Roth IRA

[Black butte porterParticipant 433]

Opened a Roth IRA. Now what. Any advice?

I want to shove Ms. Piggy in a woodchipper. No quote. That's all.

[Truthseeker82Participant 6406]

I did same in 2014. Mine matures in 2019. Not much you can do with most of them. Just wait for the certificate to mature. There is the tax benefit of being after tax vs pre tax for a standard 401k.

[~BSParticipant 3266]

Now drop 5.5k in it?

Off topic but black butte porter is pretty awesome. I like my stout beers too : )

"He didn't marry until now, so he won't ever do it. Think about it, why would a man like him ever marry? It's too late to catch him. " ~some cunt

[Black butte porterParticipant 433]

Drinking one now. It gets me thru the week. Ahhhhh

I want to shove Ms. Piggy in a woodchipper. No quote. That's all.

[BeerParticipant 11832]

Truthseeker82 wrote:

There is the tax benefit of being after tax vs pre tax for a standard 401k.

If you don’t plan on getting a fat pension, or are also maxing out a pretax 401k on top of the ROTH, you probably won’t have enough retirement income to put yourself in a higher tax bracket in retirement than you are in while working…meaning a ROTH is bad.

Personally my top income now is in the 28% bracket and a 6% state bracket. In order to put 5500 in a ROTH IRA I have to gross 8,333 dollars. Alternatively I could put 5500 in a pretax IRA, which would leave me with 2,833 gross taxed at 34% to put into a post tax brokerage account…or 1,870 dollars. Why pay a higher tax rate now just to end up with a smaller nest egg when I retire, my retirement account withdrawals won’t be as much as my income, I can move into a state with no income tax, and if I layer my pretax/post tax investments right I’ll never pay more than 15% on any of it.

[TaxGuyParticipant]

Beer wrote:

Truthseeker82 wrote:

There is the tax benefit of being after tax vs pre tax for a standard 401k.

If you don’t plan on getting a fat pension, or are also maxing out a pretax 401k on top of the ROTH, you probably won’t have enough retirement income to put yourself in a higher tax bracket in retirement than you are in while working…meaning a ROTH is bad.

Personally my top income now is in the 28% bracket and a 6% state bracket. In order to put 5500 in a ROTH IRA I have to gross 8,333 dollars. Alternatively I could put 5500 in a pretax IRA, which would leave me with 2,833 gross taxed at 34% to put into a post tax brokerage account…or 1,870 dollars. Why pay a higher tax rate now just to end up with a smaller nest egg when I retire, my retirement account withdrawals won’t be as much as my income, I can move into a state with no income tax, and if I layer my pretax/post tax investments right I’ll never pay more than 15% on any of it.

My only other fear with a Roth IRA is that the government will change the tax law in the future and tax your earnings. We are $20 trillion in debt, we can’t keep on this path forever. I’d rather have my tax deduction TODAY than some break promised in the future. I don’t trust my current government enough to believe they won’t start taxing Roth earnings, and I sure as hell don’t trust what we will have 10-20 years from now.

That said, are you asking what you should invest it in? Not that I have a good answer for that, just clarifying.

Order the good wine

[KeymasterKeymaster]

First thing you do, is never listen to other people on what you should do with your money.

Having said that……

Black butte porter wrote:

Now what

The beauty of it is –>> you don’t need to decide today.

You can put $6500 away this year — and another $6500 away as early as January. The benefit is you’re taking $6500 that would otherwise be taxed and not allowing it to be.

You don’t need to do anything with it today or even 10 years from now. What you need to do is realize if you don’t do it, $3000 of that would vanish to the government in taxes anyway! Instead , you’re paying yourself first.

Have your little pleasures and indulgences, but max your IRA every year and start as soon as possible. get a second job if you have to. There are other tax breaks and things you can invest your money in too, but this is a good way to treat the first $6500 you make every year. Make sure you keep it all for YOURSELF.

Do it now. In January and NEXT January (2018) and you will have $19,500 nest egg within the next 15 months. Pretty wow, right?

Be careful of seeking facial advice on what to do with it., you can decide that for yourself you can even use it as a down payment for a house some day. (talk to someone about that and understand all the implications)

And congratulations on doing this for yourself. You earned it.

If you keep doing what you've always done... you're gonna keep getting what you always got.

[BeerParticipant 11832]

TaxGuy wrote:

My only other fear with a Roth IRA is that the government will change the tax law in the future and tax your earnings.

They pretty much already did this by offering ROTH conversions to people who were still working. Worst move you could do but people did it. If I understand it correctly the conversion amount is counted as income so they got hammered during the move because they got bumped to a high tax bracket. One guy I work with for example converted over 600k, so he’d lose roughly 1/3, 200k, on the way to ROTH. If the market averages 7% a year he’d be giving up 14,000 a year growth on that 200k he lost to save maybe a couple grand a year in taxes on distributions and he thinks he got a good deal.

TaxGuy wrote:

We are $20 trillion in debt, we can’t keep on this path forever. I’d rather have my tax deduction TODAY than some break promised in the future. I don’t trust my current government enough to believe they won’t start taxing Roth earnings, and I sure as hell don’t trust what we will have 10-20 years from now.

Yeah you never really know to be honest. With the way the laws work right now ROTH distributions don’t count as income. If democrats dominate politics for the next 10-20 years, I’m fairly certain we’ll be seeing more handout programs that are means tested. If that happens, and ROTH rules stay the same, I’ll be doing a ROTH conversion if they are still available 1 year before I retire, taking the tax hit, and then qualifying for every means tested program around if the value of such programs is high enough to make it worth it. People are doing this with Obamacare now. You can have millions in ROTH IRA/401ks and qualify for medicaid because your ROTH distributions don’t count as income, its sickening how stupid our politicians are.

If anything I wouldn’t be surprised to see them pass a wealth tax on “large” retirement account balances…like anyone with more than a million in retirement accounts pays a 5% tax over that amount or something, because why should the guy that consistently saved over a life time enjoy his retirement when some of that “extra” money could be redistributed to others who need it more, even though they had the option to save as well and many just chose not to?

TaxGuy wrote:

That said, are you asking what you should invest it in? Not that I have a good answer for that, just clarifying.

Yeah back to OP…I don’t know your situation or anything, just wanted you to be aware a ROTH may not be your best option. You really gotta crunch the numbers and see how it works with how you envision your retirement. Also if you don’t know much about investing its generally not a bad idea to just go with a low cost index fund. Picking individual stocks on your own is pretty risky, and managed funds that charge high fees generally don’t consistently beat the market enough to make them worth it. Periodic contributions to an index fund are going to win for you as long as the major indexes are higher when you retire than they are today.

[WhackerGuy2030Participant 999]

What kind of investments do you plan to put into it?
What is your comfort level with investing?
Do you understand the fees you’re paying?

Best place to start is with more info. Keymaster is right, don’t take other’s input as gospel. Consider it and how it fits you and make a decision.

My one piece of advice; start reading more about personal finance, taxes, investing strategies etc. You’ll figure out where you’re comfortable and good as an investor.

[Author]

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