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Retirement Plan Options in addition to Roth IRA
Posted on 3/23/12 at 2:24 pm
Posted on 3/23/12 at 2:24 pm
Long story short, I do not have a 401k available through my work. I'm 26 and work full time. I started an IRA effective 2009. I maxed it out last year and plan on doing it again this year. But that's the most I can do with it year in and year out.
I'm wondering if any of the money savvy folks here have any other suggestions on investing, planing for the future and retirement. I guess I'm just worried an IRA alone will not be enough in the long run. I guess I could start another IRA? Thoughts?
I'm wondering if any of the money savvy folks here have any other suggestions on investing, planing for the future and retirement. I guess I'm just worried an IRA alone will not be enough in the long run. I guess I could start another IRA? Thoughts?
2
Posted on 3/23/12 at 2:55 pm to iggle
Most you can do in an IRA per year is $5000. As long as you're doing that every year, either into a Roth or Traditional, you're good there. Roth would probably be better for someone your age.
That said, if you are wanting to do more than $5k per year for retirement savings, you should look at opening up an Individual (taxable) investment account (maybe a Vanguard target retirement fund...Or even in the same funds as your IRA assuming you have good ones)....OR a tax-deferred VA. The benefit of the taxable acct would be access (con would be taxes). The benefit of the VA would be tax-deferred earnings (con would be higher fees and no access). Either way, those are the two things you could do over and beyond your IRA savings.
That said, if you are wanting to do more than $5k per year for retirement savings, you should look at opening up an Individual (taxable) investment account (maybe a Vanguard target retirement fund...Or even in the same funds as your IRA assuming you have good ones)....OR a tax-deferred VA. The benefit of the taxable acct would be access (con would be taxes). The benefit of the VA would be tax-deferred earnings (con would be higher fees and no access). Either way, those are the two things you could do over and beyond your IRA savings.
This post was edited on 3/23/12 at 2:56 pm
Posted on 3/23/12 at 3:52 pm to JPLSU1981
Tax exempt muni bonds if those interest you. You could also open up a regular IRA, start a 529 for kids education, or open up a bank account in idk say ivory coast and hope IRS doesn't find out!
Posted on 3/24/12 at 4:37 am to JPLSU1981
quote:
maybe a Vanguard target retirement fund
Think these are legit? I just opened up a Roth and maxed it out in a target retirement fund. Didn't seem like they have been around for too long but I figure they know what they're doing.
Posted on 3/24/12 at 9:46 am to TheIndulger
Heck yeah, those Vanguard target retirement funds are a great one-stop shop. It's merely a fund of funds, combining other Vanguard index funds, and it will get more conservative as you get older (decrease equities, increase bonds). And because it's index funds, the expense ratio is incredibly low.
To be honest, the majority of people out there could invest in the Target Retirement Fund and nothing else and be properly diversified and set for retirement.
The only negative would be that by investing in index funds, you are guaranteed to never beat the market. You are the market, and thus can never beat the market's performance. However, hisorically this method of investing is far superior to active fund management due to the expenses saved, but there is no guarantee going forward that passive investing (index funds) will continue to beat active management (For example, if God forbid the market is flat for the next 20 years, index funds would not be a good place to be). That said, It's a good safe bet to assume that index funds will indeed continue to outperform active funds, though. Because at the end of the day, similar active funds are still going to be highly correlated to their respective index and thus perform similar with higher fees.
To be honest, the majority of people out there could invest in the Target Retirement Fund and nothing else and be properly diversified and set for retirement.
The only negative would be that by investing in index funds, you are guaranteed to never beat the market. You are the market, and thus can never beat the market's performance. However, hisorically this method of investing is far superior to active fund management due to the expenses saved, but there is no guarantee going forward that passive investing (index funds) will continue to beat active management (For example, if God forbid the market is flat for the next 20 years, index funds would not be a good place to be). That said, It's a good safe bet to assume that index funds will indeed continue to outperform active funds, though. Because at the end of the day, similar active funds are still going to be highly correlated to their respective index and thus perform similar with higher fees.
This post was edited on 3/24/12 at 10:03 am
Posted on 3/25/12 at 2:00 am to JPLSU1981
I see these vangaurd Target retirement funds talked about a lot. Do they have something similar through Charles schwab?
Posted on 3/25/12 at 9:09 am to iggle
I think you can contribute to a conventional IRA AND a ROTH if you don't have a retirement account option at work? You may want to check on that.
