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post #1 of 20 (permalink) Old 02-06-2009, 03:04 PM Thread Starter
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Roth IRA

Question about Roth IRA's...

My company has stopped contributing to our 401k program. I'm thinking this is a good time for me to stop contributing as well and put my 401k contribution amount into a Roth IRA until my company matches again.

My question is... does it matter where I get my IRA from? I have an ING savings account and noticed they offer IRA's through sharebuilder.com or something like that. Is that any different than using my Dad's finance guy?

Pros/Cons? Thoughts?

Thanks!
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post #2 of 20 (permalink) Old 02-06-2009, 03:06 PM
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why stop contributing just cause the company does

youre still accumulating, just at a lower rate

-Jason
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post #3 of 20 (permalink) Old 02-06-2009, 03:09 PM
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and it is pre tax vs. paying taxes on it and then writing off the expense at year end.
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post #4 of 20 (permalink) Old 02-06-2009, 03:13 PM Thread Starter
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Quote:
Originally Posted by Pilotx1 View Post
why stop contributing just cause the company does

youre still accumulating, just at a lower rate

A Roth has tax free earning potential. I would pay tax at my current tax rate with a Roth insead of at my future (and supposedly highest) tax rate at retirement with a 401k.
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post #5 of 20 (permalink) Old 02-06-2009, 03:20 PM
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Quote:
Originally Posted by kblack View Post
A Roth has tax free earning potential. I would pay tax at my current tax rate with a Roth insead of at my future (and supposedly highest) tax rate at retirement with a 401k.
but at present value of a dollar you potentially could contribute more pre tax to make up for the higher tax rate later.

Greg
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post #6 of 20 (permalink) Old 02-06-2009, 03:21 PM
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Can you afford to pay the tax on the amount you are considering putting into a Roth IRA? Do you know what that amount is?

Are you fully vested in your 401k?

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post #7 of 20 (permalink) Old 02-06-2009, 03:24 PM Thread Starter
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Quote:
Originally Posted by jrock View Post
Can you afford to pay the tax on the amount your are considering putting into a Roth IRA?

Are you fully vested in your 401k?

Yeah, I could afford to pay the taxes. It's really not that much.

No, not fully vested for a few more months.

How do those answers impact my decision?
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post #8 of 20 (permalink) Old 02-06-2009, 03:26 PM
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Well, if you can't afford to pay the tax it is not a good move at this time and you can't move all the money if you are not 100% vested.

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post #9 of 20 (permalink) Old 02-06-2009, 03:28 PM Thread Starter
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Oh, no. I wasn't talking about moving the money I'd already invested in my 401k, just depositing my 'retirement' money bi-weekly into a new Roth instead.
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post #10 of 20 (permalink) Old 02-06-2009, 03:29 PM
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Oh, no. I wasn't talking about moving the money I'd already invested in my 401k, just depositing my 'retirement' money bi-weekly into a new Roth instead.
Ok, well that would be fine. A lot of people do a 401k and a Roth IRA. I think there is a $3,000 per year limit on Roth IRAs. And you would use after tax dollars to fund that account, so there would not be a lump sum tax hit.

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post #11 of 20 (permalink) Old 02-06-2009, 03:30 PM
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Quote:
Originally Posted by jrock View Post
Ok, well that would be fine. A lot of people do a 401k and a Roth IRA. I think there is a $3,000 per year limit on Roth IRAs. And you would use after tax dollars to fund that account, so there would be a lump sum tax hit.
5k limit per person, that limit is lower if you make over a certain amount.

Chris
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post #12 of 20 (permalink) Old 02-06-2009, 03:32 PM Thread Starter
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What's a lump sum tax hit? Wouldn't I just cancel the direct deposit into my 401k account and send it into a IRA account, paying normal taxes on the amount very pay period?
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post #13 of 20 (permalink) Old 02-06-2009, 03:33 PM
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Quote:
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What's a lump sum tax hit? Wouldn't I just cancel the direct deposit into my 401k account and send it into a IRA account, paying normal taxes on the amount very pay period?
If I took my 401k and rolled it into a Roth IRA I would have to pay tax on it like it was income - one time. Then never again. If it was $5,000 that wouldn't be so bad, but if it was $30,000, that might be too big of a hit. The reason is because a 401k is funded with pre-tax dollars. That's a benefit to you now. When you are retired and you take the money out, your tax bracket will most likely be lower. Roth IRAs are funded by post tax dollars or you funde it with pre-tax dollars you will then pay the tax one time up front.


btw, vcook quoted me before I had a chance to put the word NOT in my post.

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Last edited by jrock; 02-06-2009 at 03:35 PM.
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post #14 of 20 (permalink) Old 02-06-2009, 03:33 PM
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there would be no tax hit other than the taxes you pay on the money you plan to put in the RothIRA, but you know this because it's post tax dollars. The tax on earnings is deferred, and the money you put in is accessable.

Jrock she's not planning on moving her 401k money to a Roth, she's just planning on not putting any more pretax money into her 401k and taking that money (now post tax) and investing in a Roth IRA instead.

Chris
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post #15 of 20 (permalink) Old 02-06-2009, 03:34 PM Thread Starter
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Gotcha! Thanks!

So can I use an on-line account or should I go through a financial advisor?
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post #16 of 20 (permalink) Old 02-06-2009, 03:39 PM
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I think you should keep contributing to the 401k and also contribute to a Roth IRA.

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post #17 of 20 (permalink) Old 02-06-2009, 03:43 PM
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Quote:
Originally Posted by kblack View Post
Gotcha! Thanks!

So can I use an on-line account or should I go through a financial advisor?
If you feel that is a better option for you, then you can go any route you like: website, local bank, financial advisor.

Greg
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post #18 of 20 (permalink) Old 02-06-2009, 10:37 PM
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Quote:
Originally Posted by jrock View Post
Well, if you can't afford to pay the tax it is not a good move at this time and you can't move all the money if you are not 100% vested.

He cant move the money anyhow, even if fully vested, unless ther termiantes, retires, or becomes disabled. Unless he is already at NRA.

I am generally not in favor of roth, unless you are already maxed out dollar wise. If you can afford paying the tax on your roth deducaiton, up your 4K instead. You will come out ahead.

BTW, I have been in the retirement field since 1974. My creds. I dont sell investments.

Live Fast, Die Young, Have a good looking corpse.
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post #19 of 20 (permalink) Old 02-07-2009, 04:01 AM
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Obama will save you with a sweet retirement package. dont worry.
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post #20 of 20 (permalink) Old 02-07-2009, 07:57 AM
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Obama will save you with a sweet retirement package. dont worry.
I thought everyone had to just worry about their own bootstraps...

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