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Advice on retirement account for wife - convert to Roth IRA or keep brokerage account?
Posted on 1/24/21 at 9:08 am
Posted on 1/24/21 at 9:08 am
My wife does not have a Roth IRA, and I want to ensure that we are contributing to her retirement as much as mine. I've tried for a while to get her to sit with me and decide on how she wants to approach her Roth, but she hasn't done so yet.
My Roth has $25k in it, and I have been maxing my contributions for the past two years. We can max her contributions as well. We're both teachers and have defined pension plans that we can draw from after 25 years of teaching (we'll work longer than that). Being in Alabama, we also contribute to and can draw from social security.
Back in March, I opened a brokerage account with eTrade with an extra $1000 I had in savings. I wanted to play around with buying individual stocks. I bought $500 in Disney, $250 in Delta, and $250 in SPXL.
The account is now worth $1817. I've nearly doubled my money thanks to the dip and rise of the last year.
My Roth IRA is through Vanguard and I am invested in VTI. The returns have been modest and safe but certainly good enough to feel comfortable about the future.
With two defined pension plans, social security, and one Roth IRA, would it be better to take the higher risk investment strategy of individual stocks that may lead to higher returns? I always read about the importance of diversifying investment portfolios.
We wouldn't have any additional money to contribute to a brokerage account if we max her Roth IRA contributions, so I can't do both. I guess I could split the contributions, but that seems like it would minimize compounding interest.
My Roth has $25k in it, and I have been maxing my contributions for the past two years. We can max her contributions as well. We're both teachers and have defined pension plans that we can draw from after 25 years of teaching (we'll work longer than that). Being in Alabama, we also contribute to and can draw from social security.
Back in March, I opened a brokerage account with eTrade with an extra $1000 I had in savings. I wanted to play around with buying individual stocks. I bought $500 in Disney, $250 in Delta, and $250 in SPXL.
The account is now worth $1817. I've nearly doubled my money thanks to the dip and rise of the last year.
My Roth IRA is through Vanguard and I am invested in VTI. The returns have been modest and safe but certainly good enough to feel comfortable about the future.
With two defined pension plans, social security, and one Roth IRA, would it be better to take the higher risk investment strategy of individual stocks that may lead to higher returns? I always read about the importance of diversifying investment portfolios.
We wouldn't have any additional money to contribute to a brokerage account if we max her Roth IRA contributions, so I can't do both. I guess I could split the contributions, but that seems like it would minimize compounding interest.
3
Posted on 1/24/21 at 9:16 am to StringedInstruments
quote:
I've tried for a while to get her to sit with me and decide on how she wants to approach her Roth, but she hasn't done so yet.
Well this is a problem when you can’t get your spouse to sit down for an hour and hash out important financial decisions that will impact both of your futures.
quote:
With two defined pension plans, social security, and one Roth IRA, would it be better to take the higher risk investment strategy of individual stocks that may lead to higher returns?
Generally speaking, be risky young. Especially in a Roth where growth will not be taxed. You can buy mutual funds and etfs that are almost as risky as individual stocks and gain diversity that way.
This post was edited on 1/24/21 at 9:17 am
Posted on 1/24/21 at 9:18 am to StringedInstruments
Why put it in brokerage where you will pay tax on capital gains? You may not want to cash out now and get hit with short term capital gains but in future put it in Roth and after a year start selling some gains and reinvesting in Roth
You've already paid income tax on the contribution either way. Unless you anticipate a need for the $ including gains there is no advantage to brokerage. And if you know you'll need the $ you're already being too aggressive. You can always pull the contribution from Roth IRA tax/penalty free.
You've already paid income tax on the contribution either way. Unless you anticipate a need for the $ including gains there is no advantage to brokerage. And if you know you'll need the $ you're already being too aggressive. You can always pull the contribution from Roth IRA tax/penalty free.
Posted on 1/24/21 at 9:38 am to StringedInstruments
Max out a Roth for you and your wife. I’d go through E*TRADE for both (transfer your Vanguard over) since you already have your brokerage account with them. Forget about the brokerage account for now because you’ll have to pay taxes on the gain when you sell. With the Roth you can still buy individual stocks, mutual funds, options, and ETF’s.
Do you have kids? I started a Roth many years ago for my wife and I with the thought we could always remove our contributions (not any capital appreciation) without penalty. That way you’d have funds available for college. Also, does your district have a 403(b) matching program? If so, make sure you max it out. If you have an HSA, make sure you max that out as well because it’s a triple tax free vehicle.
Splitting the money doesn’t affect the compound interest at all. For example if you had put $500 in two brokerage accounts for you and your wife and made the same investments, you’d each have $900 which is still $1,800. Show how wife how well you’ve done with your brokerage account and just get on your phone or laptop and get an account set up for her. Good luck!
Do you have kids? I started a Roth many years ago for my wife and I with the thought we could always remove our contributions (not any capital appreciation) without penalty. That way you’d have funds available for college. Also, does your district have a 403(b) matching program? If so, make sure you max it out. If you have an HSA, make sure you max that out as well because it’s a triple tax free vehicle.
Splitting the money doesn’t affect the compound interest at all. For example if you had put $500 in two brokerage accounts for you and your wife and made the same investments, you’d each have $900 which is still $1,800. Show how wife how well you’ve done with your brokerage account and just get on your phone or laptop and get an account set up for her. Good luck!
This post was edited on 1/24/21 at 10:58 am
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