Results 1 to 12 of 12

Thread: Opening a Roth IRA- Where?

  1. #1
    Veteran Member
    Joined
    Jan 2011
    Posts
    375
    Thanks
    233
    Thanked 252 Times in 104 Posts
    My Mood
    Busy

    Default Opening a Roth IRA- Where?

    I'm finally ready to start saving for my retirement and would like to fund a roth IRA but I'm not sure where is best to have an account... thoughts? Suggestions? I was considering Vanguard or maybe T Rowe Price? Also...investment or savings IRA?

    15% Off Website Orders w/ code 'STRIPPERWEB'

  2. The Following User Says Thank You to _Elle_ For This Useful Post:


  3. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Opening a Roth IRA- Where?

    I've had good luck with Vanguard in the past. With their umbrella Roth IRA package you don't need to make a decision as to savings vs investments because a mix of both is possible.

  4. #3
    Featured Member
    Joined
    Jul 2008
    Posts
    992
    Thanks
    1,356
    Thanked 430 Times in 253 Posts

    Default Re: Opening a Roth IRA- Where?

    As someone who prepared taxes for "high net worth individuals" last Spring, Vanguard was by far the most popular for IRAs. I don't even remember seeing a client with a different company. I can't wait to start my own retirement planning, I'm still broke and in college.

  5. The Following 2 Users Say Thank You to Nuclear Martini For This Useful Post:


  6. #4
    God/dess rickdugan's Avatar
    Joined
    Apr 2010
    Location
    NYC
    Posts
    4,570
    Thanks
    4,406
    Thanked 7,481 Times in 2,715 Posts
    My Mood
    Amused

    Default Re: Opening a Roth IRA- Where?

    Elle, I noticed that you have a dancer clothing business. Are you self employed? If so, have you considered opening a SEP IRA or even a traditional IRA first? As a general rule of thumb, it is always better to take your tax deferral option upfront so that: (1) the tax dollars that would have been paid today can also work for you at compounding rates; and (2) you pay taxes on the earnings when your total income is lower than it is today, hence the application of your personal deductions and lower tax brackets to IRA withdrawals.

    Before you start investing after tax dollars into a retirement fund, you may want to max out your tax deferred options first. You can open any of these types of IRAs with Vanguard or most any of the other large mutual fund companies (Vanguard, Putnam, etc.).

    Just something to consider.
    Last edited by rickdugan; 08-22-2013 at 07:42 AM.

  7. The Following 2 Users Say Thank You to rickdugan For This Useful Post:


  8. #5
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Opening a Roth IRA- Where?

    ^^^ comparing a traditional IRA / 401k / SEP IRA with a Roth IRA does indeed result in a reduced tax bill next year for the same amount contributed. This is obviously due to the fact that IRA / 401k / SEP IRA contributions are made with pre-tax money while Roth contributions are made with after-tax money. However, there is an arguably very large risk factor involved with an IRA / 401k / SEP IRA that does not exist for a Roth IRA. That risk factor stems from the gov't being able to change the rules applying to IRA / 401k / SEP IRA withdrawls at any time over the next ~40 years when the OP finally reaches legal retirement age.

    One such change already discussed in Washington would be to force the conversion of all investment types in any of these accounts away from stocks, corporate bonds, commodities etc. and into US Treasury bonds. With a Roth IRA there is essentially no penalty involved to dissolve the account if such a change should take place 5-10-20 years down the road. But with the others, early withdrawl to avoid having your retirement money forcibly converted into US Treasury Bonds ( which might be losing principal value while paying comparatively low 'interest' rates ) would result in a huge increase in that year's income tax bill - PLUS a 10% penalty would also have to be paid to do so.

