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Started By
Message
How crucial is a Roth IRA?
Posted on 12/18/15 at 4:31 pm
Posted on 12/18/15 at 4:31 pm
Here's my situation. In 2013 with ZERO investing background, I decided to supplement the retirment that I had through my work. I'd always heard Roth IRA, gotta have a roth, need a roth. So I opened one with Edward Jones. Fast forward to 2015 and that fund was abysmal so after asking the MT board I gave up on it. I transferred that to a Target date retirement fund with Vanguard. I contribute $300 a month into that and am hoping/expecting to be much happier with VG, which by all accounts seems to be a better company.
So in 2016 I think I may be able to have a little more wiggle room in what I can devote each month to investing. I think I can get by with adding an additional $100 a month. My question is should I just up my VG TDRF to $400 a month, or should I open a roth IRA as well? I am still a complete novice and pretty ignorant on investing, so I don't even really understand what a Roth IRA is aside from when taxes are taken out of it. Is there any benefit to that vehicle rather than what I'm currently doing?
So in 2016 I think I may be able to have a little more wiggle room in what I can devote each month to investing. I think I can get by with adding an additional $100 a month. My question is should I just up my VG TDRF to $400 a month, or should I open a roth IRA as well? I am still a complete novice and pretty ignorant on investing, so I don't even really understand what a Roth IRA is aside from when taxes are taken out of it. Is there any benefit to that vehicle rather than what I'm currently doing?
9
Posted on 12/18/15 at 4:50 pm to WG_Dawg
I don't know much but pretty sure you should open a ROTH.
Posted on 12/18/15 at 4:57 pm to tiger91
should I decrease my vanguard TDF and put $200 into each? That's one thing I DID like about EJ, they have physical branches where I can walk in and sit down and talk with someone.
Posted on 12/18/15 at 5:01 pm to WG_Dawg
You have a retirement account through your employer. Is that, already maxed to the limit?
Posted on 12/18/15 at 5:08 pm to Porker Face
I contribute to work the max percentage amount they'll match.
Posted on 12/18/15 at 5:16 pm to WG_Dawg
So this Vanguard is an after tax brokerage account?
Posted on 12/18/15 at 5:18 pm to WG_Dawg
You can buy that target date vanguard fund within your Roth IRA. Just call Vanguard and ask them the steps for opening one up. You may already have one and don't know it.
Posted on 12/18/15 at 6:12 pm to WG_Dawg
quote:
So I opened one with Edward Jones.
Wait. You opened a Roth already, what happened to that one after you sold your EJ investment? You could have simply transferred the Roth to basically anywhere. I hope you didn't close the account entirely, that means starting completely over. If your EJ advisor didn't warn you against that I would seriously consider filing a formal complaint.
A Roth is just a type of account. You can invest the money in that account in basically whatever fund you want. For example, I have a Roth with Schwab but it is invested in a variety of funds, Vanguard included. Just because you have a Roth account at a particular institution doesn't mean you have to invest in only their funds.
Posted on 12/18/15 at 6:16 pm to WG_Dawg
When you say that you transferred "it" to Vanguard, do you mean the Roth account that you had with EJ, or did you actually withdraw from and close the EJ Roth and then open some other type of account with Vanguard? If you transferred the account, then you should still have a Roth IRA.
And there's nothing wrong with a target date fund. It's just another investment option WITHIN the account. For a new investor, I think the target funds are the way to go.
Having a Roth IRA (or 401k) isn't so much crucial. It just allows you tax free growth in the account - until some slick politician(s) puts an end to that advantage.
And there's nothing wrong with a target date fund. It's just another investment option WITHIN the account. For a new investor, I think the target funds are the way to go.
Having a Roth IRA (or 401k) isn't so much crucial. It just allows you tax free growth in the account - until some slick politician(s) puts an end to that advantage.
Posted on 12/18/15 at 9:37 pm to Jag_Warrior
quote:
And there's nothing wrong with a target date fund. It's just another investment option WITHIN the account. For a new investor, I think the target funds are the way to go.
