roth ira?

[bombolo]

anyone here have a roth ira instead of a 401k? it says here http://www.roth-ira-rules.com/roth-ira.html "A Roth IRA is a special type of an Individual Retirement Account where your investment choices are unlimited. You can allocate your savings over a diversified set of investments such as common stock, mutual funds, bonds, Certificates of Deposit, Real Estate or even derivatives. "

if that's the case, howcome Roth IRA is not very famous while the 401k is popular?

 

[PercocetThreat]

With a 401(k)/traditional IRA you get the tax deduction now; with a Roth you don't get it until you withdraw the money. Most people are in a higher tax bracket now as opposed to when they are withdrawing their retirement funds (usually retirement); ergo the 401(k)/traditional IRA is more beneficial to them from a tax savings standpoint.

Also, the annual contribution limits to a 401(k) are much higher than a Roth IRA. (However, they are the same as a Roth 401(k)).

 

[LineTamer+]

The roth ira is not usually a company sponsored plan. Until this year, it wasnt even an option for company to ahve in place.

The 401k is a company plan offered to employees. So the average worker may not even know about the ROTH option

 

[Illini]

With a 401(k)/traditional IRA you get the tax deduction now; with a Roth you don't get it until you withdraw the money. Most people are in a higher tax bracket now as opposed to when they are withdrawing their retirement funds (usually retirement); ergo the 401(k)/traditional IRA is more beneficial to them from a tax savings standpoint.

Also, the annual contribution limits to a 401(k) are much higher than a Roth IRA. (However, they are the same as a Roth 401(k)).

I don't know why everyone says that. It's completely wrong, at least in my case and the people I know that are my age. When I'm retired, I'm gonna spend a helluva lot more money than when I'm working. Otherwise, what is the point of saving and investing? Roth IRA is the best way to go for 99% of people. Yes, you have to contribute with after-tax money. But the withdrawals are tax-free, no matter how much you accumulate in it. Can't get better than tax-free. Plus, it has very favorable rules when you become of retirement age. No mandatory withdrawals at age 70, no taxes when you die and pass it on to your beneficiaries. I have no idea why any competent financial advisor could recommend to someone that they do a traditional IRA instead of a Roth IRA. Once you are contributing enough in your 401K to max out your company match, do a Roth IRA. If you can max out the Roth IRA and still have available funds, then put more in your 401K, as much as you can up to what your company will allow. If you start this stuff young, you will be financially independent at age 55 or 60, even if you make a modest income.

 

[PercocetThreat]

Most people I know who invest are in a higher bracket now, I see what you're saying though. A Roth is definiately more beneficial for people who do not earn all that much per year. However, the people who do not earn all that much usually can't afford to take advantage of any IRA/401(k).

 

[LineTamer+]

there are income limits set on roths as well...

 

[TKE683]

Open a Roth! The best investment you can make.
The government realized what a blunder giving this was but either they don't think many people use it or are afraid to take it away, but it is a jewel!

 

[Illini]

there are income limits set on roths as well...

True, but what are they? When they started Roths in 1998, it was 95K for singles, and 150K for married filing jointly. I'm sure it's gone up a lot. And for traditional IRAs, you cannot deduct the contributions if you are making over a certain amount. It used to be 35K for singles. So, for a single person that made 50K, a traditional IRA would have been the absolute dumbest thing you could possibly do. I don't know what the ranges are now, but I'm sure they've all gone up, as has the contribution limit, which used to 2K per year max. Is it 4K or 5K now?

 

[Illini]

Most people I know who invest are in a higher bracket now, I see what you're saying though. A Roth is definiately more beneficial for people who do not earn all that much per year. However, the people who do not earn all that much usually can't afford to take advantage of any IRA/401(k).

I just don't see how anyone that makes good money is going to drop to a lower tax bracket when they retire. It's going to cost just as much to live as when they were working, and they'll want to be taking trips and stuff all the time. At least that is what I'll be doing. Retirement is going to be a non-stop party, and all these years of saving are gonna pay off.

 

[jarhead60]

Big advantage of both traditional and Roth Ira is the interest/earnings compound tax free. Means a lot if you can set it up and fund it early in your career.

 

[Illini]

Big advantage of both traditional and Roth Ira is the interest/earnings compound tax free. Means a lot if you can set it up and fund it early in your career.

With a traditional IRA, they compound tax-deferred, but not tax free. You have to pay income tax on all withdrawals. That is why the Roth is so much better. It provides truly tax-free gains.