    Another such change that has been 'run up the flagpole' is to make future social security benefit check size dependent on actual income level at retirement age. Withdrawls from Roth IRA accounts do not count as additional income upon withdrawl ( since they were already counted as income in the year in which the contribution was originally made ), whereas withdrawls from an IRA / 401k / SEP IRA DO count as additional income. Besides a potentially smaller future social security check, the effect of a higher level of official retirement 'income' due to counting IRA / 401k / SEP IRA withdrawls as additional income after retirement could also cascade into a reduction in / denial of other potential gov't benefits at retirement age ( i.e. property tax exemptions / discounts, SNAP benefits, utility subsidy payments etc. )

    And even if none of the above changes actually happens, the present day advantage of an IRA / 401k / SEP IRA over a Roth IRA is based on an assumption that the person's effective tax rate this year is significantly higher than the person's effective tax rate will be ~40 years from now when money withdrawn from an IRA / 401k / SEP IRA will be added to that year's income and subjected to progressive income tax rates. With recently enacted tax increases as a trend-setter, there is no guarantee whatsoever that the effective income tax rate ~40 years from now that will apply to IRA / 401k / SEP IRA withdrawls will still be lower than the current year tax rate that applies to Roth IRA contributions.

    IMHO at least, these potential downside risks now exceed the current 'benefits' for any of the tax-deferred gov't sanctioned retirement accounts ... or at least for those dancers and camgirls earning less than $75k per year such that their current year effective tax rates aren't in the highest brackets. While Roth IRA money isn't totally free of gov't 'strings' and potential future gov't rule changes, the potential financial impact of future rule changes or income tax rate changes on Roth IRA money is far lower than for the tax-deferred retirement accounts.
    Last edited by Melonie; 08-22-2013 at 10:54 AM.

  9. #6
    God/dess rickdugan's Avatar
    Joined
    Apr 2010
    Location
    NYC
    Posts
    4,570
    Thanks
    4,406
    Thanked 7,481 Times in 2,715 Posts
    My Mood
    Amused

    Default Re: Opening a Roth IRA- Where?

    Melonie, you are suggesting that she forego very significant tax and growth benefits today just in case some doomsday scenario happens tomorrow. And let's be clear that the odds of those doomsday scenarios actually happening are very low, unless the average age of the voting population magically goes down. And even if they did happen by some political miracle, then there would likely be built in grandfathering provisions, conversion windows and exemptions designed to make these changes more politically palatable.

    The main point of a tax deferral option is to use money that you would otherwise give the government today in order to save for retirement instead. If I am taxed at a 20% effective rate, then I have to earn an extra $6,000 today in order to put $5000 in a Roth IRA, as opposed to $5000 in order to put $5000 in the SEP IRA today. If my discretionary savings number is limited, this may even actually mean that I have more money to invest today than I otherwise could, thereby giving me added compounded growth of that money than would otherwise be the case on a lower balance.

    And yes, part of the benefit is also in the assumption that a retiree's effective tax rate will be lower than when he/she is working full time, but that is virtually always the case. This is particularly true since the person withdrawing from the IRA has some control over when he/she takes money out and, hence, how much taxable income is realized.

    These are the reasons that virtually any reputable financial planner strongly encourages their clients to fully utilize their tax deferred options before investing after-tax dollars.

    Seriously Melonie, I am a fan of most of what you have to say on these topics, but I honestly think that you are going a little over the deep end on this one.

    Elle, I would advise you invest a little money by speaking to a financial planner. There are a number of very good ones out there who can sit down with you and discuss your goals and options for very reasonable rates. Good luck!
    Last edited by rickdugan; 08-22-2013 at 12:28 PM. Reason: grammar

  10. #7
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Opening a Roth IRA- Where?

    If I am taxed at a 20% effective rate, then I have to earn an extra $6,000 today in order to put $5000 in a Roth IRA, as opposed to $5000 in order to put $5000 in the SEP IRA today
    And the flip side is that ( ex-earnings ) when that $6,000 in taxable money is withdrawn from a SEP IRA 40 years from now upon reaching official retirement age, the person will have $5,500 or $5,000 or $4,500 left after paying those future year taxes ( and nobody knows what that tax rate will actually be ). In comparison the $5,000 in already taxed Roth IRA money will provide $5,000 of spendable money without triggering additional taxes when withdrawn after reaching retirement age.

    Granted that if a person's current year income is six figures, the SEP IRA taxes that will be due 40 years down the road may be significantly lower than the avoided taxes in the current year thus justifying the 'risk premium'. But if the person's current year income is below $50,000 the current year tax savings on SEP IRA contributions makes the 'risk premium' VERY hard to justify.

  11. #8
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Opening a Roth IRA- Where?

