Should I start an IRA (individual retirement account)

jaxbusa · Apr 18, 2019

jpro said:
He said no Roth is available. Maybe he means that they don't offer one through his employer or his income (or combined income of him and his spouse) exceed the limit to benefit from the Roth.

In any event, I'm interested in where this thread is heading. I think what the OP is asking is if he has additional cash flow to invest now, where should he put it considering he maxes out on his employer plan already? Good problem to have, but I'm curious as well. We max our employer plans and Roths. I'd love to know what to do with savings or additional monthly cash flow (which is what I think he is asking).

Correct. An IRA is not available at my workplace but I do qualify for one. I don’t make much money, but my wife and I live below our means. I have some money left over at the end of the month that I would rather invest with than be enticed to spend. I have a mortgage at 4.5 percent interest that I’m putting a few hundred extra on every month. I contribute to deferred comp and have a mutual fund. I wanted to know if a Roth is worth it for me or do Put extra money in deferred comp, mortgage or mutual funds. Thanks.

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jaxbusa · Apr 18, 2019

wundrbird said:
Then I would contribute enough in the 401(k) to only meet the match (essentially a 100% return on your contributions). I would put the remainder of what you can afford in a Roth and would completely skip the IRA. If you max out the Roth by year's end, go back to the 401(k) with everything you're able. Any little bit of taxes you can write off now in an IRA or additional contributions to the 401(k) are nothing compared to how much you'll save by withdrawing contributions and interest from your Roth TAX-FREE when you retire.

Example:

You just put $6,000 in a 401(k)
In 30 years at 8% with no further investing you'll have $65,614

Question: Would you rather save the taxes on $6,000 now or on $59,614 later?

Just imagine what that would be like with REAL numbers like the ones it takes to actually retire.

Pay a fee to a financial advisor who has NO self-interest in how you invest, and he'll probably confirm what I've said.

And don't buy gold unless you have tons of money to throw in the trash.

Thank you for walking me through how it could help. To explain about me asking, my financial guy is a fiduciary, but he makes money from commissions from insurance and such. Once money is involved, I don’t trust anyone.

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stkjock · Apr 18, 2019

jaxbusa said:
Thank you for walking me through how it could help. To explain about me asking, my financial guy is a fiduciary, but he makes money from commissions from insurance and such. Once money is involved, I don’t trust anyone.

you need to look up the legal definition of a fiduciary

jaxbusa · Apr 18, 2019

stkjock said:
you need to look up the legal definition of a fiduciary

I have, thanks. When you read past mumbo jumbo of them acting in your best interest, all it really means is that they have to disclose all fees and personal interests they might have. Do you really think people are going to spend an hour or so going through your financial situation for free? Who’s paying their salary?

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blownstang4.6 · Apr 18, 2019

Depending on how much you're currently investing in your two investment vehicles, I'd say next step is to get rid of the debt. Pay down your mortgage. You will save 10's of thousands of dollars in interest in the long run. Once your house is paid off start dumping that extra money into retirement. I have two 30 year mortgages on both my properties. One is a multi unit investment property. I dump a couple hundred extra into each mortgage every month. When I get my yearly bonus and tax refund, I reimburse myself for any big house expenses I had during the year, and dump the rest into the mortgage. On my single family residence I've reduced my mortgage payments by 12 years and have only owned the house for a little over 2 years. That's a savings of $115,000 on 12 years of interest right there. I'm not going to be dumping as much in every year, but some favorable work circumstances allowed me to do so the last two years.

jaxbusa · Apr 18, 2019

blownstang4.6 said:
Depending on how much you're currently investing in your two investment vehicles, I'd say next step is to get rid of the debt. Pay down your mortgage. You will save 10's of thousands of dollars in interest in the long run. Once your house is paid off start dumping that extra money into retirement. I have two 30 year mortgages on both my properties. One is a multi unit investment property. I dump a couple hundred extra into each mortgage every month. When I get my yearly bonus and tax refund, I reimburse myself for any big house expenses I had during the year, and dump the rest into the mortgage. On my single family residence I've reduced my mortgage payments by 12 years and have only owned the house for a little over 2 years. That's a savings of $115,000 on 12 years of interest right there. I'm not going to be dumping as much in every year, but some favorable work circumstances allowed me to do so the last two years.

I have looked at the mortgage amortization with extra payments. The big argument people will give you is that, if your interest rate is low enough, you can make more with your money invested. So, some say it’s not financially smart to pay off your mortgage early.

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blownstang4.6 · Apr 18, 2019

jaxbusa said:
I have looked at the mortgage amortization with extra payments. The big argument people will give you is that, if your interest rate is low enough, you can make more with your money invested. So, some say it’s not financially smart to pay off your mortgage early.

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Depends on what you invest in. The extra $30k I paid off in 2 years would amount to $78k if invested over 12 years that it saved me on the mortgage with an average 8% return compounded. So I'm at $37k more by putting that lump into the mortgage and I'll be paying off more in future years.

If you keep that $30k in for 30 years it's $330,000, but I'd rather be debt free earlier in life and then dump in more money into savings later when my salary is much higher. Market returns and investments also aren't a guarantee. Just like the OP, I have other forms of investments at work and personal. So this could be considered another diversification option for the OP.

nxhappy · Apr 18, 2019

Roth IRA - 6 Benefits You Should Know About | Bankrate.com

the answer is YES. Get a roth IRA. you can pump in $6000 every year. Use a roth calculator. Over 30 years you will make roughly 800000-1 million. The roth is sweet because you can add stocks, mutual funds, ETFs, bonds, etc etc. Once you retire, it's tax FREE. Even if you are 40....do it. Thats 20-30 years of investment. Of course the roth will be on top of your 401 and stocks that you SHOULD have.

jaxbusa · Apr 19, 2019

I ended up opening a Roth. Thanks to all.

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Sinister04L · Apr 19, 2019

Willie2 said:
high income is one downside to a Roth IRA.

Filing single? you can't contribute to a Roth IRA if you have income over 137,000
Filing married? You can't contribute to a Roth IRA if you have income over 203,000

It's even less for a traditional IRA. I was surprised and disappointed to learn I couldn't contribute.

nxhappy · Apr 19, 2019

jaxbusa said:
I ended up opening a Roth. Thanks to all.

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Awesome. Dump in as much as you can ! I recommend using screeners to find the best return investments (like morning star)

stkjock · Apr 20, 2019

jaxbusa said:
I have, thanks. When you read past mumbo jumbo of them acting in your best interest, all it really means is that they have to disclose all fees and personal interests they might have. Do you really think people are going to spend an hour or so going through your financial situation for free? Who’s paying their salary?

good luck, I'm done here

Should I start an IRA (individual retirement account)

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