IRA, and retirement saving in general (annuities, bond, Scottrade, TDAmeritrade) - Investing -stocks, bonds, mutual funds, trading, market, brokers... - Page 2 - City-Data Forum

CrazyJay · 06-17-2008, 09:40 AM

i see, thanks

Submariner · 06-17-2008, 09:48 AM

Quote:

Originally Posted by CrazyJay

another issue is i plan to get married fairly soon. Our combined income will be close to $150 ,000

That means that after a short time, i will not be able to contribute to a Roth anymore. Wouldn't that be bad? Say we hit the limit in our mid 30s to late 20's, and I'm forced to stop contributing. What if there really isn't enough principle in there, yet i can't contribute. What would i do then?

All eggs in one basket?

Or counting chickens before they hatch?

Either way, relax.

It is good to be aware of what is happening. And it is good to be planning things.

However when you base your plans of variables, then your future may be 'shaky'.

Today you say that your future income: "will be close to $150,000"; allow me to say, your plan could change.

The rules behind: "i will not be able to contribute to a Roth anymore"; could change. It has only changed like a a bazillion times so far.

then: "I'm forced to stop contributing"; building a house on shifting sands.

I do think that putting money into a ROTH, is a good idea. More so when someone else is matching your contributions. GO FOR IT!

What else should you be doing?

Budgeting.

Tax-planning.

and investing.

Budget to keep your living expenses low. It is easier to control your expenses than it is to control your gross income.

Tax-plans are needed to control your tax exempt status. The moment you begin to pay income taxes, you are instantly losing a portion of your income. Some folks will knowingly pay a third of their income to taxes, and they don't care. Might as well be burning $100 bills. Maintain control of your income, and then you can invest it.

Invest into vehicles that provide tax-sheltering, and that will provide you the necessary items of your lifestyle. Some investment vehicles will house your family for free. Some investment vehicles will feed your family for free. Some investment vehicles will provide transportation to your family for free.

silverfox · 06-17-2008, 10:50 AM

You can go to Vanguard and open a Roth acct. and a Tradit. acct. without funding them right away. They will stay active for a given period without funding. Check with them for the actual rules. That way you can do the Roth or the Trad. which ever way your situation works out. Do the Roth first. It's Tax Free V/S Tax Deferred. Both are better than nothing.
The two other problems for you that I see are the "Tax Laws" going forward. If you make big plans based on today you may get taken to the cleaners buy new tax laws.
That issue is a Wild Card.
Second issue is ... now that you have made your choices as to which IRA's & 401K to invest in you also need to have a handle on how to invest in each vehicle.
I would spend some time on that issue before leaping into any investments.
If you do decide to go into the Stock Market I would make an effort to BUY LOW ie. Market cycles, and also Dollar Cost Average in on a regular Basis.
I have a large part of my investments in Vanguard. If you stay with their funds you will do it commision free.

Good Luck to you,

I think in the future you may need it.

Silverfox

Submariner · 06-17-2008, 12:10 PM

Quote:

Originally Posted by silverfox

... That way you can do the Roth or the Trad. which ever way your situation works out. Do the Roth first. It's Tax Free V/S Tax Deferred. ...

I missed that.

Which is it?

Tax free or tax defered?

silverfox · 06-17-2008, 05:38 PM

Quote:

Originally Posted by forest beekeeper

I missed that.

Which is it?

Tax free or tax defered?

1. ROTH IRA = Tax Free on all gains.

2. Traditional IRA = Tax deferred on all gains.

3. 401K = Tax deferred on all gains. Can be rolled over to Trad. IRA

Currently you must start taking distributions from # 2 and 3 at age 70 1/2.

# 2 and 3 can be converted to a Roth IRA following IRS rules.
Special rules apply to time frame...5 years... on conversions.
They are counted different and separate from the Roths you contributributed earnings to.

Silverfox

Submariner · 06-17-2008, 06:43 PM

So we are in agreement that with both a traditional IRA and a 401K; an investor is still facing taxes.

Neither is tax free

Prinny · 06-17-2008, 06:49 PM

I say do both. You can never be too prepared! you can usually borrow from your 401k depending on the plan. It's always good to plan and be preapred for retirement and can never start planning ahead soon enough.

Humanoid · 06-17-2008, 08:08 PM

Quote:

Neither is tax free

For most people they won't be tax free, but they allow you to greatly reduce your tax load. Whatever you put in your 401k is not taxed after all.

Submariner · 06-17-2008, 08:51 PM

Quote:

Originally Posted by Humanoid

For most people they won't be tax free, but they allow you to greatly reduce your tax load. Whatever you put in your 401k is not taxed after all.

Sure it is.

401Ks are only tax defered. They are not tax free.

Humanoid · 06-17-2008, 08:57 PM

Quote:

401Ks are only tax defered. They are not tax free.

Let me be more precise. Whatever you put in your 401k is not taxed on your current tax returns. Its possible to never pay tax on it, it depends how you handle matters when you're retired.

Regardless, Traditional IRA, Roth IRA, 401k etc all reduce your tax burden.