This. I'll add that all funds have their ups and downs, just because a fund has a down year isn't a reason to bail on it. It is basically impossible to know in advance that a fund will have better returns than all the others out there.
The key thing to look for is the expense ratio - it's a number in every fund prospectus that shows the expenses, so the lower the number the better.
Posted on 12/19/15 at 12:55 pm to WG_Dawg
Vanguard is a great place to start due to the low expense ratios. I also think it's wise to start with a single fund (TD in your case) and build it up to at least $10k then you can look into other funds. I currently have two US Vanguard funds, the large cap index and the blended small/mid cap index. It allows me to re-balance when I want to be more or less aggressive (moderately).
Posted on 12/21/15 at 10:03 am to Jag_Warrior
quote:
or did you actually withdraw from and close the EJ Roth and then open some other type of account with Vanguard?
Yes, this. I told EJ I wanted to close that account and then transferred the amount that was in it into a TDRF with VG. What I have currently is a 2050 target date fund; VFIFX.
quote:
nothing wrong with a target date fund. It's just another investment option WITHIN the account. For a new investor, I think the target funds are the way to go.
Ok cool. As is obvious, I really don't know what I'm doing. I figured a TDF would be the easiest way to "set it and forget it" basically, where I just contribute money every month.
Posted on 12/21/15 at 10:30 am to WG_Dawg
So you switched brokerages because you were invested in the wrong funds?
Definitely not an Edwards Jones fan, but I'm sure they had a target retirement fund.
What account did type did you open when you "transferred your funds to vanguard" ? It's hard to give advice when you are likely giving bad information, but if you have $400/ month extra to invest, then go ahead and make it the $458 and change to max out your contributions to a Roth IRA - whether that's to the one you might have or opening a new one. Good luck. May want to consider getting some professional help.
Definitely not an Edwards Jones fan, but I'm sure they had a target retirement fund.
quote:
So in 2016 I think I may be able to have a little more wiggle room in what I can devote each month to investing. I think I can get by with adding an additional $100 a month. My question is should I just up my VG TDRF to $400 a month, or should I open a roth IRA as well? I am still a complete novice and pretty ignorant on investing, so I don't even really understand what a Roth IRA is aside from when taxes are taken out of it. Is there any benefit to that vehicle rather than what I'm currently doing?
What account did type did you open when you "transferred your funds to vanguard" ? It's hard to give advice when you are likely giving bad information, but if you have $400/ month extra to invest, then go ahead and make it the $458 and change to max out your contributions to a Roth IRA - whether that's to the one you might have or opening a new one. Good luck. May want to consider getting some professional help.
Posted on 12/21/15 at 12:25 pm to WG_Dawg
Here is your overriding question:
Do you expect your top marginal rate to be higher now, or in retirement?
If it is now, you probably need to be maxed out for traditional (instant benefits now, and subsidizes your retirement contributions now, that will accumulate, albeit with tax consequences). If it is at retirement, then you should be maxed out on ROTH. Why save on taxes you're not paying (or not paying very much of), when you can enjoy that retirement income tax free, forever?
So, most kids starting out should be at ROTH, and, at some point in their late 30s or early 40s shift to traditional, once the A/B analysis of their current versus retirement tax rates switch.
Do you expect your top marginal rate to be higher now, or in retirement?
If it is now, you probably need to be maxed out for traditional (instant benefits now, and subsidizes your retirement contributions now, that will accumulate, albeit with tax consequences). If it is at retirement, then you should be maxed out on ROTH. Why save on taxes you're not paying (or not paying very much of), when you can enjoy that retirement income tax free, forever?
So, most kids starting out should be at ROTH, and, at some point in their late 30s or early 40s shift to traditional, once the A/B analysis of their current versus retirement tax rates switch.
Posted on 12/21/15 at 3:47 pm to WG_Dawg
quote:What do you mean here? Isn't the current account a roth IRA?
My question is should I just up my VG TDRF to $400 a month, or should I open a roth IRA as well?
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