    Seriously Melonie, I am a fan of most of what you have to say on these topics, but I honestly think that you are going a little over the deep end on this one.
    All I can say is that recent changes in the economy have already seen several long standing adages disproved ...

    - remember 'getting a college education will always land you a good job' ?
    - remember 'real estate will always go up in value' ?

    will 'tax deferred IRA's are always a better deal than Roth IRA's' be added to that list in the future ?

    I'm not saying that, at this moment, or for that matter in the next few years, that the 'apparent' advantages of contributing to any of the tax-deferred retirement accounts won't continue to exceed those of a pre-taxed Roth IRA. But where the OP is concerned, 40 years until reaching legal retirement age is a VERY long time, and many seemingly 'impossible' changes could indeed happen in the meantime ! In that regard, the pre-taxed Roth IRA money will be far less subject to those possible changes.

    I agree with all that sitting down with a financial planner certainly can't hurt, and could result in some very good advice. However, an open mind must be kept regarding interpreting where the financial planner is 'coming from'. Unfortunately, many 'low priced' financial planners appear to work from a common playbook ... which may not take into consideration the 'mispriced risk' that is arguably present in a lot of financial instruments these days.

  12. #9
    Veteran Member
    Joined
    Jan 2011
    Posts
    375
    Thanks
    233
    Thanked 252 Times in 104 Posts
    My Mood
    Busy

    Default Re: Opening a Roth IRA- Where?

    - I have a college education. It will not land me a good job. I continue to dance currently because it makes more financial sense to me.

    - I'm considering acquiring rental properties, but I'm not even sure I want any ties here at all. I'm 25, but retiring out of the country down the road appeals to me.

    - I've been listening to Suze Orman on the ride to work (thanks to a regular who got me an audio book). She pushes for the roth IRA because the money is already taxed and we have no idea what the future tax rates will be. I make enough that maxing out a roth each year is not that big of a deal to me. I feel more comfortable knowing that I can take that money out and not have to worry about how much of it is going to be taken away by taxes.

    - To date...I have not met any worthwhile financial planners. I've talked to a few. I seem to get more solid advice from my investment banker friend and from stripperweb than I have from any financial planner...lol.

    - And yes... more of a mix of stocks or bonds. I'm 25 so the suggested funds for me are made up of mostly stock. Most places have funds you can pick that are age appropriate, but it is probably better to research and pick my own.

    15% Off Website Orders w/ code 'STRIPPERWEB'

  13. The Following 2 Users Say Thank You to _Elle_ For This Useful Post:


  14. #10
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Opening a Roth IRA- Where?

    I have not met any worthwhile financial planners. I've talked to a few. I seem to get more solid advice from my investment banker friend and from stripperweb than I have from any financial planner...lol.
    While this may seem funny, where a person's retirement savings are concerned there's arguably no basis for joking ! Where financial 'professionals' are concerned, I always ask myself 'follow the money' questions ... if this person is such an expert then why is he working for a small time credit union or regional bank for a comparative 'pittance' instead of a Wall St. brokerage ? Not to say that some financial 'professionals' at credit unions and regional banks can't be extremely knowledgeable, but ...


    more of a mix of stocks or bonds. I'm 25 so the suggested funds for me are made up of mostly stock. Most places have funds you can pick that are age appropriate, but it is probably better to research and pick my own
    Out of curiosity, were any alternative investments to stocks and bonds discussed ? Inverse Index ETF's ? Commodity ETF's ? Precious Metals ? For better or worse, many financial planners don't mention these alternatives since the institution they work for doesn't offer them as an 'in-house' fund option !!!

    Also, where both Roth's and conventional IRA's are concerned, it arguably makes no sense whatsoever to add tax-advantaged investment types to these accounts ... since the earnings on investments under the gov't sanctioned retirement account umbrella are ( conditionally ) exempt from tax. Thus federal tax exempt US Treasury bonds ... which typically make up a significant portion of 'time targeted' investment funds ... 'waste' the annual contribution limit if bought under an IRA. Arguably, investment types under a Roth or conventional IRA should be those that carry the highest effective tax rates ... such as 'royalty' paying oil and gas stocks, short term 'flip' stocks, high yield junk bonds etc. With the tax rate on long term capital gains and qualified dividend payments having been raised from 15% to 20% this year, Roth IRA's have become even more popular as a means of legally side-stepping most of this tax altogether ... without the draconian penalties for 'early withdrawl' of a conventional IRA.
    Last edited by Melonie; 08-24-2013 at 08:57 PM.

