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Retirement Part II

May 19th, 2019 at 08:09 pm

Well this week I plan on taking a look at opening a Roth IRA, I’ll be contributing about 3-5% each pay day. Someone in a previous post mentioned Vanguard, I’ll be doing a little bit more research but was wondering if there are any other financial institutions you may recommend?

6 Responses to “Retirement Part II”

  1. Amber Says:

    Update, I’ve opened the account, a Roth with vanguard. I’ll be rolling over two former 401(k) with previous employers, they’re not much but hey. I’ve added 3% to deposit each pay date for my budget. Once CC9 is paid off I’ll bump to 2% and bimbo again when CC10 is done

  2. Jenn Says:

    Good for you!! I admire the way you take action once you've made a decision. Now you can maintain your short-term focus on knocking out the CCs knowing that there is a continual investment in your future. Mr Money Mustache describes those dollars invested as little employees working for you.

  3. jp Says:

    Are your former 401k's Roth 401k's (most are NOT)? You don't want to roll a traditional 401k into a Roth IRA or you'll be hit with a ton of taxes. You want to roll your Traditional 401k into a Traditional IRA (like to like = no taxes).

    Also, typically, at your age, you want to contribute to a traditional IRA. You'll get a tax break now, vs a Roth where you'd get a tax break when you take the money back out. The theory is you make more money now, thus have a higher tax rate now and thus want to take the tax break now. For the Roth, you are assuming you'd owe more in taxes during retirement than you would now, which usually isn't the case.

    But good on you for getting started! Just like the Chinese Proverb β€œThe best time to plant a tree was 20 years ago. The second best time is now.” same with retirement funds!

    We use Vanguard as much as possible. If you call them, they will help you out picking the best index funds for your age & risk tolerance - if you have enough rolling over, ask about their admiral funds, they have the lowest fees.

  4. Petunia 100 Says:

    That's great, Amber.

    Personally, I would make certain that I was on track to have my 0%, 10%, and 12% tax brackets full before I funded a Roth. There is no point paying tax at your highest marginal rate now (22%?) in order to avoid paying 0% and 10% later.

  5. Fire and I Says:

    You were on it! You published the post and a half hour later the accounts were opened. You're a doer!

    I've been woefully behind on retirement stuff. It's quite a learning process.

  6. Dido Says:

    Watch for what JP said! Unless your 401ks are Roth 401ks, and they are probably not, you want to roll them to a TRADITIONAL IRA at Vanguard, NOT a Roth, otherwise you will incur a big tax bill for 2019.

    If you have a low-income year, you can do a Roth conversion of some of the amounts from a traditional IRA into a Roth, and having the Roth IRA is terrific for new Roth IRA *contributions*, but have Vanguard do a Rollover IRA from your old 401k plans.

    Vanguard is a great custodian as they have lots of options and low expenses, but before you do a rollover you should be sure you have no need of creditor protection (i.e., no one is going to go after you for your debts) since 401ks offer that protection while IRAs do not, and make sure that there is no other 401k advantage you would be leaving behind by doing the rollover--for example some plans allow 401k loans, and while generally it's not a good idea to borrow from your retirement plans and is not recommended, *sometimes* borrowing a *little* from a 401k can help with debt management. The big advantage of IRA rollovers is greater choice and lower fees; the disadvantage is loss of creditor protection and some special plan provisions (loans and the ability in many plans to take out money after age 55 and after separation from service without penalty, just regular tax). IRA rollovers are generally a good idea, but not in all cases.

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