Do you have college loans, a car loan or mortgage? Paying them down is not sexy, but it's a guaranteed return, even if the interest is tax-deductible.
Otherwise, a stock fund fund held outside of a retirement account. Index funds have an advantage here. Because they don't buy and sell stocks as much as active funds, they don't trigger as much capital gains.
Do you have college loans, a car loan or mortgage? Paying them down is not sexy, but it's a guaranteed return, even if the interest is tax-deductible.
Otherwise, a stock fund fund held outside of a retirement account. Index funds have an advantage here. Because they don't buy and sell stocks as much as active funds, they don't trigger as much capital gains.
Posted on 3/26/12 at 12:43 pm to JPLSU1981
quote:
To be honest, the majority of people out there could invest in the Target Retirement Fund and nothing else and be properly diversified and set for retirement.
That would be nice, since the roth IRA I have is the Vanguard target retirement fund
quote:
And because it's index funds, the expense ratio is incredibly low.
was reading about these this weekend. They were also highly recommended over actively managed funds.
Posted on 3/26/12 at 12:52 pm to Cold Pizza
quote:
I think you can contribute to a conventional IRA AND a ROTH if you don't have a retirement account option at work? You may want to check on that.
I will check, thanks. I'm basically a full time employed freelancer. The company that hires me pays another staffing/recruitment company. This staffing/recruitment company has an option for a 401(K) but they only added it the last few months and there is 0 matching. While the max would certainly be a lot higher (14k right?) I don't know if this would be better or not. I guess I could just roll it over if I ever leave this company.
quote:
Do you have college loans, a car loan or mortgage? Paying them down is not sexy, but it's a guaranteed return, even if the interest is tax-deductible.
yup (just student loan), but not much, 11k which is down to <7k now. Been paying much more than the monthly note the last year, paying down the principal. I plan to have it cut in half AT LEAST, by the end of the year.
quote:
Otherwise, a stock fund fund held outside of a retirement account. Index funds have an advantage here. Because they don't buy and sell stocks as much as active funds, they don't trigger as much capital gains.
will look into these too, thanks. Like I said a post above, I was just reading about them this weekend, and apparently I just never heard of them. It was actually in that kindle book that was posted on here.
Posted on 3/26/12 at 12:57 pm to JPLSU1981
quote:
As long as you're doing that every year, either into a Roth or Traditional, you're good there. Roth would probably be better for someone your age.
that's good to know. I'm not exactly pulling down OT money and I live in ny so expenses are higher. I'm just trying to do more with my money while I have and not just let it sit in a savings account earning 1.25%...
quote:
That said, if you are wanting to do more than $5k per year for retirement savings, you should look at opening up an Individual (taxable) investment account (maybe a Vanguard target retirement fund...Or even in the same funds as your IRA assuming you have good ones)....OR a tax-deferred VA. The benefit of the taxable acct would be access (con would be taxes). The benefit of the VA would be tax-deferred earnings (con would be higher fees and no access). Either way, those are the two things you could do over and beyond your IRA savings.
The roth ira I have is actually the vanguard retirement fund haha. What is a tax-deferred VA? Tried a quick google, but I don't know what VA stands for.
Posted on 3/26/12 at 1:23 pm to iggle
a VA (variable annuity) is a tax-deferred account that invests in the market.
Pros: tax-deferred earnings
Cons: -higher fees (which may or may not be offset by the tax-deferred earnings)
-no access...you would pay a penalty to access money, and you won't be able to withdraw the earnings without 10% penalty from IRS until you are age 59.5.
Really, though, You should probably just max out your 401k/IRAs, and if you're wanting to save more just open up a regular/Individual taxable account (for example, with Vanguard). VAs, while good for additional tax-deferred retirement savings, can be complicated and expensive, and there is no guarantee that the tax-deferred earnings/savings will outweight the higher fees over the longrun.
Pros: tax-deferred earnings
Cons: -higher fees (which may or may not be offset by the tax-deferred earnings)
-no access...you would pay a penalty to access money, and you won't be able to withdraw the earnings without 10% penalty from IRS until you are age 59.5.
Really, though, You should probably just max out your 401k/IRAs, and if you're wanting to save more just open up a regular/Individual taxable account (for example, with Vanguard). VAs, while good for additional tax-deferred retirement savings, can be complicated and expensive, and there is no guarantee that the tax-deferred earnings/savings will outweight the higher fees over the longrun.
This post was edited on 3/26/12 at 1:25 pm
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