Company doesn't offer any retirement benefits, what to do?

Traditional IRA.

Its not a pre tax option but why not a Roth IRA and catch the tax break on the withdrawal when you are being taxed in a higher tax bracket?

quote:

---

The traditional Ira allows pre-tax. Though, if your tax bracket is decently low, I would do the Roth.

---

I concur.

quote:

---

My fiancee is about to start her first post college job, and the company doesn't offer any 401k match, etc. I'm not accustomed to this, so what should we do to save for her? Are there options to put pre tax dollars in? Yes, I know this is an incredibly noobish question, but I trust this place more than google. Thanks.

---

A tradiational IRA is almost identical as far as tax.

THough you might think of a Roth instead. You pay the taxes up front instead of at withdrawal - but it has the advantage that after 5 years you can withdraw the principle penalty free.

quote:

---

THough you might think of a Roth instead. You pay the taxes up front instead of at withdrawal - but it has the advantage that after 5 years you can withdraw the principle penalty free.

---

You can withdraw the contribution of principle at any time with no penalty.

It's why some recommend using your Roth as your emergency fund.

You are thinking of rollover conversions into a Roth.

quote:

---

You can withdraw the contribution of principle at any time with no penalty.

It's why some recommend using your Roth as your emergency fund.

---

I like this even more. Besides the $5k limit/year, which is enough for us for now anyway, I think that will work out perfectly.

quote:

---

You plan on being in a higher tax bracket during retirement? Weird.

---

Than I am right now, yea. In a few years I'll revisit that, but for now, I think so.

quote:

---

The downside of this is that you'll get less bang for your buck since you are investing taxed income. Isn't building as fast as possible to realize the benefits of compounded interests especially important for young people?

---

The tax rate is the tax rate, regardless of if it's taken now or then. You can do the math...given the same tax rate and growth rate it works out to be the same.

You can just as easily say that it's better to do a Roth if you are young because it means compound interest can grow completely tax free.

If there is any games with inputs with the same tax rate, 5000 after tax is obviously worth a lot more than 5000 pre tax so if you are maxing your contribution that is a consideration even if you don't think taxes are going up for you in the future.

Ummm.

Yeah.

I never hinted otherwise.

Look at what you quoted again, especially in the context of who I was replying to.

I was arguing that there was no benefit to putting more money aside now because pre tax dollars ramps up compound interest.

Given the same tax rate, pre tax dollar investments and post tax dollar investments are the same.

10% return over 30 years results in a compound interest growth factor of 17.449.

This is a constant regardless of amount of starting principal. For every dollar you put in now will result in 17.449 dollars 30 years from now.

Assuming a same tax rate of 15% (allowing you to keep 85% of your money):

(.85*1000)= 850 post tax dollars in Roth

850*17.449=14,831.65 growth from initial investment.

-------

Depositing 1000 dollars on pre tax account:


1000*17.449=17,449 in your account at the end of 30 years.

But now you have to pay taxes to withdraw:

17,449*.85=14,831.65


You see, pretax and post tax doesn't matter for compound interest. Only time invested boosts that.

So the choice of which to use is SOLELY determined by current and anticipated tax rates.

And again, as both have the same max contributions, it is almost always better to max contribute to a Roth than a IRA due to post tax dollars being "worth" more, especially in a borderline case.

If you do not max contribute, your main concerns are tax rates then and now.