 

[amhlilhaus]

the best way for most people who make less than 70 k or so a year is to:

invest in your companies 401k plan up to the company match.
(free money is always the best way to save)

then invest whatever you can in the roth ira
(it's not taxed when it's withdrawn, and contrary to the other poster, even if you're in a lower tax bracket when you retire who cares your saving a few thousand a year with the tax deduction, the goverment will get a much larger dollar amount after you've invested your money for 30-40 years)

 

[Illini]

the best way for most people who make less than 70 k or so a year is to:

invest in your companies 401k plan up to the company match.
(free money is always the best way to save)

then invest whatever you can in the roth ira
(it's not taxed when it's withdrawn, and contrary to the other poster, even if you're in a lower tax bracket when you retire who cares your saving a few thousand a year with the tax deduction, the goverment will get a much larger dollar amount after you've invested your money for 30-40 years)

Exactly. Also, Roth IRA contribution limits are going up to 8K per year in 2008. And they will continue to go up even more after 2010.

 

[whiteladder81]

"If you want to purchase a house (your principal residence), upto $10,000 can be withdrawn without paying any penalties. This $10,000 is known as a "qualified" amount. This house must be bought by the IRA account owner, his spouse or descendants and must not have owned another home in the past 24 months. "

It says you can use your ROTH IRA as an investment in RE but if it is your primary residence it is treated as a withdrawal from your ROTH acct. Does anyone know if you can purchase investment property under your ROTH IRA? Can you be living in the residence while renting out other rooms? I am sure in that case it is treated as your primary residence and will be a withdrawal from your acct.

 

[joelatti]

Juicy Tidbit for ALL....In 2010 you can roll over your traditional IRA into a ROTH and then contribute into that ROTH...and THERE ARE NO income limits when 2010 comes around...so for those who are making >150K you should be investing in a NON-Traditional IRA and CONVERT in Jan 1st 2010...This is free money and as long as the Dems don't change it, it will be the best thing that has happened since the roth was invented...Only problem with the roth is the income limits....it is a great investment tool....ALWAYS take the tax break later....IE if you put 4K a year into a roth for the next 30 years obviously that 120K you've invested AND it should be going HIGHER with a good investment strategy....After 30 years you could be looking at ALOT of cash and it will be tax FREE...Where as now you just get the 4K pre-tax contribution.......Any sound finance person will tell you ROTH's are golden, but you can't make over 100K as a single....WAIT till 2010!!!

 

[ThePig+]

Roughly how much will I have in 30 years if I stick in the Max every year?...4000 now and then 5000 and then 8000 when the max goes up to 8 k in a few years...Can I expect higher rates of return than 8% some of those years?

 

[EasyMoney]

I'm deffinatly going to open a roth in the next couple of months. But can someone tell me this. With a Roth I can invest in anything I want to right? For example, insted of the conventional mutual funds can I pick say 5 to 10 stocks and just invest in those? Or a combination of stocks and mutual funds.

I'm just not a big fan of mutual funds, because the way I see it they have alot of good stocks in them sure but they also have to have alot of bad stocks in them. I would rather just own the best financial, oil, or whatever stocks as oppossed to a bunch of them, where some are good and some are bad.

 

[heart222]

ok here we go 28 yrs in busines. roth income levels single 100 adjust gross income couple 160k agi. roth 401k just started last year idf your firm has it its wonderful as you can put in more. the bottom line is not paying taxes when you retirement age. the roth compounds and you can buy stocks or funds or bonds.
I am of retirement age and in a few years i will have to staret taing money out manatory age 70 1/2 and then pay taxes on that. with a roth no taxes its a big differance like 30%. For young people do a roth buy stocks or better some good growth funds and let it do it thing. if you can compound at 8% your money will double in 9 years. rule of 72. Roth 401k have no income limits for entry as opposed to roth iras. hope this helps regards heart222

 

[Illini]

I'm deffinatly going to open a roth in the next couple of months. But can someone tell me this. With a Roth I can invest in anything I want to right? For example, insted of the conventional mutual funds can I pick say 5 to 10 stocks and just invest in those? Or a combination of stocks and mutual funds.

I'm just not a big fan of mutual funds, because the way I see it they have alot of good stocks in them sure but they also have to have alot of bad stocks in them. I would rather just own the best financial, oil, or whatever stocks as oppossed to a bunch of them, where some are good and some are bad.

You can invest in anything with a Roth. Savings account, money market, stocks, mutual funds, whatever. You best bet would be to open a Roth IRA at TD Ameritrade or a similar online broker. You can buy stocks and mutual funds, and get in and out different things by the click of a mouse. Mutual funds are the way to go for most people. Just do your research and pick some good ones that have a long track record. I'm learning how to trade stocks myself, and it's not easy. Best of luck in whatever you decide to do.

 

[EasyMoney]

Thanks guys, That's my plan. I think I'm going to open a Roth next week at scottrade. The idea is to get into stocks. I have another 401K in mutual funds right now, but I would like to think that I can do better myself in stocks. I know its not easy but I'm a fairly smart guy and would like to give it a shot. But I appreciate the help.