  15. #11
    Featured Member hot4ablackchick's Avatar
    Joined
    May 2006
    Location
    Ohio
    Posts
    1,346
    Thanks
    83
    Thanked 265 Times in 150 Posts

    Default Re: Opening a Roth IRA- Where?

    I just opened a Roth IRA with Ally Bank a few months ago.
    CARMEN IS HOTT 4 A BLACK CHICK!!!!!!!!

    Quote Originally Posted by ViolaStrings View Post
    Why does he have a headset on his head, like Janet Jackson or some shit?
    Quote Originally Posted by Emily View Post
    why does Janet Jackson have a headset on her head?!

  16. #12
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Opening a Roth IRA- Where?

    in the way of an update, there is now a concrete example of 'private' money in gov't sanctioned retirement funds being suddenly subjected to drastic 'rule changes' ...

    from

    (snip)"WARSAW, Sept 4 (Reuters) - Poland said on Wednesday it will transfer to the state many of the assets held by private pension funds, slashing public debt but putting in doubt the future of the multi-billion-euro funds, many of them foreign-owned.

    The changes went deeper than many in the market expected and could fuel investor concerns that the government is ditching some business-friendly policies to try to improve its flagging popularity with voters.

    The Polish pension funds' organization said the changes may be unconstitutional because the government is taking private assets away from them without offering any compensation.

    Announcing the long-awaited overhaul of state-guaranteed pensions, Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings.

    He said that what remained in citizens' pension pots in the private funds will be gradually transferred into the state vehicle over the last 10 years before savers hit retirement age.

    The reform is "a decimation of the ...(private pension fund) system to open up fiscal space for an easier life now for the government," said Peter Attard Montalto of Nomura. "The government has an odd definition of private property given it claims this is not nationalization."(snip)


    In roughly equivalent terms, the Polish 'state' pension fund is akin to US Social Security, and the Polish 'private' pension funds are akin to IRA's and 401k's. And in roughly equivalent terms, the action taken by the Polish gov't was to forcibly transfer bonds held in 'private' pension funds to the 'state' pension fund ... with a presumption that the 'state' pension fund will pay increased retirement benefits to make up for the reduction in 'private' pension fund earnings due to the bonds now being 'owned' by the gov't thus no longer generating passive income for the individual owner. Also in roughly equivalent terms, opponents point out that this action amounts to an 'eminent domain' confiscation of private property with insufficient 'fair value' compensation. Proponents argue that the forced transfer of bonds into the 'gov't' system increases the 'safety' of future retirement benefits by eliminating the risk of principal loss for bonds formerly held in 'private' pension funds.

    Bottom line regarding the Polish gov'ts rule changes appear to go like this. Polish Zloty's aside, in exchange for confiscating say a ~$10,000 bond that was privately purchased by an individual and placed into a gov't sanctioned 'private' retirement account ( ~= an IRA or a 401k ), the gov't promises to pay that person an additional ~$100 dollars per month via the 'public' retirement system ( ~= Social Security ) when they reach retirement age. The ~$10,000 principal value of that bond is 'lost' to the individual owner ( and their future heirs ), instead immediately becoming a gov't 'asset'.
    Last edited by Melonie; 09-14-2013 at 08:08 AM.

Similar Threads

  1. Roth IRA
    By xGeminix in forum Dollar Den
    Replies: 4
    Last Post: 02-03-2013, 12:26 AM
  2. Replies: 12
    Last Post: 10-03-2010, 04:01 AM
  3. roth ira and simple ira
    By anomar in forum Dollar Den
    Replies: 6
    Last Post: 02-12-2008, 10:16 AM
  4. And yet another Roth IRA question...
    By greggy in forum Dollar Den
    Replies: 9
    Last Post: 11-10-2006, 03:31 PM
  5. Roth IRA
    By rain in forum Dollar Den
    Replies: 15
    Last Post: 10-31-2005, 01:59 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •