How do I decide how much to convert to a Roth IRA?
The word “convert” in your question suggests that you might be moving money for a regular IRA to a Roth IRA. If this is the case Charles Schwab has a good tool.Roth IRA Conversion CalculatorThis calculator includes the losses on the funds used to pay taxes on the regular IRA when it is converted so it is pretty thorough. One thing it doesn’t address is any impact on your ACA (Obama care) subsidies if any. If you are receiving subsidies more than likely the conversion will not work for you unless they are very small.If the word “convert” means to take normal funds, not IRA funds, then you should deposit all that you can afford and the law allows (google it). If you don’t have any expensive dept and you have 6 months of operating capital in the bank then I would max it out. If you do have dept and don’t have 6 months or think you can afford it learn how to change your lifestyle so you can. Start with some “FIRE” blogs (google it) like MrMoneyMostache.
How do I Decide which IRA suits you best. Compare Roth vs. traditional IRAs.?
First the basics.Traditional IRA (Trad IRA) - tax deductible up front, investment earnings grow tax free but then all money is subject to tax when taken out.Roth IRA = non deductible up front, but money grows tax free and both the contribution and the investment earnings are never taxed again.Here are the factors to consider:How much time before you start needing the money. The up front tax deduction is a huge head start for the Trad IRA. Think of it this way, if you make a $4000 contribution, it only costs you say $3000 because of the upfront tax savings. A Roth $4000 costs $4000. But the Roth grows tax free. Therefore, the more time you give the Roth, the more time it has to “make up” for the fact that the Trad IRA got a “head start.”How much you have saved for retirement. If you don’t have much, you probably aren’t going to be taxed or at least taxed very little when withdrawing the money anyway. Therefore the upfront deduction really helps. Really wealthy people benefit from a Roth because even though they aren’t working when retired, their income could still be very high. The Roth is an advantage because that money is never taxed again.Rate of return on investments. Remember, the Roth earnings are never taxed. The Trad IRA will be taxed when withdrawn. A higher rate of return = more money that is never taxed with a Roth.This is how I like to look at it and have explained it to my clients. Think of a drag strip and two cars racing. One car is faster (The Roth), but the other car gets a head start (Trad IRA). When picking a car to win the race, how much time does the faster car have to make up for the fact that the other car is getting a head start.I generally prefer the Traditional IRA. I know that goes against conventional wisdom, but that upfront tax deduction really helps lower the cost and allows you to max out your contribution much easier.
How do I start and manage my Roth 401k?
Both a traditional 401(k) and a Roth 401(k) are available through employers who offer this benefit. However, there are some differences:Traditional 401(k)-Employers can match your contributions.-Taxes are paid when money is taken out at retirement.-Beneficial if your tax bracket will be lower in retirement.-You can start taking money out at age 59 and a half.-Minimum withdrawals required at age 70 and a half.Roth 401(k)-Employers can match contributions in a separate account that will be taxed as income when you take it out in retirement.-Money is taxed before you invest it, but the earnings and withdrawals are tax-free in retirement.-Beneficial if your tax bracket will be higher in retirement.-You can take money out at age 59 and a half and when account has been open five years.-Can roll over money to a Roth IRA to avoid withdrawal requirement at age 70 and a half.One subtle but key consideration is that Roth 401(k) plans aren’t subject to income restrictions like Roth IRAs. This can offer advantages to high-income individuals whose Roth IRA has been limited by these restrictions.You can set up a Roth 401(k) through your employer. Employers are required by federal law to offer retirement plans for full-time employees.A number of investment companies, like Vanguard, Fidelity, offer Individual Roth 401(k)s.Make sure you are eligible to start a Roth IRA. Your income and tax filing status will determine how much you can contribute.Pick where you want to start your Roth IRA. Companies from full-service financial advisors to discount brokerages offer Roth IRA accountsChoose your investments. You can pick almost any investment for your Roth IRA.
How and where to set up a Roth IRA?
Your best bet is to invest with an " investment company"...Fidelity, T.Rowe Price, Vanguard... their main reasons for being IN BUSINESS is investing and making money grow. Take a few hours to look at their websites...find out what mutual funds belong in your IRA...( conservative at first?.. do you want to be aggressive for awhile?..do you want to be active or let it lay for 35 years? ) I use Fidelity and E-trade and invest ( IRA's ,401's, rollovers, for myself, wife, daughters, and a couple of friends) and what I have learned is: I should have known about this approach when I was younger!!! The Roth is your a great choice for your first step... it is not an " investment" by itself, what you choose to put in the Roth is your real investment.... If you check into http://finishrich.com ...and click on the " latte calculator" you can get an idea of how much you can gain over different periods, saving different amounts and getting different returns... Please...get familiar with what's available to you...and get a ROTH every year....find out how to up your returns with a little on-line moving...if it takes a couple of nights or even weekends, you will never regret being informed about " investing".....it's something that should be taught in every school at every level ...Teach people to take care of themselves and their futures...improve the lives of couples and families.... And we wouldn't have a zillion people trying to live off Soc. Sec. Good luck P.S. I hope you get to read this part, I'm adding it much later...BUT, I didn't want to forget to STRESS that a ROTH IRA is probably THE very best investment for an average American..".tax-free income" an unbelievable concept!!! You'll get my drift after you pay taxes on EVERYTHING for the next 30 years.
Should I consult with financial advisor before start Roth IRa?
Financial advisors can advise you with general finance knowledge but do NOT let them manage your money and/or ask them for picks. I would recommend only paying them a low hourly advising fee to plan taxes.They have a vested interest to invest your money to line their pockets due to information asymmetry, not necessarily even in bad will. Most of the time, they are in good will. In every industry, professionals tend to line their own pockets, even if they are good people. Look at car mechanics and Doctors. They tend to order extra preventive repairs or diagnostic tests that are questionable if you asked other professionals not vested who were in your shoes. Just to "make sure". It's called cognitive dissonance. You'll have to find someone that is competent that you can trust to help you out even when you are broke and help you save money to the best of their knowledge. Think about how hard that is. Public service doctors in other countries tend to order less unnecessary tests because their pay is not directly tied to the orders. If you have no idea on what to invest in but want exposure to the market, find a low cost market index ETF that follows the market well and stick to it, keep adding your savings into it every month and ignore any news, good or bad. Historically, you'll earn 7% yearly even if you are in a bear market. If you're looking for something less risky, buy T-bonds ETF.To defer your taxes, buy them under a Roth IRA and use $0 commission brokers. Another problem is monkeys throwing darts do better than financial advisors or mutual funds. It's actually been tested with research. No one can predict the future. You're better off following the market starting at a low. How do you know it's a low? Blood on the streets. Lastly I am not responsible for your losses. Do your own research. Anything I say does not constitute investment advice.
Roth ira vs roth tsp?
im currently in the military and i currently have a little more than half a year left in the military.... im trying to decide if i should invest in a in a roth ira or the new roth tsp...i understand once i get out of the military i wont be able to contribute any more money to the roth tsp and that you can contribute 17k per year in the roth tsp and only 5k in the roth ira...i think for now i want to max out the roth tsp but im not sure if it would be smarter to wait till after tax season because im not sure how taxes would affected it but i also want the option of putting in an other 17k after January first. few other questions: can you move your money around in the different funds in the roth tsp, after i get out of the military? can you transfer 17k into a roth tsp and then immediately transfer into a roth ira when i get out of the military? and how long do you have to do so? what are the penalties for withdrawing money before your 59.5? can you withdraw penalty free for your first home?
How can I take a loan from my Roth IRA?
IRA plan does not allow the loan option, so you will not be able to borrow (and pay back) from your Roth IRA.Since it is a Roth, you may be able to withdraw from the contributed amount without any tax or penalty. If you have a 401k with an employer, you can check if the plan allows the loan option and borrow from there instead.
Roth IRA and 401k questions?
I have learned a bit about the stock market in my economics class and since I just turned 18, I am planning to eventually open a Roth IRA account with Scott Trade. I will be taking Economic college courses in the spring, so would investing in spiders be a good idea until I become more knowledgeble and be more comfortable in deciding which stocks to invest in? My Teacher had called Spiders "The idiot proof way to make money" I have read up that mututal funds have larger fees and that Spiders are a safer investment than investing in individual stocks. I would like to know exactly why are spiders safer? I just would like someone to confirm the information I have read. Are Roth IRA accounts FDIC insured? Or just the investments insured? Also would investing in 401K also be a good idea? Online I have read that it's "free money" but my father and brother have told me that it might not be a good idea since people with 401k had lost a lot of money recently. They are not investorswhat so ever but this is what they had heard. Can anyone give me a little more info on that? I apologise for all the questions but I am new at this sort of thing and I want to have my facts straight before I start anything :]