Roth Accounts

[ultralite09]

Figured I would ask around here and see who everyone has their account with before I bug my roommate and get his advice.


Currently have a workplace 401K through T Rowe Price, I am contributing 7% towards it, company matches 4%.

Thinking I will drop that contribution to 4% and open up another Roth account and contribute 11% towards that.

Any pros/cons towards doing this?

Trying to get my financial life together and start gearing towards working to save Vs. Working to spend.

Thanks guys

[12RingKing]

Contribution limitations to IRA accounts would limit your ability to add anymore than 5500 a year, or 6500 if you're 50 or over.

I'm assuming you're going to open up a Roth IRA.

Btw, you're going to get hammered on here for asking for financial advice from anyone other than your financial advisor. We are all financial dummies.

[44mAG]

If you think you will be withdrawing more income every year when you retire than you are currently making, then a Roth makes sense. If your income (combined if married) is more than you think you will withdraw every year when retired, then traditional may make sense. Plus, you will save a lot on taxes every year it is coming off the top of your taxable income. There are tons of other factors to consider however. A good financial advisor can be a priceless asset to have.

[RWB]

Does your company offer a Roth 401k option?

[lwelch70]

If you think you will be withdrawing more income every year when you retire than you are currently making, then a Roth makes sense. If your income (combined if married) is more than you think you will withdraw every year when retired, then traditional may make sense. Plus, you will save a lot on taxes every year it is coming off the top of your taxable income. There are tons of other factors to consider however. A good financial advisor can be a priceless asset to have.

Also have to consider future tax rates and what age the OP is. If early 20's...do you think tax rates will be higher in the future than what they are today? Probably.

If you're near retirement then rates are likely not to change much.

[TigerBob]

As long as you're saving, you'll be ahead of most people. Keep saving in one avenue or another and keep increasing those contributions until you can max out all your tax-advantaged options. There's tons of different opinions on paying tax now or later, but at the end of the day as long as you keep saving and keep living within your means there's no real wrong answer in my book.

[ultralite09]

haha I posted this knowing good and well I would probably get flamed for asking.

Other thing to factor is that I just turned 26 so my thought process is interest rates will be higher by the time I retire. Finally making okay money and trying to better prepare myself for the future

I dont have a financial advisor yet, more than likely it will be another TBHer / my new roommate he his a CFP for Morgan Stanley but I was trying to gain a little more knowledge before pestering him about it since I know hes been pretty swamped with work lately

[dustoffer]

All I will say is good on ya!!! I wish everyone would contribute to their retirement this way--instead of complaining that Soc Sec isn't enough to live on.

[Balcones_Walker]

Roth to the max first, then 401k with the excess.

[12RingKing]

Don't forget that Roth is after tax contribution, so no tax relief. But you can pull out your contributions as you need to. You can withdraw growth for certain expenses, like college.

I'm utilizing mine as a college fund.

As always, this is my research, so please fact check for yourself.

[dustoffer]

Don't forget that Roth is after tax contribution, so no tax relief. But you can pull out your contributions as you need to. You can withdraw growth for certain expenses, like college.

I'm utilizing mine as a college fund.

As always, this is my research, so please fact check for yourself.

Tax relief comes with tax-free withdrawals on the Roth. So if you invest $10k after taxes and it grows to $100k, you dodged taxes on $90k--

[12RingKing]

Also, if you utilize a Roth 401K at work, all your companies contributions will be traditional in nature. So you're going to have both types in your 401k.

[refugioco]

We use Fidelity for our Roths. If I was young, with kids, I would go HSA first. Comes off the top like an IRA,401k,403b but comes out (for qualified medical expenses) tax free. It also can grow and be invested during the years you do not need it.

[44mAG]

We use Fidelity for our Roths. If I was young, with kids, I would go HSA first. Comes off the top like an IRA,401k,403b but comes out (for qualified medical expenses) tax free. It also can grow and be invested during the years you do not need it.

Agree with the HSA. I personally (29 yrs old) am maxing out traditional 401K, Roth IRA, and HSA. With the combined income of my wife and I, tax rates would have to go WAY up in order for Roth 401K to make sense for us. I am trying to lower our current taxable income as much as possible with the traditional 401K, HSA, and FSA for childcare expenses.

[HogHunter34]

My vote is for Vanguard to set up a Roth. They have the lowest expense ratios on fund choices. Most people don't factor fees & expenses long term which can chew up gains. In my 401k plan choices I have some vanguard funds & they are typically $0.50-$0.60 per $1k invested while some other fund options hit $7-$12 per $1k invested. Just my $0.02 worth