 
Originally posted by: EagleKeeper
Both can be done, but the combined total can not exceed the limits for each year.
Click to expand...
Where do you find the limits? I've heard you can be penalized for going over the limit.
 
Another advantage of the Roth is no required minimum distributions when you hit 70 1/2. Your principal continues to grow.

You can also withdrawl principal deposits in emergency situations without penalty in Roth.
 
Originally posted by: Philippine Mango
Originally posted by: DaveSimmons
Good if you want to pay taxes on $5,000 now instead of on $125,000 later.

Traditional IRA = save taxes now, pay taxes later on the full amount of your account including all of the growth in your investments.

Roth IRA = pay taxes now, but NO taxes later, the decades of growth in value are tax-free.
.
Click to expand...

Thats the way I see it, basically speaking Traditional IRAs are only good for people who live paycheque to paycheque... Isn't there something about a taxible income for something of the sort I have to have? If I don't have any real 'income' yet I manage to get 'money', wouldn't I not be allowed to have an IRA/Roth ira?

Edit: I also heard you could make a roth ira/ira account at any age, what do they mean 'any age'? Is it literally any age? So if I was 2 years old, could I have made one?
Click to expand...


You have to have an earned income - usually this means filing and paying taxes on a W-2 form, unless you are self-employed or something fancy. Just getting money from your parents won't count.

Roth IRA[

At this point, you can make a $4,000 contribution for 2006, as well as a $4,000 contribution for the 2007 tax year. Next year it will rise to 5K per year. The Roth IRA is the ideal way to invest - no taxes on future earnings (unless, of course, the law is changed). Basic rules of retirement investing, as has been stated many times on this and other finance forums:
1. 401k to maximum employer match
2. Roth IRA
3. 401k to annual max ($15,500)

401k obviously requires payroll deductions, so it must be made with more planning, i.e. if you have a bunch of cash leftover at the end of the year, you can't throw it into your 401k (not that I know of, at least). It is made with pretax dollars.

The Roth IRA allows you to take your contributions out at any time, and your earnings can be removed up to $10,000 if used to purchase a principal residence. Obviously the goal is to leave all this money in for as long as possible but this is available.

I have been using Vanguard, and within the past 9 months I made 2005, 2006 and 2007 deposits into my Roth. Been very happy with their service, I currently hold the Total Stock Market Fund (75%) and Total International Fund (25%). Keep in mind that the minimum to buy into a fund is 3K, so if you are just making the 2006 deposit (which you need to do by April 15) you will only be able to pick one fund.
 
Vanguard might be the best. Make sure you get a low fee. This is just as important as return percentage.

Roth IRA is a great investment because you are taxed at today's rates. Given underfunding problems of entitlement programs, most people think taxes will go up in the future.
 
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