Roth IRA

[jdbailey1206]

Just a quick poll to see if anyone here has a Roth IRA and how they feel about it.  I'm looking to get one for my retirement.

[harveybirdman]

Depends.  It basically defers the tax advantage.

If it's more valuable to have the tax savings now, a traditional is better.  If you want to take the money out after age 59 1/2 and not have a penalty then.  Roth is a good vehicle.

[pbj]

Please, please, please go talk to someone that does this professionally.  If you're on any type of retirement program now, there is someone managing it that is sitting on his thumb and dying for someone to talk to.  Do not listen to blathering idiots on an arcade board, and I say this as a blathering idiot that used to be on an institutional investment committee.

[harveybirdman]

Jim is right, your bank probably has certified financial planners with much better advice than us.

[BadMouth]

Please, please, please go talk to someone that does this professionally.  If you're on any type of retirement program now, there is someone managing it that is sitting on his thumb and dying for someone to talk to.  Do not listen to blathering idiots on an arcade board, and I say this as a blathering idiot that used to be on an institutional investment committee.

eh, I take the position that it's best to talk to someone who isn't going to profit from swaying you.
Someone once told me to only work with a financial planner that gets paid by the hour and does not make money any other way.
I'm yet to come across one though. (not that I've looked)

Like harveybirdman said, it's whether you want a tax break on the money before you put it in or when you take it out.
Read up and open it at the most reputable place with the lowest fees.
....never forget to figure out how much they are going to skim off you.

http://www.fool.com/search/solr.aspx?q=roth ira

[Token]

eh, I take the position that it's best to talk to someone who isn't going to profit from swaying you.
Someone once told me to only work with a financial planner that gets paid by the hour and does not make money any other way.
I'm yet to come across one though. (not that I've looked)

That's good advice. Find a local fee-only financial adviser here: https://www.napfa.org/

Generally, you should go Roth unless one of these situations applies to you: http://www.businessinsider.com/five-people-who-shouldnt-convert-to-a-roth-ira-2012-8

[pbj]

Serving on one of those committees can be a real eye opener.  We dealt with TIAA-CREF and they admitted that the majority of their own employees didn't participate in the company retirement plan.  And my company had about 40 funds in their mix, where something like a dozen was the norm.  Each of those carried an administrative cost of $20kish a year, and some just had a couple thousand invested in them. 

We also got one of those "commodities! commodities! commodities! gold backed commodities funds!" guys on the committee... clearly he had listened to too much talk radio... gold bottomed out a few months later...

Anyway, even the funds with the worst fee structures were pretty reasonable from the mostly passive, long term investment perspective...  I don't think any reputable house is going to screw you too badly.  People have to make a living.

[Token]

Serving on one of those committees can be a real eye opener.  We dealt with TIAA-CREF and they admitted that the majority of their own employees didn't participate in the company retirement plan.  And my company had about 40 funds in their mix, where something like a dozen was the norm.  Each of those carried an administrative cost of $20kish a year, and some just had a couple thousand invested in them. 

I hope you were able to clean up some of that when you were on the committee. I don't understand how some large employers are still pushing high-fee funds in their company 401(k)s. You would think their employees' long-term financial stability would be in their own best interest.

The vast majority of people would be best served by putting their retirement savings in 3-5 ETFs or Vanguard low-fee funds, and then not looking at the balance but once a year.

[pbj]

Yeah, can't argue with any of that.  We were able to nuke a few of the offerings, but we couldn't shut down anything that already had money in it.  So it turned into a game of waiting for those people to die or retire,  subtly encouraging them to redistribute into other funds, and preventing any further deposits.  The company chunked 7% into an age appropriate mix, and the employees had to actively opt out of an automatic 3%.  We did make that annual opt out a yearly requirement and sadly lots of people did it. 

Anyway, I was only involved a couple of years and left, so I hope they've been able to hold firm against people randomly selecting funds to add to the mix.  Given the manpower situation, I doubt it.

[BorgDog]

The vast majority of people would be best served by putting their retirement savings in 3-5 ETFs or Vanguard low-fee funds, and then not looking at the balance but once a year.

There are so many people that don't do anything that just starting something and putting money into it is better than what they have now, Roth or Traditional.  And I second and third the don't ---fudgesicle--- with it. 

That business insider article you linked to was about converting to a Roth, not starting one, big difference.

[ark_ader]

I don't know.  I am not Irish.

[jdbailey1206]

Fellas.  The reason I asked is so I don't waste my time talking to someone.  Its either you have one and you like it or I'm making a big mistake by getting one and I should go with a 401K etc.

[MonMotha]

If you've got a ton of money to put away for retirement, you can generally use both a ROTH IRA (if you qualify) and a 401(k) or other employer-provided retirement plan.  The 401(k) might disqualify you from contributing to a traditional IRA, but most of that does not apply to a ROTH IRA.

The ROTH IRA is actually pretty darned cool.  You contribute post-tax income, yes, so you don't get the near-term tax breaks that you do on a tax-deferred option like a traditional IRA or 401(k).  However, since you've already paid taxes on that money, you pay NO TAXES when you take distributions post retirement even on your gains!  You ALSO can take funds back out under most circumstances (there are a few restrictions) with no penalties even prior to the retirement age as long as you limit your withdrawals to only what you contributed (no gains).  This means you can use it as a sort of emergency fund/long-term savings vehicle, in addition to just a retirement plan.

Now, since you'll probably have low income during retirement, you will probably also want some tax-deferred savings available to you, especially if you make a fair bit of money right now, in order to take advantage of the lower marginal tax bracket you'll be in during retirement.  If your job offers a 401(k) or SEP, SIMPLE IRA, etc., that's your tax-deferred option, and you can either split your contributions between them and your ROTH IRA or, possibly, depending on your circumstances (talk to a tax advisor), max both of them out.  If your company does not offer a retirement plan, you should be able to split your maximum IRA contribution (~$6500/yr) between a traditional and a ROTH IRA.

You can have the money in your ROTH IRA managed just like a traditional IRA.  That is, you can either have an advisor manage it for you, or you can basically just have some "advisor" be the mandatory custodian and manage it yourself (E*Trade, etc.).  Honestly, you probably won't do much better than just taking the latter option and dumping it all into some low-cost index funds unless you've got a fair bit socked away in the account. and even then, it's questionable.  Simply having one that you otherwise mostly manage can be fairly low cost.  Something on the order of $20/yr for account "maintenance".

I use a ROTH IRA as my primary retirement savings means at the moment.

If you have a high-deductible health plan, you should also look into whether you qualify for an HSA that you're not taking advantage of.  You put tax-free/deferred money into them, and most any health related expense can come back out at any time totally tax-free.  Once you hit 55.5, you can start withdrawing from it tax-deferred just like a traditional IRA.  So, it's more flexible than a traditional IRA with similar planning type benefits.  It also has a separate contribution limit from your IRA(s), so you can sock away even more money if you're able to.